<PAGE>
As filed with the Securities and Exchange Commission on March 24, 1998.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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<TABLE>
<CAPTION>
<S> <C>
U.S. Home & Garden
U.S. Home & Garden Inc. Trust I
(Exact name of registrant as specified in its charter) (Exact name of co-registrant as specified in its charter)
Delaware Delaware
(State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation or organization)
2879 6719
(Primary standard industrial classification number) (Primary standard industrial classification number)
77-0262908 Applied for
(IRS employer identification number) (IRS employer identification number)
</TABLE>
655 Montgomery Street
San Francisco, CA 94111
(415) 616-8111
(Address, including zip code, and telephone number, including area code, of
co-registrants' principal executive offices)
----------------
Robert Kassel, President
U.S. Home & Garden Inc.
655 Montgomery Street
San Francisco, CA 94111
(415) 616-8111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Robert J. Mittman, Esq. Kenneth R. Lamb, Esq.
Tenzer Greenblatt LLP Gibson, Dunn & Crutcher LLP
405 Lexington Avenue One Montgomery Street
New York, New York 10174 Telesis Tower
Telephone No. (212) 885-5000 San Francisco, California 94104
Telecopier No. (212) 885-5001 Telephone No. (415) 393-8300
Telecopier No. (415) 986-5309
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
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(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If 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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
The Co-Registrants hereby amend this registration statement on such date
or dates as may be necessary to delay its effective date until the
Co-Registrants shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Share(1) Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Cumulative Trust Preferred
Securities of U.S. Home &
Garden Trust I ................ 2,530,000 (2) $ 25.00 $63,250,000 $ 18,658.75
- ----------------------------------------------------------------------------------------------------------------
% Junior Subordinated Defer-
rable Interest Debentures of
U.S. Home & Garden Inc.(3)
- ----------------------------------------------------------------------------------------------------------------
U.S. Home & Garden Inc.
Guarantee with respect to
% Cumulative Trust Pre-
ferred Securities(4) ..........
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Total Registration Fee(5) ................................................................... $ 18,658.75
================================================================================================================
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
(2) Includes 330,000 additional ($8,250,000 aggregate liquidation amount of) %
Cumulative Trust Preferred Securities pursuant to an over-allotment
option.
(3) The % Junior Subordinated Deferrable Interest Debentures will be purchased
by U.S. Home & Garden Trust I with the proceeds from the sale of the %
Cumulative Trust Preferred Securities. Such securities may later be
distributed for no additional consideration to the holders of the %
Cumulative Trust Preferred Securities of U.S. Home & Garden Trust I upon
its dissolution and the distribution of its assets.
(4) No separate consideration will be received for the U.S Home & Garden Inc.
Guarantee.
(5) This Registration Statement is deemed to cover the % Junior Subordinated
Deferrable Interest Debentures of U.S. Home & Garden Inc., the rights of
holders of % Junior Subordinated Deferrable Interest Debentures of U.S.
Home & Garden Inc. under the Indenture, the rights of holders of the %
Cumulative Trust Preferred Securities of U.S. Home & Garden Trust I under
the Trust Agreement, the rights of holders of the % Cumulative Trust
Preferred Securities under the Guarantee and the Expense Agreement entered
into by U.S. Home & Garden Inc. and certain backup undertakings as
described herein, which taken together, fully, irrevocably and
unconditionally guarantee all of the obligations of U.S. Home & Garden
Trust I under the % Cumulative Trust Preferred Securities.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 24, 1998
2,200,000 TRUST PREFERRED SECURITIES
U.S. HOME & GARDEN TRUST I
% CUMULATIVE TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER TRUST
PREFERRED SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED BY
[U.S. HOME & GARDEN INC. - LOGO]
---------------------
The % Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent undivided beneficial preferred interests
in the assets of U.S. Home & Garden Trust I, a statutory
business trust created under the laws of the State of Delaware (the "Trust").
U.S. Home & Garden Inc., a Delaware corporation (the "Company"),. . .
(continued on page 3)
---------------------
See "Risk Factors" beginning on Page 17 for a discussion of certain
information that should be considered by prospective purchasers
of the securities offered hereby.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
<TABLE>
<CAPTION>
Underwriting
Price to the Discounts and Proceeds to
Public Commissions(1) the Trust(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Trust Preferred Security $ 25 (2) $ 25
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Total(3) .................... $55,000,000 (2) $55,000,000
===============================================================================
</TABLE>
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters by the Trust and the Company and other matters.
(2) In view of the fact that all of the proceeds of the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, the Company has agreed to pay the Underwriters as compensation
for arranging the investment therein of such proceeds, $1.00 per Trust
Preferred Security or $2,200,000 in the aggregate. See "Underwriting." The
Company has also agreed to pay the expenses of the offering estimated to
be $575,000.
(3) The Trust has granted to the Underwriters a 30-day option to purchase up to
an additional $8,250,000 aggregate liquidation amount of Trust Preferred
Securities on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public and Proceeds to the Trust will be $63,250,000 and
$63,250,000, respectively and the total compensation to be paid by the
Company to the Underwriters will be $2,530,000. See "Underwriting."
---------------------
The Trust Preferred Securities are being offered hereby by the
Underwriters named herein, subject to prior sale, when, as and if issued by the
Trust and delivered to and accepted by the Underwriters and subject to certain
prior conditions, including the right of the Underwriters to reject any order
in whole or in part. It is expected that delivery of the Trust Preferred
Securities will be made in New York, New York in book-entry form only through
the facilities of The Depository Trust Company on or about , 1998.
EVEREN Securities, Inc. Josephthal & Co. Inc.
The date of this Prospectus is , 1998
<PAGE>
[Photos of certain products]
SOME OF THE COMPANY'S ACCOUNTS
- -------------------------------------------------------------------------------
Home Improvement Centers Mass Merchants Co-ops
- -------------------------------------------------------------------------------
Builder's Square Home Quarters Country General Ace Hardware
Eagle Hardware Lowe's Kmart Mid-States
Hechinger Orchard Supply Scotty's True*Serve
HomeBase Yardbirds Wal-Mart
Home Depot
- -------------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS,
ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE, WHICH STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE MARKET PRICE OF THE TRUST PREFERRED SECURITIES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE TRUST PREFERRED SECURITIES IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
(Continued from cover page)
will be the owner of all of the beneficial interests represented by common
securities of the Trust (the "Common Securities" and, collectively with the
Trust Preferred Securities, the "Trust Securities"). The Trust exists for the
sole purpose of issuing the Trust Securities and investing the proceeds thereof
in an equivalent amount of ___% Junior Subordinated Deferrable Interest
Debentures (the "Junior Subordinated Debentures") to be issued by the Company.
The Junior Subordinated Debentures will mature on , 2028, which date may
be shortened (such date, as it may be shortened, the "Stated Maturity") to a
date not earlier than , 2003. The Trust Preferred Securities will have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the Common
Securities, which will be held by the Company. See "Description of the Trust
Preferred Securities--Subordination of Common Securities of the Trust Held by
the Company."
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable monthly in arrears on the day of each calendar month of
each year (subject to possible deferral as described below), commencing ,
1998, at the annual rate of % of the Liquidation Amount (as defined herein)
of $25 per Trust Preferred Security ("Distributions"). The amount of each
Distribution due with respect to the Trust Preferred Securities will include
amounts accrued through the date the Distribution payment is due. The Company
will have the right, so long as no Debenture Event of Default (as defined
herein) has occurred and is continuing, to defer payments of interest on the
Junior Subordinated Debentures at any time or from time to time for a period
not exceeding 60 consecutive months with respect to each deferral period (each,
an "Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any such Extension Period and the payment of all amounts then due, the Company
may elect to begin a new Extension Period subject to the requirements set forth
herein. If interest payments on the Junior Subordinated Debentures are so
deferred, Distributions on the Trust Preferred Securities will also be deferred
and the Company will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to its capital
stock or to make any payment with respect to its debt securities that rank pari
passu with or junior to the Junior Subordinated Debentures. During an Extension
Period, interest on the Junior Subordinated Debentures will continue to accrue
(and the amount of Distributions to which holders of the Trust Preferred
Securities are entitled will accumulate) at the rate of % per annum,
compounded monthly, and holders of the Trust Preferred Securities will be
required to accrue income and will be required to pay United States federal
income tax on that income. See "Description of Junior Subordinated
Debentures--Option to Defer Interest Payment Period" and "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
The Company has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust's obligations under the Trust
Preferred Securities. See "Relationship Among the Trust Preferred Securities,
the Junior Subordinated Debentures and the Guarantee--Full and Unconditional
Guarantee." Under the Guarantee, the Company guarantees the payment of
Distributions by the Trust and payments on liquidation of or redemption of the
Trust Preferred Securities (subordinate to the right to payment of Senior Debt
and Subordinated Debt of the Company, each as defined herein) to the extent of
funds held by the Trust. See "Description of Guarantee." If the Company does
not make required payments on the Junior Subordinated Debentures held by the
Trust, the Trust will have insufficient funds to pay Distributions on the Trust
Preferred Securities. The Guarantee does not cover payment of Distributions
when the Trust does not have sufficient funds to pay such Distributions. In
such event, a holder of the Trust Preferred Securities may institute a legal
proceeding directly against the Company pursuant to the terms of the Indenture
to enforce payment of such Distributions to such holder. See "Description of
Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of
Trust Preferred Securities." The obligations of the Company under the Guarantee
and the Junior Subordinated Debentures are subordinate and junior in right of
payment to all Senior Debt and Subordinated Debt of the Company. "See
Description of Junior Subordinated Debentures-Subordination."
The Trust Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Junior Subordinated Debentures at the
Stated Maturity or their earlier redemption, in each case at a redemption price
equal to the aggregate liquidation preference of the Trust Preferred Securities
plus any accumulated
3
<PAGE>
and unpaid Distributions thereon to the date of redemption. The Junior
Subordinated Debentures are redeemable prior to maturity at the option of the
Company (i) on or after , 2003, in whole at any time or in part from time to
time, or (ii) at any time, in whole (but not in part), within 90 days following
the occurrence of a Tax Event or an Investment Company Event (each as defined
herein), in each case at a redemption price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures to the date fixed for
redemption, plus 100% of the principal amount thereof. See "Description of the
Trust Preferred Securities--Redemption."
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause a Like Amount (as defined herein) of the Junior
Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. See "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Dissolution."
In the event of the dissolution of the Trust, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the
holders of Trust Preferred Securities will be entitled to receive a liquidation
amount of $25 per Trust Preferred Security ("Liquidation Amount"), plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a Distribution of such Like Amount of Junior Subordinated
Debentures, subject to certain exceptions. See "Description of the Trust
Preferred Securities--Liquidation Distribution Upon Dissolution."
The Junior Subordinated Debentures and the Guarantee are unsecured and
subordinated to all Senior Debt and Subordinated Debt. The terms of the Junior
Subordinated Debentures and the Guarantee place no limitation on the amount of
Senior Debt and Subordinated Debt that the Company can issue. Currently, the
Company has bank credit agreements (collectively, the "Credit Facility") that
consists of a $30.2 million term loan and a revolving credit facility that
provides for borrowings of up to $20.0 million. The Company will apply a
portion of the net proceeds of this offering to pay off the outstanding balance
under the Credit Facility which was approximately $37.5 million as of March 20,
1998. The Credit Facility will then be terminated. The Company has entered into
negotiations regarding a new credit facility, which may be for an amount less
than the Company's current Credit Facility. Because the Company is a holding
company, substantially all of the Company's assets consist of the capital stock
of its subsidiaries. All obligations of the Company relating to the securities
described herein will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. The Company may cause additional
trust preferred securities to be issued by trusts similar to the Trust in the
future, and there is no limit on the amount of such securities that may be
issued. In that event, the Company's obligations under the junior subordinated
debentures to be issued to such other trusts and the Company's guarantees of
the payments by such trusts will be pari passu with the Company's obligations
under the Junior Subordinated Debentures and the Guarantee, respectively.
The Trust Preferred Securities have been approved for listing on the
American Stock Exchange, subject to notice of issuance. In order to meet the
listing requirements of the American Stock Exchange, the representatives of the
Underwriters have undertaken to distribute the Trust Preferred Securities to a
minimum of 400 public stockholders. Although the Underwriters have indicated an
intention to make a market in the Trust Preferred Securities, the Underwriters
are not obligated to do so, and any market making may be discontinued at any
time at the sole discretion of any of the Underwriters. There can be no
assurance that a market will develop for the Trust Preferred Securities. See
"Risk Factors--Absence of Existing Public Market; Market Prices" and
"Underwriting."
Each of the Trust Preferred Securities and, if the Junior Subordinated
Debentures are distributed to holders of Trust Preferred Securities, the Junior
Subordinated Debentures will be represented by one or more global certificates
registered in the name of The Depository Trust Company (the "Depositary") or
its nominee. Beneficial interests in the Trust Preferred Securities and, in
such event, the Junior Subordinated Debentures will be shown on, and transfers
thereof will be effected only through, records maintained by participants in
the Depositary. The Depositary and the Paying Agent (as defined herein) will be
responsible for interest and dividend payments to holders of the Trust
Preferred Securities and the Junior Subordinated Debentures. Except as
described herein, the Trust Preferred Securities in certificated form will not
be issued in exchange for global certificates. See "Book-Entry Issuance."
4
<PAGE>
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture
dated as of , 1998, as amended and supplemented from time to time,
between the Company and Wilmington Trust Company, as Trustee (the "Indenture
Trustee"), under which the Junior Subordinated Debentures will be issued, (ii)
the "Trust Agreement" means the Amended and Restated Trust Agreement relating to
the Trust among the Company, as depositor, Wilmington Trust Company, as Property
Trustee (the "Property Trustee"), Wilmington Trust Company, as Delaware Trustee
(the "Delaware Trustee"), the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees") and the holders, from time to time, of the trust securities, (iii)
the "Guarantee Agreement" means the Guarantee Agreement relating to the
guarantee between the Company and Wilmington Trust Company, as Guarantee Trustee
(the "Guarantee Trustee"), and (iv) the "Expense Agreement" means the Agreement
as to Expenses and Liabilities between the Company and the Trust.
AVAILABLE INFORMATION
The Company and the Trust have jointly filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement"), under the Securities Act of 1933 (the "Securities Act"), with
respect to the offering of the securities offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company, the
Trust and the securities offered hereby, reference is made to the Registration
Statement and the exhibits and the financial statements, notes and schedules
filed as a part thereof or incorporated by reference therein, which may be
inspected at the public reference facilities of the Commission, at the addresses
set forth below. Statements made in this Prospectus concerning the contents of
any documents referred to herein are not necessarily complete, and in each
instance are qualified in all respects by reference to the copy of such document
filed as an exhibit to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. Reports,
proxy statements and other information filed by the Company can be inspected and
copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices
of the Commission: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048. The Commission also
maintains a Web site (http://www.sec.gov) at which reports, proxy and
information statements and other information regarding the Company may be
accessed.
No separate financial statements of the Trust have been included herein.
The Company and the Trust do not consider that such financial statements would
be material to holders of the Trust Preferred Securities because the Trust is a
newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures of the
Company and issuing the Trust Securities. The Trust is a wholly-owned
subsidiary of the Company, and the Company will fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the Trust
Preferred Securities. See "Prospectus Summary--The Company" and "--U.S. Home &
Garden Trust I," "Description of the Trust Preferred Securities," "Description
of Junior Subordinated Debentures" and "Description of Guarantee."
The Company will provide to the holders of the Trust Preferred Securities
annual reports containing financial statements audited by the Company's
independent auditors and such other reports as the Company shall determine or
as shall be required by law. The Company will also furnish annual reports on
Form 10-K and quarterly reports on Form 10-Q (except for exhibits thereto) free
of charge to holders of the Trust Preferred Securities who so request in writing
to the Company.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Each prospective investor is urged to read this Prospectus in its
entirety.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Prospectus contains statements that are forward-looking, such as statements
relating to plans for future activities. Such forward-looking information
involves important known and unknown risks, uncertainties and other factors
that could significantly affect actual results, performance or achievements of
the Company in the future and, accordingly, such actual results, performance or
achievements may materially differ from those expressed or implied in any
forward-looking statements made by or on behalf of the Company. These risks,
uncertainties and factors include, but are not limited to, those relating to
the Company's growth strategy, customer concentration, outstanding
indebtedness, dependence on weather conditions, seasonality, expansion and
other activities of competitors, changes in federal or state environmental laws
and the administration of such laws, protection of trademarks and other
proprietary rights and the general condition of the economy and its effect on
the securities markets. The words "believe", "expect", "anticipate", "intend"
and "plan" and similar expressions identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looding statements
which speak only as of the date the statement was made. See "Risk Factors."
The Company
The Company is a leading manufacturer and marketer of a broad range of
consumer lawn and garden products. The Company's products include weed
preventive landscape fabrics, fertilizer spikes, decorative landscape edging,
shade cloth and root feeders, which are sold under recognized brand names such
as WeedBlock(R), Jobe's(R), Emerald Edge(R), Shade Fabric(TM) and Ross(R). In
February 1998, the Company acquired the assets of Weed Wizard, Inc., a
manufacturer and distributor of weed trimmer replacement heads, and will
continue marketing the product under the "Weed Wizard" trademark. In addition,
in March 1998, the Company acquired substantially all of the assets of
Landmaster Products, Inc., a manufacturer and distributor of polyspun landscape
fabrics. The Company believes that it has significant market share and
brand-name recognition in several of its primary product categories. The Company
markets its products through most large national home improvement and mass
merchant retailers ("Retail Accounts"), including Home Depot, Lowe's, Kmart,
Builder's Square, Wal-Mart and Home Base.
The Company has experienced significant growth in recent years. Net sales,
EBITDA (as defined herein) and net income grew at average compound annual rates
of 63%, 77% and 42%, respectively, during the period from the fiscal year ended
June 30, 1995 through the fiscal year ended June 30, 1997. The Company achieved
record results from operations for the fiscal year ended June 30, 1997, with
net sales, EBITDA and net income increasing to $52.0 million, $12.6 million and
$3.2 million, respectively, from $27.0 million, $4.6 million and $2.5 million
for the fiscal year ended June 30, 1996. The Company believes that its success
has been primarily attributable to the expansion of its product lines through
the acquisition of complementary lawn and garden businesses, the quality of its
products, its focus on providing Retail Accounts with a single source of lawn
and garden products, the efficiency and reliability of its inventory tracking
and order fulfillment systems and its distinctive advertising and in-store
displays.
Lawn and Garden Industry
Historically, the lawn and garden industry was comprised of relatively
small regional manufacturers and distributors whose products were sold to
consumers primarily through local nurseries and garden centers. As the industry
has grown, national home improvement and mass merchant retailers have replaced
many of these local garden centers as the primary retail source for lawn and
garden products. In an effort to improve operating margins and reduce the
number of vendors needed to source high volume lawn and garden products, the
preference among home improvement and mass merchant retailers has shifted to
single source suppliers such as the Company that offer broad product lines of
consumer brand-name merchandise and provide the product support necessary to
stimulate consumer demand and ensure timely and cost effective order
fulfillment. Smaller regional suppliers generally lack the capital and other
resources necessary to offer the variety and number of product lines, the
product support and the inventory stocking and tracking capabilities required
by home improvement and mass merchant retailers.
6
<PAGE>
Regional manufacturers, distributors and marketers are now largely
fragmented and the Company believes that many of them are attractive
acquisition candidates for larger suppliers and distributors in the lawn and
garden industry. The Company has historically been successful in locating,
acquiring and integrating certain of these manufacturers and distributors into
its business and intends to continue its acquisition program as a principal
component of its growth strategy.
According to the 1996-1997 National Gardening Survey, 1996 retail sales of
lawn and garden products were approximately $22 billion and 64% of the
approximately 101 million households in the United States participated in some
form of gardening activity during 1996. In addition, sales growth in the lawn
and garden industry is being driven in part by the aging of the "baby boomer"
consumer segment. According to the National Gardening Survey, persons 50 years
of age and older spent an average of $400 per household on lawn and garden
activities in 1996.
Business Strategy
The Company's business objective is to be a leading single source supplier
of lawn and garden products to Retail Accounts and its strategy includes: (i)
marketing low-cost, high-margin products that stimulate impulse buying by
consumers; (ii) supplying Retail Accounts with a broad range of brand-name
products within each of its product categories; (iii) utilizing distinctive
packaging and point-of-purchase product displays, new product introductions and
other merchandising techniques to stimulate consumer demand; (iv) generating
brand-name recognition of its products through national marketing and
advertising programs; and (v) promoting Retail Account satisfaction by
providing them with timely and cost efficient order fulfillment services.
Growth Strategy
The Company attributes its historical growth and success to its ability to
capitalize on the consolidation of the lawn and garden industry by locating,
acquiring and effectively integrating acquisition targets and its ability to
act as an efficient single source supplier of a broad range of quality
products. The Company intends to continue this growth strategy, which consists
of the following principal components:
o Pursue Additional Strategic Acquisitions. The Company plans to continue
its primary strategy of acquiring complementary lawn and garden companies
and product lines. The Company has consummated seven (7) such acquisitions
since 1992 and recently entered into a non-binding letter of intent to
acquire another lawn and garden product business. By consolidating
companies with complementary product lines, the Company believes it can
capitalize on its existing channels of distribution and gain market share
by increasing sales to its Retail Accounts.
o Increase Brand Awareness. The Company intends to enhance existing
consumer brand awareness by expanding its advertising and marketing
efforts with an emphasis on its Jobe's fertilizer spikes, a
nationally-recognized brand name. The Company believes that the
modernization of its Jobe's packaging, together with a national television
advertising campaign targeted at the "baby boomer" consumer segment, will
allow it to further capitalize on its brand name recognition.
o Utilize Existing Infrastructure. The Company's management and
administrative infrastructure has been designed to accommodate the
integration of additional products when suitable lawn and garden companies
and product lines are acquired. The Company believes that its ability to
efficiently integrate new businesses and product lines into its existing
infrastructure will result in significant savings in the areas of
management, distribution, marketing and customer service. The Company also
believes that its infrastructure, including its on-line inventory tracking
and order fulfillment capabilities, allows it to be an effective and
efficient source of lawn and garden products for Retail Accounts.
o Focus on High-Volume Retailers. National high-volume retailers such as
the Company's Retail Accounts are gaining an increasing share of the lawn
and garden retail market. By focusing on the
7
<PAGE>
emergence of high-volume retailers and their needs, including providing
broad product lines, order fulfillment capabilities and marketing and
merchandising programs, the Company believes that it will increase its
market share and enhance its position as a leading single source supplier
of lawn and garden products.
Recent and Proposed Acquisitions
Since August 1992, the Company has consummated the following seven (7)
acquisitions of lawn and garden companies or product lines for a total of over
$75 million in consideration:
o Golden West Chemical Distributors, Inc. A manufacturer of humic
acid-based products designed to improve crop yield, which was acquired in
August 1992 for aggregate consideration of approximately $2.2 million.
o Easy Gardener, Inc. A manufacturer of multiple fabric landscaping
products including WeedBlock, which was acquired in September 1994 for
aggregate consideration of approximately $23.5 million.
o Emerald Products LLC. A manufacturer of decorative landscape edging,
which was acquired in August 1995 for aggregate consideration of $935,000.
o Weatherly Consumer Products Group, Inc. A manufacturer of fertilizer
spikes and other lawn and garden products, which was acquired in August
1996 for aggregate consideration of approximately $25.9 million.
o Plasti-Chain Product Line of Plastic Molded Concepts, Inc. A line of
plastic chain links and decorative edgings, which was acquired in May 1997
for approximately $4.3 million.
o Weed Wizard, Inc. A manufacturer and distributor of weed trimmer
replacement heads which was acquired in February 1998 for approximately
$16.0 million, of which approximately $5.0 million was based on the value
of certain net current assets acquired.
o Landmaster Products, Inc. A manufacturer and distributor of polyspun
landscape fabrics for use by consumers and professional landscapers,
substantially all of whose assets were acquired in March 1998 for
approximately $3.0 million, of which approximately $750,000 was based on
the value of certain net current assets acquired.
In addition, the Company has entered into a non-binding letter of intent
to purchase a manufacturer and distributor of lawn and garden products for
approximately $4.8 million (the "Proposed Acquisition").
The Company was organized under the laws of the State of California in
August 1990 under the name Natural Earth Technologies, Inc. In January 1992,
the Company reincorporated under the laws of the State of Delaware and, in July
1995, changed its name to U.S. Home & Garden Inc. The Company's lawn and garden
operations are conducted through its subsidiary Easy Gardener, Inc. ("Easy
Gardener") and Easy Gardener's subsidiaries, Weatherly Consumer Products Group,
Inc. ("Weatherly") and Weed Wizard Acquisition Corp. ("Weed Wizard"), and the
Company's agricultural operations are conducted through its subsidiary Golden
West Agri-Products, Inc. ("Golden West"). Except when used with respect to the
Trust Preferred Securities or where the context otherwise requires, references
in this Prospectus to the "Company" mean U.S. Home & Garden Inc., its
subsidiaries Easy Gardener and Golden West and the subsidiaries of Easy
Gardener (all such subsidiaries to be referred to herein as the
"Subsidiaries"). The Company's executive offices are located at 655 Montgomery
Street, San Francisco, California 94111, and its telephone number is (415)
616-8111.
8
<PAGE>
U.S. Home & Garden Trust I
The Trust is a statutory business trust created under Delaware law
pursuant to (i) the trust agreement of the Trust among the Company, as
depositor, the Delaware Trustee and an Administrative Trustee, and (ii) the
filing of a Certificate of Trust with the Delaware Secretary of State on March
16, 1998. The Trust's business and affairs are conducted by the Property
Trustee, the Delaware Trustee and three individual Administrative Trustees who
are officers of the Company. The Trust exists for the exclusive purposes of:
(i) issuing and selling the Trust Securities, (ii) using the proceeds from the
sale of the Trust Securities to acquire the Junior Subordinated Debentures
issued by the Company and (iii) engaging in only those other activities
necessary, advisable or incidental thereto. The Junior Subordinated Debentures
will be the sole assets of the Trust and payments by the Company under the
Junior Subordinated Debentures and the Expense Agreement will be the sole
revenues of the Trust. All of the Common Securities will be owned by the
Company. The Common Securities will rank pari passu, and payments will be made
thereon pro rata, with the Trust Preferred Securities, except that upon the
occurrence and during the continuance of an event of default under the Trust
Agreement resulting from an event of default under the Indenture, the rights of
the Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Trust Preferred Securities.
See "Description of the Trust Preferred Securities--Subordination of Common
Securities of the Trust Held by the Company." The Company will acquire Common
Securities in an aggregate liquidation amount equal to 3% of the total capital
of the Trust. The Trust has a term of 31 years, but may dissolve earlier as
provided in the Trust Agreement.
The Trust's principal offices are located at 655 Montgomery Street, San
Francisco, California 94111 and its telephone number is (415) 616-8111.
9
<PAGE>
SUMMARY FINANCIAL DATA AND OTHER INFORMATION
(in thousands, except percentages, ratios and per share data)
The summary financial data set forth below has been derived from the
Company's consolidated financial statements. Such information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
------------ -------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales ............................. $2,910 $ 3,063 $ 19,692 $ 27,031 $ 52,046
Gross profit .......................... 1,402 1,608 10,541 14,361 28,397
Selling, general and administrative
expenses(1) ......................... 1,826 6,786 7,152 10,612 17,745
------ -------- ---------- -------- ----------
Income (loss) from operations ......... (424) (5,178) 3,389 3,749 10,652
Interest expense, net ................. (45) (41) (1,776) (1,940) (3,262)
Income (loss) before extraordinary
expense ............................. (469) (5,219) 1,575 2,524 4,190
------ -------- ---------- -------- ----------
Extraordinary gain (expense), net...... 389 -- -- -- (1,007)
------ -------- ---------- -------- ----------
Net income (loss) ..................... $ (80) $ (5,219) $ 1,575 $ 2,524 $ 3,183
====== ======== ========== ======== ==========
Dilutive income (loss) per share:
Income (loss) per share before
extraordinary expense(2) ............ $ (.22) $ (1.31) $ 0.16 $ 0.19 $ 0.26
Net income (loss) per share(2) ........ $ (.04) $ (1.31) $ 0.16 $ 0.19 $ 0.20
====== ======== ========== ======== ==========
Weighted average number of com-
mon and common equivalent
shares outstanding(2) ............... 2,178 3,980 10,125 13,361 16,068
====== ======== ========== ======== ==========
Other Data(3):
EBITDA(4) ............................. $ 4,026 $ 4,583 $ 12,642
Interest expense, net ................. 1,776 1,940 3,262
Depreciation and amortization ......... 637 834 1,990
Capital expenditures .................. 151 261 528
Net cash provided by (used in)
operating activities ................ 438 618 10,545
Net cash (used in) investing
activities .......................... (15,576) (2,103) (29,594)
Net cash provided by financing
activities .......................... 16,021 1,195 20,452
Growth Rates(3):
Net sales growth ...................... 37.3% 92.5%
EBITDA growth(4) ...................... 13.8 175.9
Income from Operations growth ......... 10.6 184.1
Margins(3):
EBITDA margin(4)(5) ................... 20.4% 17.0% 24.3%
Operating income (loss) margin(6) 17.2 13.9 20.5
Net income (loss) margin .............. 8.0 9.3 6.1
Ratios:
EBITDA to interest expense,
net(4) .............................. 2.3x 2.4x 3.9x
Earnings to fixed charges(7) .......... 468(9) 5,219(9) 1.9x 1.9x 3.1x
Pro forma ratio of earnings to
fixed charges(7)(8) ................. 3.6x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Statement of Income Data:
Net sales ............................. $ 12,939 $ 15,538
Gross profit .......................... 7,114 8,159
Selling, general and administrative
expenses(1) ......................... 7,312 8,552
-------- --------
Income (loss) from operations ......... (198) (393)
Interest expense, net ................. (1,332) (1,493)
Income (loss) before extraordinary
expense ............................. (1,055) (1,086)
-------- --------
Extraordinary gain (expense), net...... (1,007) --
-------- --------
Net income (loss) ..................... $ (2,062) $ (1,086)
======== ========
Dilutive income (loss) per share:
Income (loss) per share before
extraordinary expense(2) ............ $ (0.08) $ (0.07)
Net income (loss) per share(2) ........ $ (0.15) $ (0.07)
======== ========
Weighted average number of com-
mon and common equivalent
shares outstanding(2) ............... 13,437 15,552
======== ========
Other Data(3):
EBITDA(4) ............................. $ 760 $ 870
Interest expense, net ................. 1,332 1,493
Depreciation and amortization ......... 958 1,263
Capital expenditures .................. 230 486
Net cash provided by (used in)
operating activities ................ (1,540) 682
Net cash (used in) investing
activities .......................... (24,667) (1,414)
Net cash provided by financing
activities .......................... 25,783 11,383
Growth Rates(3):
Net sales growth ...................... 20.1%
EBITDA growth(4) ...................... 14.5
Income from Operations growth ......... (98.5)
Margins(3):
EBITDA margin(4)(5) ................... 5.9% 5.6%
Operating income (loss) margin(6) ( 1.5) (2.5)
Net income (loss) margin .............. (15.9) (7.0)
Ratios:
EBITDA to interest expense,
net(4) .............................. .6x .6x
Earnings to fixed charges(7) .......... 1,530(9) 1,886(9)
Pro forma ratio of earnings to
fixed charges(7)(8) ................. 1,488(9)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
At December 31, 1997
--------------------------------
At June 30, 1997 Actual As Adjusted(10)
------------------ ---------- -------------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital ...................................... $ 2,292 $15,753 $ 30,829
Intangible assets, net ............................... 44,364 43,474 57,947
Total assets ......................................... 68,475 77,636 107,985
Short-term debt ...................................... 8,990 6,086 0
Long-term debt ....................................... 17,570 16,430 0
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely junior
subordinated debentures(11) ........................ 55,000
Stockholders' equity ................................. 31,926 46,616 45,335
</TABLE>
- -------------
(1) Includes goodwill amortization expense of $91,000, $105,000, $475,000,
$585,000, $1.3 million, $590,000 and $730,000 for the fiscal years ended
June 30, 1993, 1994, 1995, 1996 and 1997 and the six months ended December
31, 1996 and 1997, respectively.
(2) Net income (loss) per share calculations for all periods presented reflects
the retroactive adoption of the provisions of Statement of Financial
Accounting Standards No. 128, Earnings Per Share (SFAS 128). See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," Summary of Accounting Policies of Consolidated Financial
Statements and Note 14 of Notes to Consolidated Financial Statements.
(3) Certain Other Data, Growth Rates and Margins for the fiscal years ended
June 30, 1993, 1994 and 1995 have been omitted due to the lack of relevant
comparison after the Company's acquisition of Easy Gardener, Inc. in
September 1994.
(4) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and non-recurring charges. EBITDA is not
intended to represent cash flow from operations as defined by generally
accepted accounting principles and should not be considered as an
alternative to cash flow or as a measure of liquidity or as an alternative
to net earnings as indicative of operating performance. The Company's
reported EBITDA may not be comparable to similarly titled measures of
other companies that do not have non-recurring charges. EBITDA, EBITDA
growth, EBITDA margin and EBITDA to interest expense, net are included
herein because management believes they are useful for measuring the
Company's ability to service its debt.
(5) EBITDA margin represents EBITDA divided by net sales.
(6) Operating income (loss) margin represents income (loss) from operations
divided by net sales.
(7) For purposes of calculating the ratio and pro forma ratio of earnings to
fixed charges, earnings consist of income before income taxes, plus fixed
charges. Fixed charges consist of the interest expense on all
indebtedness, including amortization of deferred financing costs, and the
estimated representative interest factor of rental expense.
(8) The average outstanding debt balances for the year ended June 30, 1997 and
the six-month period ended December 31, 1997 were approximately
$28,877,000 and $24,188,000, respectively, and gross interest expense was
approximately $3,338,000 and $1,597,000, respectively. The pro forma
ratios assume the replacement of this indebtedness with a corresponding
amount of Junior Subordinated Debentures on July 1, 1996. If, on a
consolidated basis, the entire $55,000,000 principal amount of Junior
Subordinated Debentures had been outstanding throughout the periods, total
interest expense would have been approximately $5,225,000 and $2,612,500,
respectively.
(9) Earnings are inadequate to cover fixed charges. Amounts shown reflect the
coverage deficiency for this ratio to equal one.
11
<PAGE>
(10) As adjusted to give effect to (i) the acquisitions by the Company of the
assets of Weed Wizard, Inc. and Landmaster Products, Inc. in February and
March 1998 using $10.0 million under the Credit Facility to pay a portion
of the acquisition costs, and (ii) the issuance by the Trust of the
2,200,000 Trust Preferred Securities offered hereby and the receipt by the
Company of the proceeds, net of estimated underwriting compensation and
other estimated offering expenses, from the corresponding sale of the
Junior Subordinated Debentures to the Trust, and the application of the
net proceeds therefrom as described under "Use of Proceeds." Estimated
underwriting compensation and other estimated offering expenses have been
reflected as a deferred financing cost to be amortized over the life of
the Junior Subordinated Debentures. Existing deferred financing costs
related to debt to be repaid from the proceeds of this offering have been
reflected as a charge to earnings.
(11) The assets of the Trust consist solely of an aggregate principal amount of
$56,700,000 Junior Subordinated Debentures.
12
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Trust Preferred
Securities issuer .......... U.S. Home & Garden Trust I ("the Trust")
Securities offered ......... 2,200,000 Trust Preferred Securities having a Liquidation
Amount of $25 per Trust Preferred Security. The Trust
Preferred Securities represent preferred undivided
beneficial interests in the Trust's assets, which will consist
solely of the Junior Subordinated Debentures and
payments thereunder.
Distributions .............. The Distributions payable on each Trust Preferred Security
will be fixed at a rate per annum of % of the Liquidation
Amount of $25 per Trust Preferred Security, will be cumu-
lative, will accrue from the date of issuance of the Trust
Preferred Securities, and will be payable monthly in arrears
on the day of each calendar month of each year, com-
mencing on , 1998 (subject to possible deferral as
described below). The amount of each Distribution due
with respect to the Trust Preferred Securities will include
amounts accrued through the date the Distribution payment
is due. See "Description of the Trust Preferred Securities."
Extension periods .......... So long as no Debenture Event of Default (as defined
herein) has occurred and is continuing, the Company will
have the right, at any time, to defer payments of interest on
the Junior Subordinated Debentures by extending the inter-
est payment period thereon for a period not exceeding 60
consecutive months with respect to each deferral period
(each an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the Jun-
ior Subordinated Debentures. If interest payments are so
deferred, Distributions on the Trust Preferred Securities
will also be deferred and the Company will not be permit-
ted, subject to certain exceptions described herein, to
declare or pay any cash distributions with respect to the
Company's capital stock or debt securities that rank pari
passu with or junior to the Junior Subordinated Deben-
tures. During an Extension Period, Distributions will con-
tinue to accumulate with income thereon compounded
monthly. Because interest would continue to accrue and
compound on the Junior Subordinated Debentures, to the
extent permitted by applicable law, holders of the Trust
Preferred Securities will be required to accrue income for
United States federal income tax purposes. See "Descrip-
tion of Junior Subordinated Debentures--Option to Defer
Interest Payment Period" and "Certain Federal Income
Tax Consequences--Interest Income and Original Issue
Discount."
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Maturity .......................... The Junior Subordinated Debentures will mature on
, 2028 which date may be shortened (such
date, as it may be shortened, the "Stated Maturity") to a
date not earlier than , 2003. The Company might
exercise its right to shorten the maturity of the Junior Sub-
ordinated Debentures under the circumstances where a Tax
Event, Investment Company Event or other undesirable
event could be avoided simply by shortening the maturity
of the Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures--General."
Redemption ........................ The Trust Securities are subject to mandatory redemption
upon repayment of the Junior Subordinated Debentures at
their Stated Maturity or their earlier redemption at a
redemption price equal to the aggregate Liquidation
Amount of the Trust Securities plus accumulated and
unpaid Distributions thereon to the date of redemption. The
Junior Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or after
, 2003 in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not in part),
within 90 days following the occurrence of a Tax Event or
an Investment Company Event, in each case at a redemp-
tion price equal to 100% of the principal amount of the
Junior Subordinated Debentures so redeemed, together
with any accrued but unpaid interest to the date fixed for
redemption. See "Description of the Trust Preferred
Securities--Redemption" and "Description of Junior Sub-
ordinated Debentures--Redemption."
Distribution of Junior
Subordinated Debentures ......... The Company has the right at any time to dissolve the
Trust, and, after satisfaction of creditors of the Trust as
required by applicable law, to cause the Junior
Subordinated Debentures to be distributed to holders of
Trust Preferred Securities in liquidation of the Trust. See
"Description of the Trust Preferred Securities--
Distribution of Junior Subordinated Debentures."
Guarantee ......................... Taken together, the Company's obligations under the vari-
ous documents described herein, including the Guarantee
Agreement, provide a full and unconditional guarantee (the
"Guarantee") of payments by the Trust of Distributions and
other amounts due on the Trust Preferred Securities. Under
the Guarantee Agreement, the Company guarantees the
payment of Distributions by the Trust and payments on liq-
uidation or redemption of the Trust Preferred Securities
(subordinate to the right to payment of Senior Debt and
Subordinated Debt of the Company) to the extent of funds
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
held by the Trust. If the Trust has insufficient funds to pay
Distributions on the Trust Preferred Securities (i.e., if the
Company has failed to make required payments under the
Junior Subordinated Debentures), a holder of the Trust Pre-
ferred Securities would have the right to institute a legal
proceeding directly against the Company to enforce pay-
ment of such Distributions to such holder. See "Description
of Junior Subordinated Debentures--Enforcement of Cer-
tain Rights by Holders of Trust Preferred Securities," and
"--Debenture Events of Default" and "Description of
Guarantee."
Ranking ............... The Trust Preferred Securities will rank pari passu, and
payments thereon will be made pro rata, with the Common
Securities of the Trust held by the Company, except as
described under "Description of the Trust Preferred
Securities--Subordination of Common Securities of the
Trust Held by the Company." The obligations of the Com-
pany under the Guarantee, the Junior Subordinated Deben-
tures and other documents described herein are unsecured
and rank subordinate and junior in right of payment to all
current and future Senior Debt and Subordinated Debt of
the Company, the amount of which is unlimited. The Com-
pany will apply a portion of the net proceeds of this offer-
ing to pay off the outstanding balance under the Credit
Facility, which was approximately $37.5 million as of
March 20, 1998. The Credit Facility will then be termi-
nated. Because the Company is a holding company, all
obligations of the Company relating to the securities
described herein will be effectively subordinated to all
existing and future liabilities of the Company's Subsidiar-
ies. The Company may cause additional trust preferred
securities to be issued by trusts similar to the Trust in the
future, and there is no limit on the amount of such securi-
ties that may be issued. In that event, the Company's obli-
gations under the junior subordinated debentures to be
issued to such other trusts and the Company's guarantees
of the payments by such trusts will rank pari passu with
the Company's obligations under the Junior Subordinated
Debentures and the Guarantee, respectively.
Voting rights ......... The holders of the Trust Preferred Securities will have no
voting rights except in limited circumstances. Except as
provided below, the affirmative consent of the holders of at
least a majority of the outstanding Trust Preferred Securi-
ties will be required by the Trust for amendments to the
Trust Agreement that would affect adversely the rights or
privileges of the holders of the Trust Preferred Securities.
The Property Trustee, the Administrative Trustees and the
Company may amend the Trust Agreement without the
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
consent of holders of the Trust Preferred Securities to
ensure that the Trust will be classified for United States
federal income tax purposes as a grantor trust or to ensure
that the Trust will not be required to register as an "invest-
ment company" under the Investment Company Act, even
if such action adversely affects the interests of such hold-
ers. See "Description of the Trust Preferred Securities--
Voting Rights; Amendment of the Trust Agreement."
ERISA considerations ......... Prospective purchasers should carefully consider the
information set forth under the caption "ERISA
Considerations."
American Stock Exchange
symbol ..................... UHG.Pr.A
Use of proceeds .............. The proceeds to the Trust from the sale of the Trust Pre-
ferred Securities offered hereby will be invested by the
Trust in the Junior Subordinated Debentures of the Com-
pany. The Company will use approximately $37.5 million
of the net proceeds of the offering to pay off in full the
indebtedness outstanding under the Credit Facility. The
balance of the proceeds will be applied to working capital,
which may include, without limitation, funding additional
investments in, or extensions of credit to, the Company's
operating subsidiaries for the expansion of operations.
In addition, a portion of the proceeds allocated to working
capital may be used for possible future acquisitions. See
"Use of Proceeds."
</TABLE>
16
<PAGE>
RISK FACTORS
Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information
before purchasing the Trust Preferred Securities offered hereby.
Risk Factors Relating to the Offering
Ranking of the Company's Obligations Under the Junior Subordinated Debentures
and the Guarantee
All obligations of the Company under the Guarantee, the Junior
Subordinated Debentures and other documents described herein are unsecured and
rank subordinate and junior in right of payment to all current and future
Senior Debt and Subordinated Debt of the Company, the amount of which is
unlimited.
The Company will use a portion of the proceeds from this offering to pay
off the outstanding balance under the Credit Facility which was $37.5 million
as of March 20, 1998. The Credit Facility will then be terminated. No assurance
can be given that the Company will be successful in obtaining a replacement
credit facility that will be on terms favorable to the Company. In addition, no
assurance can be given that any such replacement credit facility will not
contain terms and conditions in addition to those already contained in the
Junior Subordinated Debentures which might cause the Company to exercise its
existing right under the Junior Subordinated Debentures to defer the payment of
interest on the Junior Subordinated Debentures or otherwise restrict the
ability of the Company to pay interest on the Junior Subordinated Debentures
and, consequently, the Trust's ability to pay Distributions on the Trust
Preferred Securities.
In addition, because the Company is a holding company, substantially all
of the Company's assets consist of the capital stock of its Subsidiaries. All
obligations of the Company relating to the securities described herein will be
effectively subordinated to all existing and future liabilities of the
Company's Subsidiaries. As a holding company, the right of the Company to
participate in any distribution of assets of any Subsidiary upon such
Subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Trust Preferred Secur-ities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that Subsidiary,
except to the extent that the Company may itself be recognized as a creditor of
that Subsidiary. Accordingly, the Junior Subordinated Debentures and all
obligations of the Company relating to the Trust Preferred Securities will be
effectively subordinated to all existing and future liabilities of the
Subsidiaries and holders of the Trust Preferred Securities should look only to
the assets of the Company, and not of its Subsidiaries, for principal and
interest payments on the Junior Subordinated Debentures. None of the Indenture,
the Guarantee, the Guarantee Agreement or the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt
and Subordinated Debt, that may be incurred by the Company or its Subsidiaries.
Further, there is no limitation on the Company's ability to issue additional
junior subordinated debentures in connection with any further offerings of
trust preferred securities, and such additional debentures would rank pari
passu with the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures--Subordination" and "Description of Guarantee--Status
of the Guarantee."
Option to Defer Interest Payment Period
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, the Company has the right under the Indenture to defer
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 60 consecutive months with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such deferral, monthly Distributions on the Trust Preferred Securities by the
Trust will be deferred (and the amount of Distributions to which holders of the
Trust Preferred Securities are entitled will accumulate additional amounts
thereon at the rate of % per annum, compounded monthly, from the relevant
payment date for such Distributions) during any such Extension Period. During
any such Extension Period, the Company will be prohibited from making certain
payments or distributions with respect to the Company's capital stock
(including dividends on or redemptions of common or preferred stock) and from
making certain payments with respect to any debt securities of the Company that
rank pari passu with or junior in interest to the Junior Subordinated
Debentures; however, the Company will not be restricted from (a) paying
dividends or distributions in capital stock of the Company, (b) redeeming
rights or taking certain other actions under
17
<PAGE>
a stockholders rights plan, (c) making payments under the Guarantee or (d)
making purchases of common stock related to the issuance of common stock or
rights under any of the Company's benefit plans for its directors, officers,
employees or consultants. Further, during an Extension Period, the Company
would have the ability to continue to make payments on its Senior Debt and
Subordinated Debt, if any. Prior to the termination of any Extension Period,
the Company may further extend such Extension Period provided that such
extension does not cause such Extension Period to exceed 60 consecutive months
or to extend beyond the Stated Maturity. Upon the termination of any Extension
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the annual rate of %, compounded monthly), the Company
may elect to begin a new Extension Period subject to the above requirements.
There is no limitation on the number of times that the Company may elect to
begin an Extension Period. As a consequence of the Company's deferral of
interest payments, holders of the Trust Preferred Securities will not receive
cash distributions during such deferral periods (although the Distributions to
which holders of the Trust Preferred Securities are entitled will continue to
accumulate until payment in full), and the market price of the Trust Preferred
Securities is likely to be adversely affected by such deferral. A holder that
disposes of such holder's Trust Preferred Securities during an Extension
Period, therefore, might not receive the same return on such holder's
investment as a holder that continues to hold Trust Preferred Securities. See
"Description of the Trust Preferred Securities--Distributions," "Description of
Junior Subordinated Debentures--Option to Defer Interest Payment Period," and
"Description of Junior Subordinated Debentures--Debenture Events of Default."
Tax Consequences of Option to Defer Interest Payment Period and of a Deferral
of Interest Payment
Because the Company has no current plan to exercise its option to defer
payments of interest and considers the likelihood of exercising the option to
be a remote contingency as of the issue date of the Junior Subordinated
Debentures, it is the Company's position that the Junior Subordinated
Debentures will be treated as issued without "original issue discount" for
United States federal income tax purposes. As a result, holders of Trust
Preferred Securities will include interest in taxable income under their own
methods of accounting (i.e., cash or accrual). However, if the Internal Revenue
Service were to successfully challenge the Company's position, or if the
Company exercises its right to defer payments of interest, the holders of Trust
Preferred Securities will be required to include their pro rata share of
original issue discount in gross income as it accrues for United States federal
income tax purposes in advance of the receipt of cash. If the tax authorities
successfully asserted that, as of the issue date of the Junior Subordinated
Debentures, exercise of the deferment option is not a remote or incidental
contingency, interest would be reportable under the contingent payment debt
rules of the Treasury Regulations as of the issue date. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount." Should
the Company elect to exercise its right to defer payments of interest in the
future, the market price of the Trust Preferred Securities is likely to be
adversely affected. A holder that disposes of such holder's Trust Preferred
Securities during an Extension Period, therefore, might not receive the same
return on such holder's investment as a holder that continues to hold Trust
Preferred Securities. See "Description of Junior Subordinated
Debentures--Option to Defer Interest Payment Period."
Redemption Prior to Stated Maturity
The Company may, at its option, on or after , 2003, redeem the Junior
Subordinated Debentures in whole at any time or in part from time to time at
100% of the principal amount together with accrued but unpaid interest to the
date fixed for redemption and therefore cause a mandatory redemption of the
Trust Securities.
In addition, upon the occurrence and during the continuation of a Tax
Event or an Investment Company Event (whether occurring before or after
, 2003), the Company has the right, if certain conditions are met, to
redeem the Junior Subordinated Debentures in whole (but not in part) at 100% of
the principal amount together with accrued but unpaid interest to the date
fixed for redemption within 90 days following the occurrence of such Tax Event
or Investment Company Event and therefore cause a mandatory redemption of Trust
Securities. See "Description of the Trust Preferred Securities--Redemption."
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A "Tax Event" means the receipt by the Company and the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
original issuance of the Trust Preferred Secur-ities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is not, or within
90 days of such opinion, will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes, or (iii) the Trust is, or
will be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
An "Investment Company Event" means the receipt by the Company and the
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of any change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
becomes effective on or after the original issuance of the Trust Preferred
Securities.
If less than all of the Trust Securities issued by the Trust are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the Trust
Preferred Securities and the Common Securities based upon the relative
Liquidation Amounts of such classes. The particular Trust Preferred Securities
to be redeemed shall be selected by the Property Trustee from the outstanding
Trust Preferred Securities not previously called for redemption, by such method
as the Property Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $25 or an integral
multiple thereof) of the Liquidation Amount of Trust Preferred Securities.
Possible Distribution of Junior Subordinated Debentures to Holders of Trust
Preferred Securities; Risk of Taxation Upon a Distribution
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in liquidation of the Trust.
Because holders of the Trust Preferred Securities may receive Junior
Subordinated Debentures in liquidation of the Trust and because Distributions
are otherwise limited to payments on the Junior Subordinated Debentures,
prospective purchasers of the Trust Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and
should carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Dissolution" and "Description of
Junior Subordinated Debentures." If a Tax Event were to occur which would cause
the Trust to be subject to United States federal income tax with respect to
income received or accrued on the Junior Subordinated Debentures, a
distribution of the Junior Subordinated Debentures by the Trust could be a
taxable event to the Trust and the holders of the Trust Preferred Securities.
See "Certain Federal Income Tax Consequences--Distribution of Junior
Subordinated Debentures to Holders of Trust Preferred Securities."
Shortening of Stated Maturity of Junior Subordinated Debentures
The Company will have the right at any time to shorten the maturity of the
Junior Subordinated Debentures to a date not earlier than five years from the
date of issuance and thereby cause the Trust Preferred Securities to be
redeemed on such earlier date. See "Description of Junior Subordinated
Debentures--Redemption."
Limitations on Direct Actions Against the Company and on Rights Under the
Guarantee
The Guarantee guarantees to the holders of the Trust Preferred Securities
the following payments, to the extent not paid by the Trust: (i) any
accumulated and unpaid Distributions required to be paid on the Trust Preferred
Securities, to the extent that the Trust has funds on hand available therefor
at such time, (ii) the redemption price with respect to any Trust Preferred
Securities called for redemption, to the extent that the Trust has
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funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Trust (unless the
Junior Subordinated Debentures are distributed to holders of the Trust
Preferred Securities), the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions to the date of payment to
the extent that the Trust has funds on hand available therefor at such time
(the "Liquidation Distribution") and (b) the amount of assets of the Trust
remaining available for distribution to holders of the Trust Preferred
Securities after satisfaction of liabilities to creditors of the Trust as
required by applicable law. The holders of not less than a majority in
aggregate liquidation amount of the Trust Preferred Securities have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee
under the Guarantee Agreement. Any holder of the Trust Preferred Securities may
institute a legal proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. If the Company were
to default on its obligation to pay amounts payable under the Junior
Subordinated Debentures, the Trust would lack funds for the payment of
Distributions or amounts payable on redemption of the Trust Preferred
Securities or otherwise, and, in such event, holders of the Trust Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have occurred
and be continuing and such event is attributable to the failure of the Company
to pay interest on or principal of the Junior Subordinated Debentures on the
date on which such payment is due and payable, then a holder of Trust Preferred
Securities may institute a legal proceeding directly against the Company for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Trust Preferred Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will have a right
of set-off under the Indenture to the extent of any payment made by the Company
to such holder of Trust Preferred Securities in the Direct Action. Except as
described herein, holders of Trust Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures or assert directly any other rights in respect of the
Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Trust Preferred
Securities" and "Description of Guarantee." The Trust Agreement provides that
each holder of Trust Preferred Securities by acceptance thereof agrees to the
provisions of the Guarantee Agreement and the Indenture.
Ability to Make Payments on the Trust Preferred Securities and Junior
Subordinated Debentures; Dependence on Subsidiaries
The ability of the Trust to pay amounts due on the Trust Preferred
Securities is solely dependent upon the Company making payments on the Junior
Subordinated Debentures as and when required. The Company will have significant
interest expense under the Junior Subordinated Debentures. As of the date
hereof, after giving effect to the offering and the application of net proceeds
therefrom, the Company would have no indebtedness outstanding on a consolidated
basis. As a holding company without significant assets other than its equity
interest in the Subsidiaries, the Company's ability to pay interest on the
Junior Subordinated Debentures to the Trust (and consequently, the Trust's
ability to pay distributions on the Trust Preferred Securities and the
Company's ability to pay its obligations under the Guarantee) depends primarily
on cash and liquid investments of the Company and upon cash dividends and
interest payments the Company may receive in the future from its Subsidiaries.
Such Subsidiaries' ability to make payments to the Company is subject to such
Subsidiaries' profitability, financial condition, and capital expenditure and
other cash flow requirements. In addition, the Indenture does not prohibit the
Company or such Subsidiaries from incurring additional indebtedness including
indebtedness secured by their assets or properties, or from entering into
credit agreements or other financial arrangements that restrict such
Subsidiaries from making payments to the Company. While the Company expects
that its operating cash flow will be sufficient to cover its expenses including
interest costs, there can be no assurance with respect thereto. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Limited Covenants; Absence of Sinking Fund
The covenants in the Indenture are limited. The Company is not required
under the Indenture to meet any financial tests that measure the Company's
working capital, interest coverage or net worth in order to comply
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<PAGE>
with the terms of the Indenture. There are no covenants relating to the Company
in the Trust Agreement. As a result, neither the Indenture nor the Trust
Agreement protects holders of Junior Subordinated Debentures, or Trust
Preferred Securities, respectively, in the event of a material adverse change
in the Company's financial condition or results of operations, or limits the
ability of the Company or any Subsidiary to incur additional indebtedness.
Therefore, the provisions of these governing instruments should not be
considered a significant factor in evaluating whether the Company will be able
to comply with its obligations under the Junior Subordinated Debentures or the
Guarantee. Further, the Junior Subordinated Debentures do not have the benefit
of any sinking fund payments by the Company.
Limited Voting Rights
The holders of the Trust Preferred Securities will have no voting rights
except in limited circumstances relating only to the modification of the Trust
Preferred Securities and the exercise of the rights of the Trust as holder of
the Junior Subordinated Debentures and the Guarantee. Except as provided below,
the affirmative consent of the holders of at least a majority of the
outstanding Trust Preferred Securities will be required by the Trust for
amendments to the Trust Agreement that would affect adversely the rights or
privileges of the holders of the Trust Preferred Securities. Holders of Trust
Preferred Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, and such voting rights are vested
exclusively in the holder of the Common Securities except upon the occurrence
of certain events described herein. In no event will the holders of the Trust
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the
holder of the Common Securities. The Property Trustee, the Administrative
Trustees and the Company may amend the Trust Agreement without the consent of
holders of the Trust Preferred Securities to cure any ambiguity or make other
provisions not inconsistent with the Trust Agreement or to ensure that the
Trust will be classified for United States federal income tax purposes as a
grantor trust or to ensure that the Trust will not be required to register as
an "investment company" under the Investment Company Act, even if such action
adversely affects the interests of such holders. See "Description of the Trust
Preferred Securities--Voting Rights; Amendment of the Trust Agreement" and
"--Removal of Trustees."
Absence of Existing Public Market; Market Prices
There is no existing market for the Trust Preferred Securities. The Trust
Preferred Securities have been approved for listing on the American Stock
Exchange, subject to notice of issuance. There can be no assurance, however,
that an active and liquid trading market for the Trust Preferred Securities will
develop or that continued quotation of the Trust Preferred Securities will be
available on the American Stock Exchange. Although the representatives of the
Underwriters have informed the Trust and the Company that the Underwriters
intend to make a market in the Trust Preferred Securities offered hereby, the
Underwriters are not obligated to do so and any such market making activity may
be terminated at any time without notice to the holders of the Trust Preferred
Securities. Future trading prices of the Trust Preferred Securities will depend
on many factors including, among other things, prevailing interest rates, the
operating results and financial condition of the Company, and the market for
similar securities. As a result of the existence of the Company's right to defer
interest payments on or shorten the Stated Maturity of the Junior Subordinated
Debentures, the market price of the Trust Preferred Securities may be more
volatile than the market prices of debt securities that are not subject to such
optional deferrals or reduction in maturity. There can be no assurance as to the
market prices for the Trust Preferred Securities or the Junior Subordinated
Debentures that may be distributed in exchange for the Trust Preferred
Securities if the Company exercises its right to dissolve and liquidate the
Trust. Accordingly, the Trust Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that a holder of the Trust
Preferred Securities may receive in liquidation of the Trust, may trade at a
discount from the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
Risk Factors Relating to the Company
Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information in
evaluating the Company and its business before purchasing the Trust Preferred
Securities offered hereby.
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<PAGE>
Risks Associated with Growth Strategy
The acquisition of complementary lawn and garden companies and product
lines continues to be a principal component of the Company's growth strategy.
The Company's ability to successfully implement its strategy will depend upon a
number of factors including, among other things, the Company's ability to
identify attractive acquisition candidates, to consummate such acquisitions on
terms favorable to the Company, to obtain financing to consummate such
acquisitions on economically acceptable terms, to retain, hire and train
professional management and sales personnel at each such acquired business and
to promptly and profitably integrate the acquired operations into the Company's
operations. Acquiring additional businesses may also require the consent of the
Company's lenders. No assurance can be given that such consent will be
obtained. Any such acquisitions are likely to involve incurring additional debt
or the issuance of one or more classes or series of the Company's equity
securities, which could have a dilutive effect on the then outstanding Common
Stock of the Company. Other than a non-binding letter of intent relating to the
Proposed Acquisition, the Company currently has no agreements, commitments,
understandings or arrangements with respect to any acquisition. There can
be no assurance that the Proposed Acquisition will be consummated or that the
Company will continue to be able to manage its expanding operations
successfully, implement its acquisition strategy or that any acquired
operations will be profitable or will be successfully integrated into the
Company or that any such future acquisitions will not otherwise materially and
adversely affect the Company. See "Business -- Recent and Proposed
Acquisitions."
As a result of seven prior acquisitions, the Company is required to
amortize the excess of costs over net assets acquired (an aggregate of
approximately $57.4 million) over a period of up to 30 years. Although such
amortization does not have an effect on the Company's available capital, it
will be treated as an operating expense that will reduce the Company's reported
earnings. Future acquisitions could result in substantial additional
amortization expenses to the Company which would reduce future earnings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and Consolidated Financial Statements.
Customer Concentration; Consolidating Customer Base
The Company's customers include home improvement centers, mass
merchandisers, hardware stores, nurseries and garden centers and other retail
channels throughout the United States. The Company's three largest customers
for fiscal 1997, Home Depot, Lowe's and Kmart, accounted for approximately 26%,
10% and 7%, respectively, of its net sales during such year. During fiscal
1996, Home Depot, Lowe's, Kmart and Builder's Square accounted for 27%, 9%, 7%
and 5%, respectively, of the Company's net sales. During fiscal 1995, sales to
Home Depot, Kmart, Builders Square and Lowe's accounted for approximately 27%,
9%, 7% and 6%, respectively, of the Company's net sales. The Company's ten
largest customers as a group accounted for 71%, 69% and 65% of its net sales
during fiscal 1995, 1996 and 1997, respectively. Sales to such customers are
not governed by any contractual arrangement and are made pursuant to standard
purchase orders. While the Company believes that relations with its largest
customers are good, the loss of any of these customers could have a material
adverse effect on the Company.
The Company does not have long-term purchase agreements or other
contractual assurances as to future sales to these or any other Retail
Accounts. The loss of, or significant reduction in sales to, such Retail
Accounts could have a material adverse effect on the Company. Moreover, retail
distribution channels in the lawn and garden industry have been consolidating
in recent years, as home improvement and mass merchant retailers have replaced
local nurseries and garden centers as the dominant source for lawn and garden
products. To the extent such consolidation continues to occur, the Company's
sales and profitability may be increasingly sensitive to a significant
deterioration in the financial condition of, or other adverse developments in
its relationships with, one or more Retail Accounts. In addition, from time to
time, the Company has experienced credit losses due to customers seeking
protection under bankruptcy or similar laws. Although such credit losses have
not had a material adverse effect on the Company to date, there can be no
assurance that future credit losses will not have a material adverse effect on
the Company. See "Business -- Customers."
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Effect of Early Repayment of Outstanding Indebtedness - Possible Need for
Additional Financing
The Company intends to use substantially all of the proceeds from the sale
of the Junior Subordinated Debentures to repay the entire indebtedness
outstanding under the Credit Facility with certain financial institutions (the
"Lenders") pursuant to a credit agreement (the "Credit Agreement"). As a result
of the early payment, the Company will write off deferred financing costs of
approximately $1.4 million and incur a prepayment penalty of approximately
$735,000 during its quarter ending March 31, 1998 which will reduce its
reported income. Upon repayment of the outstanding indebtedness, the Credit
Facility will be terminated and the Company will have no alternate sources of
financing. Although the Company is currently negotiating new credit facilities
with several banks, there can be no assurance that the Company will be able to
obtain a new credit facility on terms acceptable to it, or at all. Failure to
obtain a new credit facility would materially adversely affect the Company's
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
Dependence on Weather Conditions
Weather is a significant factor in determining market demand for the
Company's products and is inherently unpredictable. Inclement weather during
the spring gardening season, particularly poor weekend weather, tends to
depress consumer purchases of do-it-yourself lawn and garden care products.
During protracted periods of inclement weather, sales of lawn and garden
products are likely to be severely diminished. In addition, lack of snow or
rain during the winter may adversely affect spring growing conditions and also
lower sales of lawn and garden products. Any of the foregoing may have a
material adverse effect on the Company. Without limiting the generality of the
foregoing, protracted or particularly severe weather conditions may adversely
impact the Company's ability to comply with its obligations under the Junior
Subordinated Debentures or to its lenders under any financing arrangements. In
recent months, large segments of the United States (particularly the east and
west coasts) have experienced severe weather conditions which may be due to a
phenomenon known as "El Nino." The effects of such severe weather on the
Company's operations for the balance of the current fiscal year and the fiscal
year ending June 30, 1999 cannot be predicted at this time. See "--Significant
Outstanding Indebtedness."
Competition
The consumer lawn and garden care industry is highly competitive and
somewhat fragmented. The Company competes with a combination of national and
regional companies ranging from large agri-chemical companies to garden catalog
businesses and companies specializing in the manufacture of lawn and garden
care products. Several of such companies, such as Solaris Group, a division of
Monsanto Company, and the Scotts Miracle Gro Company have captured a
significant, and in certain cases controlling, share of such markets. Many of
the Company's competitors have achieved significant national, regional and
local brand name and product recognition and engage in frequent and extensive
advertising and promotional programs, both generally and in response to efforts
by new competitors entering the market or existing competitors introducing new
products. Many of these companies have substantially greater financial,
technical, marketing and other resources than the Company. There can be no
assurance that the Company will be able to compete successfully or that
reacting to competitive pressures will not materially adversely affect the
Company. See "Business--Competition."
Dependence on Third-Party Manufacturing and Supply Arrangements
The Company purchases all of the material for its primary lawn and garden
product, WeedBlock, from Tredegar Industries, Inc. ("Tredegar") pursuant to a
supply arrangement that can be terminated by Tredegar at any time. The Company
purchases its basic materials for its other lawn and garden products from a
variety of suppliers. Although the Company has purchased all of its landscape
fabric supply from Tredegar for in excess of 10 years and believes that its
relationship with Tredegar is good, Tredegar is free to terminate its
relationship with the Company at any time and accordingly could market its
fabrics to other companies, including competitors of the Company. There can be
no assurance that the production capacity of Tredegar or the Company's other
suppliers, manufacturers and processors will be sufficient to satisfy the
Company's requirements or that alternate suppliers, manufacturers and
processors will be available on commercially reasonable terms, or at all. The
unavailability of certain materials, the unavailability of manufacturing and
processing sources or delays either in manufacturing or in locating new
manufacturing and processing sources could adversely affect the Company's
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ability to deliver its products on a timely and competitive basis. In addition,
because the Company recognizes a significant percentage of its annual sales
during a few months of the year, any delay in the delivery or the
unavailability of its products during such months could materially adversely
affect the Company. See "Business --Conversion, Manufacturing and Supply," and
"--Seasonality."
Seasonality
The Company's sales are highly seasonal due to the nature of the lawn and
garden business, which parallels the annual growing season. The Company's sales
and shipping are concentrated in the period from late December through May when
customers purchase supplies for spring planting and Retail Accounts increase
their inventory of lawn and garden products. To support this sales peak, the
Company must anticipate demand and increase inventories of finished goods
throughout the fall and winter. Accordingly, the Company's levels of raw
materials and finished goods inventories tend to be at their highest, relative
to sales, during the Company's first and second fiscal quarters. These factors
increase variations in the Company's quarterly results of operations and
potentially expose the Company to greater adverse effects of changes in
economic conditions and industry trends. Moreover, actual demand for the
Company's products may vary substantially from the anticipated demand, leaving
the Company with either excess inventory or insufficient inventory to satisfy
customer orders. Sales typically decline by early to mid-summer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations and Seasonality,"
"Business--Seasonality" and "--Inventory and Distribution."
Dependence on a Limited Number of Product Lines
Approximately 44% and 24% of the Company's net sales for fiscal 1997 were
derived from sales of landscape fabric and fertilizer spikes. In fiscal 1995
and 1996, landscape fabric represented 71% and 66% of the Company's net sales,
respectively. Any adverse developments with respect to either of these product
lines, whether arising from actions by existing or new competitors, the
inability of the Company to obtain adequate supplies of landscape fabrics or
the raw materials necessary to manufacture fertilizers, or otherwise, could
have a material adverse effect on the Company. The Company has also developed a
new marketing campaign for the Jobe's line of products, which has required, and
will require, the allocation of significant capital and other resources by the
Company. No assurance can be given that such campaign will be successful, in
which case the expenditures made to date and in the future in connection with
the campaign may not generate sufficient sales to be profitable or profitable
at the same level as has been achieved historically in connection with the
Jobe's line of products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business--Products" and "--Sales and
Marketing."
Retail Industry; General Economic Conditions
The Company sells its products through retailers, including home
improvement centers, mass merchandisers, hardware stores, nurseries and other
retail channels. Retail sales depend, in part, on general economic conditions.
A significant decline in such conditions could have a negative impact on sales
by retailers of products sold by the Company and consequently could have a
material adverse effect on the Company. Retail environments which are poor or
perceived to be poor, whether due to economic or other conditions, may lead
manufacturers and marketers, including the Company, to increase their
discounting and promotional activities. Such activities could have a material
adverse effect on the Company's profit margins and, consequently, its results
of operations. The Company may also not be able to fully offset the impact of
inflation through price increases in an unfavorable retail market.
Government Regulation
The Company is subject to many laws and governmental regulations and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
Fertilizer and Pesticide Regulation. Products marketed, or which may be
marketed, by the Company as fertilizers or pesticides are subject to an
extensive and frequently evolving statutory and regulatory framework, at both
the Federal and state levels.
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<PAGE>
The distribution and sale of pesticides is subject to regulation by the
U.S. Environmental Protection Agency ("EPA") pursuant to the Federal
Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), as well as regulation by
many states in a manner similar to FIFRA. Under FIFRA and similar state laws,
all pesticides must be registered with the EPA and the state and must be
approved for their intended use. FIFRA and state regulations also impose other
stringent requirements on marketing of such products. Moreover, many states
also impose similar requirements upon products marketed for use as fertilizing
materials, which are not typically regulated under FIFRA. Failure to comply
with the requirements of FIFRA and state laws that regulate marketing and
distribution of pesticides and fertilizers could result in the imposition of
sanctions, including, but not limited to, suspension or restriction of product
distribution, civil penalties and/or criminal sanctions.
The Company markets certain animal repellent and pesticide products that
are subject to FIFRA and to similar state regulations. The Company also markets
certain fertilizer products that are subject to regulation in some states. The
Company believes that it is in material compliance with FIFRA and applicable
state regulations regarding its material business operations. However, there
can be no assurance that the Company will be able to comply with future
regulations in every jurisdiction in which the Company's material business
operations are conducted without substantial cost or interruption of
operations. Moreover, there can be no assurance that future products marketed
by the Company will not also be subject to FIFRA or to state regulations. If
future costs of compliance with regulations governing pesticides or fertilizers
increase or exceed the Company's budgets for such items, the Company's business
could be adversely affected. If any of the Company's products are distributed
and/or marketed in violation of any of these regulations, the Company could be
subject to a recall of, or a sales limitation placed on, one or more of its
products, or civil or criminal sanctions, any of which could have a material
adverse effect upon the Company's business.
Environmental Regulation. The Company's manufacturing operations are
subject to various evolving federal, state and local laws and regulations
relating to the protection of the environment, which laws govern, among other
things, emissions to air, discharges to ground, surface water and groundwater,
and the generation, handling, storage, transportation, treatment and disposal
of a variety of hazardous and non-hazardous substances and wastes. Federal and
state environmental laws and regulations often require manufacturers to obtain
permits for these emissions and discharges. Failure to comply with
environmental laws or to obtain, or comply with, the necessary state and
federal permits can subject the manufacturer to substantial civil and criminal
penalties. Easy Gardener operates two manufacturing facilities and Weatherly
and Weed Wizard each operate one manufacturing facility. The Company believes
that all of its facilities are in substantial compliance with all applicable
material environmental laws. However, it is possible that there are material
environmental liabilities of which the Company is unaware. If the costs of
compliance with the various existing or future environmental laws and
regulations, including any penalties which may be assessed for failure to
obtain necessary permits, exceed the Company's budgets for such items, the
Company's business could be adversely affected.
Potential Environmental Cleanup Liability. The Federal Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
and many similar state statutes, impose joint and several liability for
environmental damages and cleanup costs on past or current owners and operators
of facilities at which hazardous substances have been discharged, as well as on
persons who generate, transport or arrange for disposal of hazardous substances
at a particular site. In addition, the operator of a facility may be subject to
claims by third parties for personal injury, property damage or other costs
resulting from contamination present at or emanating from property on which its
facility is located. Easy Gardener operates two manufacturing facilities and
Weatherly and Weed Wizard each operate one manufacturing facility. Moreover,
the Company or its predecessors have owned or operated other manufacturing
facilities in the past and may have liability for remediation of such
facilities in the future, to the extent any is required. In this regard,
Weatherly previously owned a facility that was the subject of certain soil
remediation activities. Although this facility was sold by Weatherly prior to
the Company's acquisition of Weatherly, there can be no assurance that the
Company will not be liable for any previously existing environmental
contamination at the facility. Moreover, although the purchaser of the facility
indemnified Weatherly for any environmental contamination liability and the
sellers of Weatherly, in turn, indemnified the Company from such liability,
there can be no assurance that, if required, the indemnifying parties will be
able to fulfill their respective obligations to indemnify the Company.
Furthermore, certain business operations of the Company's subsidiaries also
involve shipping hazardous waste off-site for disposal. As a result, the
Company could be subject to liability under these statutes. The Company could
also incur liability under
25
<PAGE>
CERCLA or similar state statutes for any damage caused as a result of the
release of hazardous substances owned by the Company but processed and
manufactured by others on the Company's behalf. As a result, there can be no
assurance that the manufacture of the products sold by the Company will not
subject the Company to liability pursuant to CERCLA or a similar state statute.
Furthermore, there can be no assurance that Easy Gardener, Weatherly and Weed
Wizard will not be subject to liability relating to manufacturing facilities
owned and/or operated by them currently or in the past.
Other Regulations. The Company is also subject to various other federal,
state and local regulatory requirements such as worker health and safety,
transportation, and advertising requirements. Failure to comply with these
requirements could result in the imposition of fines by governmental
authorities or awards of damages to private litigants. See
"Business--Government Regulation."
Product Liability
The Company, as a manufacturer of lawn and garden care and pesticide
products, may be exposed to significant product liability claims by consumers.
Although the Company has obtained product liability insurance coverage for U.S.
Home & Garden Inc. and Golden West in the aggregate amount of $3.0 million, and
for Easy Gardener, Weatherly and Weed Wizard in the aggregate amount of $2.0
million (with all policies limited to $1.0 million per occurrence), and has
obtained three umbrella policies in the amounts of $5.0 million, $15.0 million
and $20.0, respectively, there can be no assurance that such insurance will
provide coverage for any claim against the Company or will be sufficient to
cover all possible liabilities. In the event a successful suit is brought
against the Company, unavailability or insufficiency of insurance coverage
could have a material adverse effect on the Company. Moreover, any adverse
publicity arising from claims made against the Company, even if such claims
were not successful, could adversely affect the reputation and sales of the
Company's products.
Uncertainty of Protection of Trademarks and Proprietary Rights
The Company believes that its ability to successfully implement its growth
strategy is partially dependent on its ability to use its trademarks, in
particular, Easy Gardener, Jobe's, Weed Wizard and WeedBlock. In addition,
except for patents covering two lawn edge products currently sold by the
Company and certain products obtained as a result of the acquisition of
Weatherly, none of the Company's products is covered by patents. There can be
no assurance that the Company will apply for any additional trademark or patent
protection relating to its products or that its current trademarks and patents
will be enforceable or adequately protect the Company from infringement of its
proprietary rights. Although the Company believes that the products sold by it
do not infringe upon the patents or violate the proprietary rights of others,
it is possible that such infringement or violation has occurred or may occur.
In the event that products sold by the Company are deemed to infringe upon the
patents or proprietary rights of others, the Company could be required to
modify its products or obtain a license for the manufacture and sale of such
products. There can be no assurance that, in such an event, the Company would
be able to do so in a timely manner, upon acceptable terms and conditions, or
at all, and the failure to do any of the foregoing could have a material
adverse effect upon the Company. Moreover, there can be no assurance that the
Company will have the financial or other resources necessary to enforce or
defend a patent infringement or proprietary rights violation action. In
addition, if the Company's products or proposed products are deemed to infringe
upon the patents or proprietary rights of others, the Company could, under
certain circumstances, become liable for damages, which could also have a
material adverse effect on the Company. See "Business--Trademarks, Proprietary
Information and Patents."
Legal Proceeding
In response to a claim for trademark infringement filed on July 30, 1997
by Easy Gardener against Dalen Products, Inc. ("Dalen") in the United States
District Court for the Western District of Texas, Waco Division, Dalen filed a
counterclaim against Easy Gardener and a third party complaint against the
Company. Dalen alleges, among other things, that the Company and Easy Gardener
monopolized or attempted to monopolize the market for landscape fabrics; that
the Company and Easy Gardener tortiously interfered with Dalen's contractual
and prospective contractual relationships; and that Easy Gardener infringed a
Dalen trademark, deceptively
26
<PAGE>
advertised the thickness of one of its products, and misrepresented the
porosity of a Dalen product. Dalen's counterclaim and third party complaint
seek an award of unspecified damages and the entry of unspecified injunctive
relief. An adverse ruling could have a material adverse effect on the Company.
See "Business--Legal Proceeding."
Dependence on Management
The success of the Company will be largely dependent on the personal
efforts of Robert Kassel, its Chairman of the Board, Chief Executive Officer
and President, Richard Raleigh, its Chief Operating Officer, and Richard
Grandy, the President of Easy Gardener, all of whom devote their full time to
the affairs of the Company. Although the Company has entered into employment
agreements with Mr. Kassel and Mr. Raleigh which expire on March 31, 1998,
subject to automatic renewal unless terminated, and an employment agreement
with Mr. Grandy that expires in August 1998, and has obtained "key man" life
insurance in the amount of $2.0 million on the life of Mr. Kassel and $1.0
million on the lives of each of Messrs. Raleigh and Grandy, the loss of the
services of either Mr. Kassel, Mr. Raleigh or Mr. Grandy could have a material
adverse effect on the Company. In addition, the employment agreements provide
that Messrs. Kassel and Raleigh will receive a significant severance payment
from the Company upon a change in control of the Company or the occurrence of
certain other events as described therein. The success of the Company may also
be dependent, in part, upon its ability to hire and retain additional qualified
sales and marketing personnel. There can be no assurance that the Company will
be able to hire or retain such necessary personnel. See "Management." In
addition, only two of the current five members of the Company's Board of
Directors may be considered to be "independent" as they are not officers or
employees of the Company or its subsidiaries. See "Certain Transactions."
USE OF PROCEEDS
All of the proceeds to the Trust from the sale of the Trust Preferred
Securities offered by it hereby will be invested by the Trust in the Junior
Subordinated Debentures. The net proceeds to the Company from the sale of the
Junior Subordinated Debentures are estimated to be approximately $52,225,000
(approximately $60,145,000 if the Underwriters' over-allotment option is
exercised in full) after deducting the estimated underwriting compensation and
offering expenses payable by the Company.
The Company expects to use the net proceeds to repay approximately $37.5
million outstanding under its Credit Facility, which consists of: (i)
approximately $30.2 million outstanding under Easy Gardener's term loan, of
which approximately $10.0 million was incurred in February and March 1998 to
fund the purchase prices of the acquisitions of the assets of Weed Wizard, Inc.
and Landmaster Products, Inc.; and (ii) approximately $7.3 million outstanding
under Easy Gardener's revolving credit facility. The remaining proceeds will be
allocated to working capital which may include, without limitation, funding
additional investments in, or extensions of credit to, the Company's operating
subsidiaries for the expansion of operations. In addition, a portion of the
proceeds allocated to working capital may be used for possible future
acquisitions. The Company may use a portion of the proceeds allocated to
working capital to acquire businesses or products which the Company believes
will enhance its business. While the Company actively seeks and evaluates
possible acquisition opportunities, except for the Proposed Acquisition the
Company currently has no agreements, commitments, understandings or
arrangements with respect to any acquisition. There can be no assurance that
the Proposed Acquisition or any other acquisition will be consummated.
Proceeds not immediately required for the purposes set forth above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other investment grade
interest-bearing investments.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The Trust
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures will
be included in the notes to consolidated financial statements. Estimated
underwriting compensation and other estimated offering expenses will be
capitalized as a
27
<PAGE>
deferred financing cost and amortized over the life of the Junior Subordinated
Debentures. For financial reporting purposes, the Company will record
Distributions payable on the Trust Preferred Securities and amortization of
deferred financing costs as interest expense in the consolidated statements of
operations.
Future reports of the Company filed under the Exchange Act will include a
footnote to the financial statements stating that (i) the Trust is wholly
owned, (ii) the sole assets of the Trust are the Junior Subordinated Debentures
(specifying the principal amount, interest rate and maturity date of such
Junior Subordinated Debentures), and (iii) the back up obligations, in the
aggregate, constitute a full and unconditional guarantee by the Company of the
obligations of the Trust under the Trust Preferred Securities. The Trust will
not provide separate reports under the Exchange Act.
28
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of December 31, 1997 and as adjusted to give effect to: (i) the
issuance by the Trust of the 2,200,000 Trust Preferred Securities offered
hereby, (ii) the receipt by the Company of the proceeds, net of estimated
underwriting compensation and other estimated offering expenses, from the
corresponding sale of the Junior Subordinated Debentures to the Trust, and
(iii) the application by the Company of the net proceeds therefrom as described
under "Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1997
-------------------------
Actual As Adjusted
---------- ------------
(Dollars in thousands)
<S> <C> <C>
Short-term debt ............................................... $ 6,086 $
======== ========
Notes payable, less current portion ........................... $ 16,430 $
Company obligated mandatorily redeemable preferred securities
of subsidiary trust holding solely junior subordinated
debentures(1) ................................................ 55,000
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares authorized;
none issued or outstanding .................................
Common stock, $.001 par value; 30,000,000 shares authorized;
19,860,000 shares issued and outstanding(2); ............... 20 20
Additional paid-in capital ................................... 49,775 49,775
Accumulated deficit(3) ....................................... (3,179) (4,460)
-------- --------
Total stockholders' equity ................................. 46,616 45,335
-------- --------
Total capitalization .................................... $ 63,046 $100,335
======== ========
</TABLE>
- ------------
(1) The subsidiary trust is the Trust, which will hold an aggregate principal
amount of $56,700,000 of the Junior Subordinated Debentures as its sole
asset. The Trust Preferred Securities are issued by the Trust. The Junior
Subordinated Debentures will bear interest at the rate of % per annum
and will mature on 2028, which date may be shortened to a date
not earlier than , 2003 if certain conditions are met. The Junior
Subordinated Debentures are redeemable prior to maturity at the option of
the Company (i) on or after , 2003, in whole at any time or in
part from time to time, or (ii) at any time, in whole (but not in part),
within 90 days following the occurrence and continuation of a Tax Event or
an Investment Company Event. See "Description of Junior Subordinated
Debentures--Redemption." The Company owns all of the Common Securities of
the Trust.
(2) Does not include (i) an aggregate of approximately 2,550,000 shares of
Common Stock reserved for issuance upon exercise of outstanding options
under the Stock Option Plans; (ii) an aggregate of approximately 890,000
shares of Common Stock which may be issued upon exercise of options
available for future grant under the Stock Option Plans; and (iii)
approximately 6,270,000 shares issuable upon exercise of options granted
outside of the Stock Option Plans and certain outstanding warrants,
exclusive of any shares that may be issuable as a result of the
anti-dilution provisions of such options and warrants. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Management--Stock Option Plan," "Certain Transactions," "Underwriting"
and Note 9 of Notes to Consolidated Financial Statements.
(3) The accumulated deficit, as adjusted, reflects deferred financing costs of
approximately $1.4 million and a prepayment penalty of approximately
$735,000 ($1,281,000 net of tax benefits) expensed as a result of the
early repayment of the entire indebtedness outstanding under Easy
Gardener's credit facility from the assumed use of proceeds from the sale
of the Junior Subordinated Debentures to the Trust. See "Use of Proceeds."
29
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
(in thousands, except percentages, ratios and per share data)
The following selected financial data at and for the years ended June 30,
1993, 1994, 1995, 1996 and 1997 and at and for the six months ended December
31, 1996 and 1997 have been derived from the Company's consolidated financial
statements. Such information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of the Company, including the notes
thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------
1993 1994 1995 1996 1997
--------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales ............................. $2,910 $ 3,063 $ 19,692 $ 27,031 $ 52,046
Gross profit .......................... 1,402 1,608 10,541 14,361 28,397
Selling, general and administrative
expenses(1) .......................... 1,826 6,786 7,152 10,612 17,745
------ -------- ---------- -------- ----------
Income (loss) from operations ......... (424) (5,178) 3,389 3,749 10,652
Interest expense, net ................. (45) (41) (1,776) (1,940) (3,262)
Income (loss) before extraordinary
expense .............................. (469) (5,219) 1,575 2,524 4,190
------ -------- ---------- -------- ----------
Extraordinary gain (expense), net ..... 389 (1,007)
------ -------- ---------- -------- ----------
Net income (loss) ..................... $ (80) $ (5,219) $ 1,575 $ 2,524 $ 3,183
====== ======== ========== ======== ==========
Dilutive income (loss) per share:
Income (loss) per share before
extraordinary expense(2) ............. $ (.22) $ (1.31) $ 0.16 $ 0.19 $ 0.26
Net income (loss) per share(2) ........ $ (.04) $ (1.31) $ 0.16 $ 0.19 $ 0.20
====== ======== ========== ======== ==========
Weighted average number of
common and common equivalent
shares outstanding(2) ................ 2,178 3,980 10,125 13,361 16,068
====== ======== ========== ======== ==========
Other Data(3):
EBITDA(4) ............................. $ 4,026 $ 4,583 $ 12,642
Interest expense, net ................. 1,776 1,940 3,262
Depreciation and amortization ......... 637 834 1,990
Capital expenditures .................. 151 261 528
Net cash provided by (used in)
operating activities ................. 438 618 10,545
Net cash (used in) investing
activities ........................... (15,576) (2,103) (29,594)
Net cash provided by financing
activities ........................... 16,021 1,195 20,452
Growth Rates(3):
Net sales growth ...................... 37.3% 92.5%
EBITDA growth(4) ...................... 13.8 175.9
Income from Operations growth ......... 10.6 184.1
Margins(3):
EBITDA margin(4)(5) ................... 20.4% 17.0% 24.3%
Operating income (loss) margin(6) 17.2 13.9 20.5
Net income (loss) margin .............. 8.0 9.3 6.1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Statement of Income Data:
Net sales ............................. $ 12,939 $15,538
Gross profit .......................... 7,114 8,159
Selling, general and administrative
expenses(1) .......................... 7,312 8,552
-------- -------
Income (loss) from operations ......... (198) (393)
Interest expense, net ................. (1,332) (1,493)
Income (loss) before extraordinary
expense .............................. (1,055) (1,086)
-------- -------
Extraordinary gain (expense), net ..... (1,007)
-------- -------
Net income (loss) ..................... $ (2,062) $(1,086)
======== =======
Dilutive income (loss) per share:
Income (loss) per share before
extraordinary expense(2) ............. $ (0.08) $ (0.07)
Net income (loss) per share(2) ........ $ (0.15) $ (0.07)
======== =======
Weighted average number of
common and common equivalent
shares outstanding(2) ................ 13,437 15,552
======== =======
Other Data(3):
EBITDA(4) ............................. $ 760 $ 870
Interest expense, net ................. 1,332 1,493
Depreciation and amortization ......... 958 1,263
Capital expenditures .................. 230 486
Net cash provided by (used in)
operating activities ................. (1,540) 682
Net cash (used in) investing
activities ........................... (24,667) (1,414)
Net cash provided by financing
activities ........................... 25,783 11,383
Growth Rates(3):
Net sales growth ...................... 20.1%
EBITDA growth(4) ...................... 14.5
Income from Operations growth ......... (98.5)
Margins(3):
EBITDA margin(4)(5) ................... 5.9% 5.6%
Operating income (loss) margin(6) (1.5) (2.5)
Net income (loss) margin .............. (15.9) (7.0)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
------------------------------------------------------ ------------------------------
1993 1994 1995 1996 1997 1996 1997
------------ ------- --------- --------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratios:
EBITDA to interest expense, net(4) 2.3 x 2.4 x 3.9 x .6x .6x
Earnings to fixed charges(7) ......... 468(9) 5,219(9) 1.9 x 1.9 x 3.1 x 1,530(9) 1,886(9)
Pro forma ratio of earnings to fixed
charges(7)(8) ....................... 3.6 x 1,488(9)
At
December
At June 30, 31,
--------------------------------------------------------- -----------
1993 1994 1995 1996 1997 1997
-------- ---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency) ......... $ 607 $ (347) $ 3,326 $ 5,328 $ 2,292 $15,753
Intangible assets, net ............... 2,858 2,046 16,692 17,167 44,364 43,474
Total assets ......................... 5,977 5,654 28,140 33,584 68,475 77,636
Short-term debt ...................... 1,134 594 2,200 3,650 8,990 6,086
Long-term debt ....................... 8,000 6,238 17,570 16,430
Stockholders' equity ................. 3,827 3,150 15,339 19,370 31,926 46,616
</TABLE>
- ------------
(1) Includes goodwill amortization expense of $91,000, $105,000, $475,000,
$585,000, $1.3 million, $590,000 and $730,000 for the fiscal years ended
June 30, 1993, 1994, 1995, 1996 and 1997 and the six months ended December
31, 1996 and 1997, respectively.
(2) Net income (loss) per share calculations for all periods presented reflects
the retroactive adoption of the provisions of Statement of Financial
Accounting Standards No. 128, Earnings Per Share (SFAS 128). See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," Summary of Accounting Policies of Consolidated Financial
Statements and Note 14 of Notes to Consolidated Financial Statements.
(3) Certain Other Data, Growth Rates and Margins for the fiscal years ended
June 30, 1993, 1994 and 1995 have been omitted due to the lack of relevant
comparison after the Company's acquisition of Easy Gardener, Inc. in
September 1994.
(4) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and non-recurring charges. EBITDA is not
intended to represent cash flow from operations as defined by generally
accepted accounting principles and should not be considered as an
alternative to cash flow or as a measure of liquidity or as an alternative
to net earnings as indicative of operating performance. The Company's
reported EBITDA may not be comparable to similarly titled measures of other
companies that do not have non-recurring charges. EBITDA, EDITDA growth,
EBITDA margin, and EBITDA to interest expense, net are included herein
because management believes they are useful for measuring the Company's
ability to service its debt.
(5) EBITDA margins represent EBITDA divided by net sales.
(6) Operating income (loss) margin represents income (loss) from operations
divided by net sales.
(7) For purposes of calculating the ratio and pro forma ratio of earnings to
fixed charges, earnings consist of income before income taxes, plus fixed
charges. Fixed charges consist of the interest expense on all
indebtedness, including amortization of deferred financing costs, and the
estimated representative interest factor of rental expense.
(8) The average outstanding debt balances for the year ended June 30, 1997 and
the six-month period ended December 31, 1997 were approximately
$28,877,000 and $24,188,000, respectively, and gross interest expense was
approximately $3,338,000 and $1,597,000, respectively. The pro forma
ratios assume the replacement of this indebtedness with a corresponding
amount of Junior Subordinated Debentures on July 1, 1996. If, on a
consolidated basis, the entire $55,000,000 principal amount of Junior
Subordinated Debentures had been outstanding throughout the periods, total
interest expense would have been approximately $5,225,000 and $2,612,500,
respectively.
(9) Earnings are inadequate to cover fixed changes. Amounts shown reflect the
coverage deficiency for this ratio to equal one.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company manufactures and markets a broad range of brand-name consumer
lawn and garden products through its wholly-owned subsidiaries, Easy Gardener
and Golden West, and through Easy Gardener's wholly-owned subsidiaries,
Weatherly and Weed Wizard. Since 1992, the Company has consummated seven
acquisitions of complementary lawn and garden companies and product lines for an
aggregate consideration of over $75 million in cash, notes and equity
securities. As a result of such acquisitions, the Company has recognized a
significant amount of goodwill which, in the aggregate, is approximately $57.5
million at the date of this Prospectus. The Company is currently amortizing such
goodwill using the straight-line method over various time periods ranging from
20 to 30 years and amortization expenses for the fiscal year ended June 30, 1997
were $1.3 million or $0.08 per dilutive share. See Consolidated Financial
Statements.
The Company's results of operations for the fiscal year ended June 30,
1997 were significantly affected by the acquisition of Weatherly in August
1996. In connection with the acquisition of Weatherly, the Company's
outstanding notes payable were refinanced and replaced with a new credit
facility (the "Refinancing"). As a result of the Refinancing, the Company was
required to record an extraordinary expense of $1.0 million, net of tax
benefits, for the fiscal year ended June 30, 1997, which expense consisted of
the write-off of deferred finance costs at June 30, 1996 plus prepayment
penalties. Such extraordinary expense reduced the Company's net income per
share for fiscal 1997 by $0.06, from $0.26 to $0.20. See Notes 13 and 14 to
Notes to Consolidated Financial Statements.
The Company experienced net sales growth of 37% from fiscal 1995 to fiscal
1996 and 93% from fiscal 1996 to fiscal 1997. The Company believes that this
growth in net sales was primarily attributable to expansion of its product
lines through the acquisition of complementary lawn and garden businesses and
product lines. Net sales were also positively affected by an increase in sales
of pre-existing product lines. Assuming each of the Company's first five
acquisitions had been completed prior to the beginning of fiscal 1996, the
growth in net sales from fiscal 1996 to fiscal 1997 would have been 15%.
The Company was required to calculate its net income per share for all
periods presented in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings Per Share," which is effective for periods
ending after December 15, 1997 and requires the Company to report basic
earnings per share (giving no dilutive effect to derivative securities) and
diluted earnings per share (reflecting the dilutive effect of all derivative
securities). Under the SFAS No. 128 dilutive earnings per share calculation,
all derivative securities with exercise prices below the market price have been
assumed exercised. All proceeds from the exercise of such derivative securities
have been assumed to be used to repurchase common stock (at an average stock
price).
In April 1996, the Company entered into an agreement to exchange certain
unsold assets held for sale for certain trade credits issued by a third party
to be applied against future purchases of products and services from such third
party (primarily the purchase of operating assets and advertising time). These
trade credits are listed as an asset on the balance sheet of the Company. The
agreement requires the Company to pay a portion of the purchase price of the
products and services received, ranging from 45% to 90% of the total purchase
price, and apply the trade credits to the balance. All trade credits will
expire to the extent not used in April 1999 and are required to be recognized
as an expense to the Company as used, with any balance remaining in April 1999
being expensed at that time. The maximum that the Company is entitled to
receive in credits and cash is $1.6 million, of which the Company had received
approximately $50,000 in cash and had expensed approximately $400,000 in
credits as of December 31, 1997. See Note 2 of Notes to Consolidated Financial
Statements. No assurance can be given that the Company will use all or any
portion of such trade credits or that, to the extent that the Company uses the
trade credits, such trade credits will be used in a manner likely to generate
additional sales of the Company's products. See "Business -- Sales and
Marketing."
Results of Operations
The following table sets forth, for the periods indicated, certain
selected financial data as a percentage of net sales:
32
<PAGE>
<TABLE>
<CAPTION>
Percentages of Net Sales
-------------------------------------------------------------------
Six Months Ended
Year Ended June 30, December 31,
--------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales ................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ............................... 46.5 46.9 45.4 45.0 47.5
------ ------ ------ ------ ------
Gross profit ................................ 53.5 53.1 54.6 55.0 52.5
Selling and shipping expenses ............... 22.2 23.2 21.6 30.8 30.0
General and administrative expenses ......... 14.1 16.1 12.5 25.7 25.0
------ ------ ------ ------ ------
Income (loss) from operations ............... 17.2 13.9 20.5 (1.5) (2.5)
Interest expense ............................ 9.2 7.4 6.4 10.6 10.3
Income tax (expense) benefit ................ (0.2) 2.7 (6.2) 3.7 5.2
Extraordinary expense, net .................. -- -- 1.9 (7.8) --
------ ------ ------ ------ ------
Net income (loss) ........................... 8.0 9.3 6.1 (15.9) (6.9)
====== ====== ====== ====== ======
</TABLE>
Six Months Ended December 31, 1997 Compared to Six Months Ended December
31, 1996
Net sales. Net sales increased by $2.6 million, or 20%, to $15.5 million
during the six months ended December 31, 1997, from $12.9 million during the
comparable period in 1996. The increase in net sales was primarily a result of
the August 1996 acquisition of Weatherly and the May 1997 acquisition of the
Plasti-Chain line of plastic chain links and decorative edgings, combined with
internal growth of the Company's pre-existing product lines.
Gross profit. Gross profit increased by $1.1 million, or 15%, to $8.2
million for the six months ended December 31, 1997, from $7.1 million during
the comparable period in 1996. This increase was due primarily to the Weatherly
acquisition. Gross profit as a percentage of net sales decreased to 52.5%
during the six months ended December 31, 1997, from 55.0% during the comparable
period in 1996. The decrease in gross profit as a percentage of net sales was
primarily attributable to the decrease in sales of higher-margin products.
Selling and shipping expenses. Selling and shipping expenses increased
$671,000, or 17%, to $4.7 million during the six months ended December 31,
1997, from $4.0 million during the comparable period in 1996. This increase was
primarily the result of an increase in the amount of products shipped, which
was a consequence of the acquisition of Weatherly and an increase in sales of
pre-existing product lines. Selling and shipping expenses as a percentage of
net sales decreased from 30.8% during the six months ended December 31, 1996,
to 30.0% during the comparable period in 1997. This decrease was a result of
economies of scale achieved from the sale of new products to existing
customers.
General and administrative expenses. General and administrative expenses
increased $569,000, or 17%, to $3.9 million during the six months ended
December 31, 1997 from $3.3 million during the comparable period in 1996. This
increase was primarily due to increased amortization of goodwill as a result of
the acquisition of Weatherly. Furthermore, the increase is due to the addition
of certain administrative personnel as part of the Company's efforts to build
an infrastructure that it believes will be able to more readily integrate any
future products or businesses that may be acquired. As a percentage of net
sales, general and administrative expenses decreased from 25.7% during the six
months ended December 31, 1996, to 25.0% during the comparable period in 1997.
This improvement is primarily due to the closing of the Weatherly
administrative offices in February 1997 and the integration of certain
administrative functions into the Company's existing infrastructure.
Loss from operations. Loss from operations increased by $195,000, or 98%,
to $393,000 during the six months ended December 31, 1997 from $198,000 during
the comparable period in 1996. The loss from operations in actual dollars was
primarily due to the seasonal nature of the business. The increase in the loss
for the 1997 period was primarily attributable to the increased general and
administrative costs resulting from increased amortization of goodwill and, to
a lesser extent increased marketing expenses. As a percentage of net sales,
loss from operations increased to 2.5% for the six months ended December 31,
1997 from 1.5% during the comparable period in 1996.
Interest expense. Interest expense increased by $222,000, or 16%, to $1.6
million during the six months ended December 31, 1997, from $1.4 million during
the comparable period in 1996. The increase in interest
33
<PAGE>
expense is primarily related to the interest associated with the increase in
term debt associated with the Weatherly acquisition and the acquisition of the
Plasti Chain links and decorative edgings, which was partially offset by a
decrease in the Company's effective borrowing rate.
Income taxes. Income tax benefits increased to $800,000 during the six
months ended December 31, 1997 from $475,000 during the comparable period in
1996 primarily due to the increase in the Company's effective tax rate and, to
a lesser extent, the increase in the loss before income taxes and extraordinary
expense. The income tax benefit for each interim period is based upon the
Company's estimated effective income tax rate for the year.
Extraordinary expense, net. In connection with the acquisition of
Weatherly in August 1996, the Company refinanced its term debt and its
revolving line of credit. As a result of its refinancing, the Company was
required to record an extraordinary expense of $1.0 million net of tax benefits
of $452,000, during the six months ended December 31, 1996. The expense
consisted of deferred finance costs at June 30, 1996, net of accumulated
amortization, plus prepayment penalties.
Net loss. Net loss decreased by $976,000, or 47%, to $1.1 million during
the six months ended December 31, 1997 from $2.1 million during the comparable
period in 1996. This decrease was attributable to the $1.0 million
extraordinary expense incurred in the 1996 period due to the refinancing. Net
loss per common share decreased $0.08 to $0.07 during the six months ended
December 31, 1997 from $0.15 during the comparable period in 1996. The decrease
was primarily attributable to the foregoing expense incurred during the 1996
period and, to a lesser extent, the increase in the number of weighted average
common and equivalent shares outstanding during the 1997 period.
Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30,
1996
Net sales. Net sales increased by $25.0 million, or 93%, to $52.0 million
in fiscal 1997 from $27.0 million in fiscal 1996. The increase in net sales was
primarily a result of the August 1996 acquisition of Weatherly and increased
sales of the Company's landscape fabrics and landscape edging products.
Gross profit. Gross profit increased by $14.0 million, or 98%, to $28.4
million in fiscal 1997 from $14.4 million in fiscal 1996. This increase was due
primarily to the Weatherly acquisition. Gross profit as a percentage of net
sales increased to 54.6% in fiscal 1997 from 53.1% in fiscal 1996. The increase
in gross profit as a percentage of net sales was primarily attributable to the
sales of higher-margin products acquired in the Weatherly acquisition.
Selling and shipping expenses. Selling and shipping expenses increased
$4.9 million, or 78%, to $11.2 million in fiscal 1997 from $6.3 million in
fiscal 1996. This increase was primarily the result of an increase in the
amount of products shipped, which was a consequence of the acquisition of
Weatherly and an increase in sales of pre-existing product lines, particularly
landscape fabrics and landscape edging products. Selling and shipping expenses
as a percentage of net sales decreased from 23.2% in fiscal 1996 to 21.6% in
fiscal 1997. This decrease was primarily due to the consolidation of the
Company's customer services at the Waco, Texas office and the elimination of
the majority of the Weatherly sales positions in connection with the
integration of the acquisition.
General and administrative expenses. General and administrative expenses
increased $2.1 million, or 50%, to $6.5 million in fiscal 1997 from $4.4
million in fiscal 1996. This increase was primarily the result of the
acquisition of Weatherly. As a percentage of net sales, general and
administrative expenses decreased from 16.1% in fiscal 1996 to 12.5% in fiscal
1997. This improvement is primarily due to the closing of the Weatherly
administrative offices in February 1997 and the integration of certain
administrative functions into the Company's existing infrastructure.
Income from operations. Income from operations increased by $6.9 million,
or 184%, to $10.7 million in fiscal 1997 from $3.8 million in fiscal 1996. The
growth in income from operations in actual dollars was primarily due to the
increase in net sales and gross profit as a result of the Weatherly
acquisition. As a percentage of net sales, income from operations increased to
20.5% in fiscal 1997 from 13.9% in fiscal 1996. This increase was due to the
decreases in selling and shipping and general and administrative expenses as a
percentage of net sales.
34
<PAGE>
Interest expense. Interest expense increased by $1.3 million, or 65%, to
$3.3 million in fiscal 1997, from $2.0 million in fiscal 1996. The increase in
interest expense is primarily related to the interest associated with the
increase in both term and working capital debt and expenses associated with the
Weatherly acquisition, partially offset by a decrease in the Company's
effective borrowing rate. Income taxes. In fiscal 1996, the Company reported a
tax benefit of $715,000 which was a result of the recognition of a deferred tax
asset relating to available net operating loss carryforwards. In fiscal 1997,
the Company incurred a tax expense of $3.2 million, excluding the benefit
associated with the extraordinary expense, reflecting the Company's
profitability and exhaustion of the majority of net operating loss
carryforwards.
Extraordinary expense, net. In connection with the acquisition of
Weatherly, the Company completed the Refinancing. As a result of the
Refinancing, the Company was required to record an extraordinary expense of
$1.0 million net of tax benefits for fiscal 1997, which expense consisted of
deferred finance costs at June 30, 1996 net of accumulated amortization, plus
prepayment penalties.
Net income. Net income increased $659,000, or 26%, to $3.2 million in
fiscal 1997 from $2.5 million in fiscal 1996. This increase was attributable to
the successful integration into Easy Gardener of the Weatherly organization in
fiscal 1997, partially offset by the $1.0 million extraordinary expense, net of
tax benefits, incurred due to the Refinancing.
Dilutive earnings per common share increased $0.01 to $0.20 in fiscal 1997
from $0.19 in fiscal 1996. The increase was due primarily to the increase in
income from operations, which was partially offset by increases in interest and
income tax expense and the extraordinary expense of approximately $1.0 million
net of tax benefits in fiscal 1997 which did not occur in fiscal 1996.
Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June 30, 1995
Net sales. Net sales increased by $7.3 million, or 37%, to $27.0 million
in fiscal 1996 from $19.7 million in fiscal 1995. A majority of the increase in
net sales resulted from the introduction of new landscape edging and shade
cloth products. In addition, the Company believes that its sales were
positively affected by continued penetration in existing markets, expansion
into new markets and a more widespread recognition of the Easy Gardener brand
and products. The increase in net sales also resulted from the inclusion of 12
months of net sales of Easy Gardener products in the fiscal 1996 period
compared to 10 months in the prior fiscal year.
Gross profit. Gross profit increased by $3.8 million, or 36%, to $14.4
million in fiscal 1996 from $10.5 million in fiscal 1995, primarily due to the
increase in net sales, partially offset by the inclusion of 12 months of Easy
Gardener's cost of goods sold in fiscal 1996 compared to 10 months in fiscal
1995. Gross profit as a percentage of net sales decreased from 53.5% in fiscal
1995 to 53.1% in fiscal 1996. The decrease was due to a change in the product
mix sold and to higher costs, during fiscal 1996, of resin and corrugated
cardboard, which are the principal materials used in the manufacturing and
packaging of WeedBlock.
Selling and shipping expenses. Selling and shipping expenses increased by
$1.9 million, or 43%, to $6.3 million in fiscal 1996 from $4.4 million in
fiscal 1995. The increase was primarily the result of the increase in the
amount of product shipped and the inclusion of 12 months of Easy Gardener's
selling and shipping expenses in fiscal 1996 compared to 10 months in fiscal
1995. As a percentage of net sales, selling and shipping expenses increased to
23.2% in fiscal 1996 compared to 22.2% in fiscal 1995. This increase was
primarily due to introductory advertising on new products.
General and administrative expenses. General and administrative expenses
increased by $1.6 million, or 57%, to $4.4 million in fiscal 1996 from $2.8
million in fiscal 1995. General and administrative expenses as a percentage of
net sales increased to 16.1% in fiscal 1996 from 14.1% in fiscal 1995. The
increase in general and administrative expenses during fiscal 1996 was
primarily a result of the inclusion of 12 months of Easy Gardener's general and
administrative expenses in fiscal 1996 compared to 10 months in fiscal 1995.
The increase in general and administrative expenses was also due to additional
amortization and depreciation expense, and additional related overhead
expenses, associated with the overall increase in the size of the Company.
Income from operations. Income from operations increased by approximately
$400,000, or 12%, to $3.8 million in fiscal 1996 from $3.4 million in fiscal
1995. As a percentage of net sales, income from operations
35
<PAGE>
decreased to 13.9% in fiscal 1996 from 17.2% in fiscal 1995. The decrease in
income from operations as a percentage of net sales was primarily the result of
a slight decrease in gross profit as a percentage of net sales, combined with
more significant increases in selling and shipping and general and
administrative expenses as a percentage of net sales.
Interest expense. Interest expense increased by $200,000, or 11%, to $2.0
million during fiscal 1996 from $1.8 million during fiscal 1995 primarily as a
result of the inclusion in fiscal 1996 of 12 months of interest on Easy
Gardener's outstanding indebtedness which was incurred in connection with the
purchase of the assets of Easy Gardener, Inc. in September 1994 when compared
to the inclusion of such interest for only 10 months in fiscal 1995. This
increase was partially offset by the February 1995 conversion of $2.0 million
of convertible notes into Common Stock and the repayment of $1.6 million on
other notes payable. The convertible notes and other notes payable were
incurred in connection with the purchase of the assets of Easy Gardener, Inc.
in September 1994.
Income taxes. During fiscal 1996, the Company recorded a $715,000 tax
benefit compared to a $38,000 tax expense during the fiscal 1995 primarily due
to the Company's recognition of a deferred tax asset associated with Federal
net operating loss carryforwards. See "-- Liquidity and Capital Resources."
Net income. Net income in fiscal 1996 was $2.5 million, or $0.19 per share
(assuming dilution), based on 13,361,000 weighted average common and common
equivalent shares outstanding compared to net earnings of $1.6 million, or
$0.16 per share, in fiscal 1995 based on 10,125,000 common and common
equivalent shares outstanding. Such increase was primarily the result of the
recognition of a $715,000 income tax benefit.
Quarterly Results of Operations and Seasonality
The Company's sales are seasonal due to the nature of the lawn and garden
business, in parallel with the annual growing season. The Company's sales and
shipping are most active from late December through May when home lawn and
garden customers are purchasing supplies for spring planting and retail stores
are increasing their inventory of lawn and garden products. Sales typically
decline by early to mid-summer.
Sales of the Company's agricultural products, which were not material for
fiscal 1997, are also seasonal. Most shipments occur during the agricultural
cultivation period from March through October.
36
<PAGE>
<TABLE>
<CAPTION>
Set forth below is certain unaudited quarterly financial information:
Quarter Ended
-----------------------------------------------
(in thousands, except percentages and per share data)
September 30, December 31, March 31,
1995 1995 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Net sales .......................................... $ 3,265 $ 2,715 $ 10,760
Cost of sales ..................................... 1,555 1,290 5,156
---------- --------- ---------
Gross profit ...................................... 1,710 1,425 5,604
Selling, general and administrative expenses . 2,211 2,394 2,753
---------- --------- ---------
Income (loss) from operations ...................... (501) (969) 2,851
Investment income .................................. 24 10 19
Interest expense ................................... (458) (473) (541)
---------- --------- ---------
Income (loss) before income taxes .................. (935) (1,432) 2,329
Income tax benefit (expense) ...................... 100 80 138
Extraordinary expense net ..........................
Net income (loss) .................................. $ (835) $ (1,352) $ 2,467
========== ========= =========
Dilutive income (loss) per share(1) ................ $ (0.08) $ (0.13) $ 0.20
========== ========= =========
Weighted average common and common
equivalent shares outstanding(1) .................. 9,944 10,200 12,535
========== ========= =========
Net sales .......................................... 100% 100% 100%
Cost of sales ..................................... 47.6% 47.5% 47.9%
---------- --------- ---------
Gross profit ...................................... 52.4% 52.5% 52.1%
Selling, general and administrative ............... 67.7% 88.2% 25.6%
---------- --------- ---------
Income (loss) from operations ...................... (15.3%) (35.7%) 26.5%
Investment income .................................. 0.7% 0.4% 0.2%
Interest expense ................................... (14.0%) (17.4%) (5.0%)
---------- --------- ---------
Income (loss) before income taxes .................. (28.6%) (52.7%) 21.7%
Income tax benefit (expense) ....................... 3.1% 3.0% 1.3%
Extraordinary expense .............................. 0% 0% 0%
---------- --------- ---------
Net income (loss) .................................. (25.5%) (49.7%) 23.0%
========== ========= =========
Quarter Ended
----------------------------------------------------------------------------
(in thousands, except percentages and per share data)
June 30, September 30, December 31, March 31, June 30,
1996 1996 1996 1997 1997
------------ --------------- -------------- -------------- ------------
Net sales .......................................... $ 10,291 $ 5,523 $ 7,416 $ 20,559 $18,549
Cost of sales ..................................... 4,670 2,607 3,217 9,025 8,800
-------- --------- ---------- --------- -------
Gross profit ...................................... 5,621 2,916 4,199 11,534 9,749
Selling, general and administrative expenses . 3,252 3,264 4,048 5,539 4,894
-------- --------- ---------- --------- -------
Income (loss) from operations ...................... 2,369 (348) 151 5,995 4,855
Investment income .................................. 16 26 16 16 17
Interest expense ................................... (538) (563) (812) (993) (970)
-------- --------- ---------- --------- -------
Income (loss) before income taxes .................. 1,847 (885) (645) 5,018 3,902
Income tax benefit (expense) ...................... 397 280 195 (2,075) (1,600)
Extraordinary expense net .......................... (1,007)
-------- --------- ---------- --------- -------
Net income (loss) .................................. $ 2,244 $ (1,612) $ (450) $ 2,943 $ 2,302
======== ========= ========== ========= =======
Dilutive income (loss) per share(1) ................ $ 0.16 $ (0.12) $ (0.03) $ 0.18 $ 0.14
======== ========= ========== ========= =======
Weighted average common and common
equivalent shares outstanding(1) .................. 14,142 12,915 13,917 16,059 16,524
======== ========= ========== ========= =======
Net sales .......................................... 100% 100% 100% 100% 100%
Cost of sales ..................................... 45.4% 47.2% 43.4% 43.9% 47.4%
-------- --------- ---------- --------- -------
Gross profit ...................................... 54.6% 52.8% 56.6% 56.1% 52.6%
Selling, general and administrative ............... 31.6% 59.1% 54.6% 26.9% 26.4%
-------- --------- ---------- --------- -------
Income (loss) from operations ...................... 3.0% (6.3%) 2.0% 29.2% 26.2%
Investment income .................................. 0.2% 0.5% 0.2% 0.1% 0.1%
Interest expense ................................... (5.3%) (10.2%) (11.0%) (4.8%) (5.3%)
-------- --------- ---------- --------- -------
Income (loss) before income taxes .................. 17.9% (16.0%) (8.8%) 24.5% 21.0%
Income tax benefit (expense) ....................... 3.9% 5.1% 2.6% (10.1%) (8.6%)
Extraordinary expense .............................. 0% (18.2%) 0% 0% 0%
-------- --------- ---------- --------- -------
Net income (loss) .................................. 21.8% (29.1%) (6.2%) 14.3% 12.4%
======== ========= ========== ========= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------
(in thousands, except
percentages and per share
data)
September 30, December 31,
1997 1997
--------------- -------------
<S> <C> <C>
Net sales .......................................... $ 7,025 $ 8,513
Cost of sales ..................................... 3,522 3,857
--------- -------
Gross profit ...................................... 3,503 4,656
Selling, general and administrative expenses . 3,963 4,589
--------- -------
Income (loss) from operations ...................... (460) 67
Investment income .................................. 47 57
Interest expense ................................... (853) (744)
--------- -------
Income (loss) before income taxes .................. (1,226) (620)
Income tax benefit (expense) ...................... 550 250
Extraordinary expense net .......................... 0
--------- -------
Net income (loss) .................................. $ (716) $ (370)
========= =======
Dilutive income (loss) per share(1) ................ $ (0.05) $ (.02)
========= =======
Weighted average common and common
equivalent shares outstanding(1) .................. 14,702 16,384
========= =======
Net sales .......................................... 100% 100%
Cost of sales ..................................... 50.1% 45.3%
--------- -------
Gross profit ...................................... 49.9% 54.7%
Selling, general and administrative ............... 56.4% 53.9%
--------- -------
Income (loss) from operations ...................... (6.5%) 0.08%
Investment income .................................. 0.7% 0.7%
Interest expense ................................... (12.1%) (8.7%)
--------- --------
Income (loss) before income taxes .................. (18.0%) 7.3%
Income tax benefit (expense) ....................... 7.8% 2.9%
Extraordinary expense .............................. 0% 0%
--------- --------
Net income (loss) .................................. (10.2%) (4.3%)
========= ========
</TABLE>
- --------
(1) Pursuant to SFAS No. 128, dilutive income per share was calculated using
the treasury stock method except for quarters reporting a net loss. Such
quarters only reflect issued and outstanding shares of Common Stock in the
weighted average shares outstanding.
37
<PAGE>
Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily through
cash generated by operations, net proceeds from the Company's private and
public sales of securities and borrowings from lending institutions.
At December 31, 1997, the Company had consolidated cash and short-term
investments totalling $12.7 million and working capital of $15.8 million. At
June 30, 1997, the Company had consolidated cash and short-term investments
totalling $2.1 million and working capital of $2.3 million. The increase in
working capital at December 31, 1997 was due primarily to the proceeds of the
Company's public offering of Common Stock, which was consummated in December
1997 and which resulted in net proceeds to the Company of approximately $15.9
million. In addition, during the six months ended December 31, 1997 the Company
received the proceeds of the exercise of warrants to purchase Common Stock in
the amount of approximately $2.7 million.
Net cash provided by operating activities for fiscal 1997 was $10.5
million, consisting primarily of net income plus depreciation and amortization
and an extraordinary expense resulting from the Refinancing, an increase in
accounts payable and a decrease in deferred taxes, offset in part by an
increase in accounts receivable. Net cash used in investing activities for
fiscal 1997 was $29.6 million, consisting primarily of cash used for the
acquisition of Weatherly.
Net cash provided by financing activities for fiscal 1997 was $20.5
million, consisting primarily of the additional proceeds from the notes payable
used in connection with the purchase of Weatherly, and the exercise of warrants
to purchase Common Stock, the proceeds of which were used primarily for the
purchase of Weatherly.
Net cash provided by operating activities during the six months ended
December 31, 1997 was $682,000, consisting primarily of a decrease in accounts
receivable plus depreciation and amortization, offset in part by a decrease in
accounts payable and accrued expenses and an increase in inventory. Net cash
used in investing activities during the six months ended December 31, 1997 was
$1.4 million, consisting primarily of cash used for the additional purchase
price for Easy Gardener, Inc. and purchases of furniture and equipment.
Net cash provided by financing activities during the six months ended
December 31, 1997 was $11.4 million, consisting of the $15.9 million from the
Company's public offering and $2.7 million from the exercise of warrants to
purchase Common Stock, offset in part by $6.3 million of payments of
outstanding notes payable and $3.2 million to repurchase certain Unit Purchase
Options.
At December 31, 1997, the Company had consolidated term debt of $20.3
million which included debt incurred pursuant to the Refinancing and consisted
of outstanding Term Loans I and II (as defined below) of $18 million and $2.25
million.
In connection with the acquisition of Weatherly, Easy Gardener entered
into the Credit Agreement with the Lenders. Pursuant to the Credit Agreement,
the Lenders have provided the Company with the following revolving credit and
term loan facilities:
(a) Revolving Credit Facility: The maximum amount available for borrowing
under the revolving credit facility (the "Revolving Credit Facility") from time
to time is equal to the lesser of $13.0 million and a borrowing base determined
by reference to specified percentages of Easy Gardener's consolidated accounts
receivable and inventory deemed to be "eligible" by the Lenders. As of December
31, 1997, based on this formula, $4.5 million was available for borrowing and
$2.2 million was outstanding. In April 1997, the Revolving Credit Facility was
amended to provide the Company with an additional $3.0 million in available
borrowing during the months of February, March, April and May of each fiscal
year. Any additional borrowing must be paid by May 31 of the year in which
borrowed. This additional increase is for the working capital needs during the
peak season months and has the same "eligibility" requirements as the original
amount. In February 1998, the Revolving Credit Facility was amended to provide
the Company with a maximum amount available for borrowing thereunder of $20.0
million.
Revolving credit loans bear interest at an annual rate chosen by Easy
Gardener based on the prime rate of one of the lenders or the London Inter-Bank
Offered Rate ("LIBOR") plus an applicable marginal rate. Under certain
circumstances, outstanding prime rate loans may be converted to LIBOR rate
loans at the Company's option. At December 31, 1997, the effective annual rate
for outstanding borrowings under the Revolving Credit
38
<PAGE>
Facility was 9.75%. The Revolving Credit Facility expires on June 30, 2002 (the
"Expiration Date") and all outstanding revolving credit loans are then due. In
addition, for a 10-day period in August of each year, all outstanding revolving
credit loans must be paid and no revolving credit loans may be borrowed.
Revolving credit loans may be prepaid at any time. However, if Easy Gardener
elects to terminate the Revolving Credit Facility prior to the Expiration Date,
the outstanding balance must be prepaid together with a premium of from 1% to
2% of the "Average Yearly Loan Balance" (as defined in the Credit Agreement)
under the Revolving Credit Facility.
(b) Term Loan Facility: Pursuant to this facility, Easy Gardener obtained
three term loans (the "Term Loans"), one in the principal amount of $23.0
million ("Term Loan I"), $18.0 million of which was outstanding at December 31,
1997, one in the principal amount of $2.25 million ("Term Loan II"), all of
which was outstanding at December 31, 1997, and one in the principal amount of
$3.8 million ("Term Loan III"), all of which was paid in full and expired in
November 1997. At December 31, 1997, the effective annual rate of interest for
Term Loan I was 9.75%. At December 31, 1997, the effective annual rate of
interest for Term Loan II was 14.5%. In connection with the Company's
acquisition of Weed Wizard, Inc, in February 1998 Term Loan I and Term Loan II
were consolidated into a single term loan (the "Term Loan") and the balance of
the Term Loan was increased to $30.3 million. The Term Loan matures on the
Expiration Date. The Term is payable in quarterly installments of principal
commencing March 31, 1998. The Term Loan bears interest, at the election of Easy
Gardener, at the adjusted prime rate or LIBOR rate described above, and Easy
Gardener may from time to time, subject to certain restrictions, convert the
Term Loan from a prime rate loan to a LIBOR rate loan. As of the date of this
Prospectus approximately $18.0 million of the Term Loan bears interest at 9.1%
and the balance bears interest at 9.75%. Interest on the Term Loan is payable
monthly in arrears on prime rate loans and at the end of the interest period for
a LIBOR rate loan if the interest period is three months or less or on the last
day of each three-month interval during the interest period if it is longer than
three months. If Easy Gardener elects to pay the Term Loan in full at any time
prior to the Expiration Date, Easy Gardener is also obligated to pay a premium
of from 1% to 2% of the amount prepaid. The Term Loan is subject to certain
mandatory prepayments of principal from "excess cash flow" (as defined in the
Credit Agreement) of Easy Gardener and certain net proceeds of asset sales,
condemnation awards and insurance recoveries. Mandatory prepayment of principal
of the Term Loan on account of "excess cash flow", if any, will be due in
October of the following fiscal year. No mandatory prepayment under the Term
Loans was due in October 1997.
Easy Gardener's obligation to pay the principal of, interest on, premium,
if any, and all other amounts payable on account of the Revolving Credit
Facility and the Term Loan is secured by substantially all of the assets of
Easy Gardener and its subsidiaries and the irrevocable guaranties of the
Company and Easy Gardener's subsidiaries. Upon the occurrence of an event of
default specified in the Credit Agreement, the maturity of the outstanding
principal amounts of the Revolving Credit Facility and the Term Loan may be
accelerated by the lenders who may also foreclose on the secured assets of Easy
Gardener and its subsidiaries.
Under the Credit Agreement (a) Easy Gardener is required, among other
things, to comply with certain limitations on incurring additional
indebtedness, liens, guaranties, capital and operating lease expenses in excess
of a specified amount per year, and sales of assets and payment of dividends
and (b) Easy Gardener and the Company must comply with certain limitations on
merger, liquidations, changes in business, investments, loans and advances, or
certain acquisition of subsidiaries. In addition, Easy Gardener must comply
with certain minimum interest coverage, debt service and fixed charge rates,
not permit its Net Worth (as defined in the Credit Agreement) to be less than
certain amounts and generate certain minimum amounts of income before interest
expenses, taxes, depreciation and amortization. A violation of any of these
covenants constitutes an event of default under the Credit Agreement.
The Company intends to use substantially all of the proceeds from the sale
of the Junior Subordinated Debentures to repay the entire indebtedness
outstanding under the Credit Facility. As a result of the early payment, the
Company will write off deferred financing costs of approximately $1.4 million
and incur a prepayment penalty of approximately $735,000 during its quarter
ending March 31, 1998 which will reduce its reported income. Upon repayment of
the outstanding indebtedness, the Credit Facility will be terminated and the
Company will have no alternate sources of financing. Although the Company is
currently negotiating new credit facilities with several banks, there can be no
assurance that the Company will be able to obtain a new credit facility on
terms acceptable to it, or at all. Failure to obtain a new credit facility
would materially adversely affect the Company's operations.
39
<PAGE>
As of December 31, 1997, the Company had a deferred tax liability of
$650,000 and a deferred tax asset of $1.1 million (net of a $302,000 valuation
allowance), the majority of which relates to the tax benefit associated with
the accumulated net operating losses of approximately $3.4 million for Federal
income tax purposes which expire in 2011. For California income tax purposes,
the Company accumulated net operating losses of approximately $3.6 million
which expire at various times through 2001. Based upon the estimated taxable
income to be apportioned to California over the next few fiscal years and
considering the expiration date of the net operating loss carryovers, the
Company has established a valuation reserve relating to the majority of the
estimated $302,000 tax benefit associated with the California net operating
loss carryovers.
In January 1997, the Company borrowed $550,000 in the aggregate from
certain lenders. The loans were used to satisfy short term working capital
requirements. In July 1997, the Company repaid $200,000 of the loans and the
$350,000 balance was converted into 154,000 shares of Common Stock.
The Department of Labor has recently advised the Company that it is
examining the method used by the Company to calculate overtime wage payments
and whether the Company should be required to pay certain workers at its Waco,
Texas facilities additional monies as a result thereof. Although there can be
no assurance, the Company believes that any payments it will be required to
make will not have a material adverse effect on the Company.
The Company anticipates spending approximately $4.0 million, including
anticipated use of a portion of existing trade credits, in the fiscal year
ending June 30, 1998 on a combination of media development, print, radio and
television advertising, co-operative advertising (advertising done in
conjunction with retailers), and attendance at trade shows and public relations
to promote awareness, understanding and brand identification of its lawn and
garden products.
In May 1997, the Company purchased from Plastic Molded Concepts, Inc.
certain assets relating to its Plasti-Chain Line of products for approximately
$4.3 million. The purchase price was paid through the use of the Revolving
Credit Facility and Term Loan III.
In February 1998, the Company completed its acquisition of Weed Wizard,
Inc. for a purchase price of approximately $16.0 million, of which
approximately $5.0 million was based on the value of certain current assets
acquired.
In March 1998 the Company completed its acquisition of Landmaster
Products, Inc. for a purchase price of approximately $3.0 million, of which
approximately $750,000 was based on the value of certain net assets acquired.
The Company has entered into a non-binding letter of intent to purchase a
manufacturer and distributor of outdoor lawn and garden products for
approximately $4.8 million.
Recent Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board ("FASB") issued
a Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," which is effective for both interim and annual periods ending after
December 15, 1997. SFAS No. 128 requires the calculation and presentation of
basic earnings per share (giving no dilutive effect to derivative securities)
and dilutive earnings per share (reflecting the dilutive effect of all
derivative securities). Accordingly, the Company has adopted SFAS No. 128 in
its December 31, 1997 interim financial statements. As required by SFAS No.
128, all prior earnings have been restated to reflect the retroactive
application of this pronouncement.
Inflation
Inflation has historically not had a material effect on the Company's
operations.
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BUSINESS
General
The Company is a leading manufacturer and marketer of a broad range of
consumer lawn and garden products. The Company's products include weed
preventive landscape fabrics, fertilizer spikes, decorative landscape edging,
shade cloth, root feeders and weed trimmer replacement heads, which are sold
under recognized brand names such as WeedBlock(R), Jobe's(R), Emerald Edge(R),
Shade FabricTM, Ross(R) and Weed WizardTM. The Company believes that it has
significant market share and brand-name recognition in several of its primary
product categories. The Company markets its products through most large
national home improvement and mass merchant retailers ("Retail Accounts"),
including Home Depot, Lowe's, Kmart, Builder's Square, Wal-Mart and Home Base.
The Company has experienced significant growth in recent years and
believes that its success has been primarily attributable to the expansion of
its product lines through the acquisition of complementary lawn and garden
businesses, the quality of its products, its focus on providing Retail Accounts
with a single source of lawn and garden products, the efficiency and
reliability of its inventory tracking and order fulfillment systems and its
distinctive advertising and store displays.
Lawn and Garden Industry
Historically, the lawn and garden industry was comprised of relatively
small regional manufacturers and distributors whose products were sold to
consumers primarily through local nurseries and garden centers. As the industry
has grown, national home improvement and mass merchant retailers have replaced
many of these local garden centers as the primary retail source for lawn and
garden products. In an effort to improve operating margins and reduce the
number of vendors needed to source high volume lawn and garden products, the
preference among home improvement and mass merchant retailers has shifted
towards single source suppliers that offer broad product lines of consumer
brand-name merchandise and the product support necessary to stimulate
consumer demand and ensure timely and cost effective order fulfillment. Smaller
regional suppliers generally lack the capital and other resources necessary to
offer the variety and number of product lines, the product support and the
inventory stocking and tracking capabilities required by home improvement and
mass merchant retailers.
Regional manufacturers, distributors and marketers are now largely
fragmented and the Company believes that many of them are attractive
acquisition candidates for larger, single source suppliers and distributors in
the lawn and garden industry. The Company has historically been successful in
locating, acquiring and integrating certain of these manufacturers and
distributors into its business and intends to continue its acquisition program
as a principal component of its growth strategy.
According to the 1996-1997 National Gardening Survey, 1996 retail sales of
lawn and garden products were approximately $22 billion, and 64% of the
approximately 101 million households in the United States participated in some
form of gardening activity during 1996. In addition, sales growth in the lawn
and garden industry is being driven in part by the aging of the "baby boomer"
consumer segment. According to the National Gardening Survey, persons 50 years
of age and older spent an average of $400 per household on lawn and garden
activities in 1996.
Business Strategy
The Company's business objective is to be a leading single source supplier
to Retail Accounts and its strategy includes the following key components:
o Market Low-Cost, High-Margin Products. The Company focuses on
manufacturing and marketing low-cost, high-margin products, such as
landscape fabric, fertilizer spikes, landscape edging, shade cloth and
root feeders, with suggested retail prices generally ranging from $2 to
$30. The Company believes that such point-of-purchase products stimulate
impulse buying by consumers and provide high margins with relatively low
price sensitivity.
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o Supply a Wide Variety of Products. The Company supplies Retail Accounts
with several product lines, such as landscape fabric, fertilizer spikes,
landscape edging, shade cloth and root feeders. Within such product
categories the Company offers a broad range of products. For example, the
Company's landscape fabrics are available in both woven and non-woven
fabrics of varying grades of thickness. Similarly, the Company's
fertilizer, plant food and insecticide spikes are designed for a wide
variety of indoor and outdoor plants, including multiple types of trees,
flowers, vegetable plants and shrubs.
o Capitalize on Point-of-Purchase Displays. The Company utilizes
distinctive packaging and point-of-purchase product displays, new product
introductions and other merchandising techniques to stimulate consumer
purchases. The Company's sales representatives periodically visit
individual Retail Accounts to assist them in achieving innovative and
optimal use of the Company's product displays through prominent product
placement and inventory management.
o Utilize Marketing and Advertising Programs. The Company uses national and
regional marketing and advertising programs to generate consumer
brand-name recognition of its product lines. The Company retains agencies
that market and advertise its products through television programs,
newspaper inserts and weekly circulars.
o Promote Retail Account Satisfaction. The Company promotes Retail Account
satisfaction by providing timely and efficient order fulfillment services.
The Company maintains a sophisticated retail data information system which
enables it to provide timely order fulfillment so that Retail Accounts are
not required to maintain a large inventory of the Company's products.
Growth Strategy
The Company attributes its historical growth and success to its ability to
capitalize on the consolidation of the lawn and garden industry by locating,
acquiring and effectively integrating acquisition targets and its ability to
act as an efficient single source supplier of a broad range of quality
products. The Company intends to continue this growth strategy, which consists
of the following principal components:
o Pursue Additional Strategic Acquisitions. The Company plans to continue
its primary strategy of acquiring complementary lawn and garden companies
and product lines. The Company has consummated seven (7) such acquisitions
since 1992 and recently entered into a non-binding letter of intent to
acquire another lawn and garden product business. By consolidating
companies with complementary product lines, the Company believes it can
capitalize on its existing channels of distribution and gain market share
by increasing sales to its Retail Accounts.
o Increase Brand Awareness. The Company intends to enhance existing
consumer brand awareness by expanding its advertising and marketing
efforts with an emphasis on its Jobe's fertilizer spikes, a
nationally-recognized brand name. The Company believes that the
modernization of its Jobe's packaging, together with a national television
advertising campaign targeted at the "baby boomer" consumer segment, will
allow it to further capitalize on its brand-name recognition.
o Utilize Existing Infrastructure. The Company's management and
administration infrastructure has been designed to accommodate the
integration of additional products when suitable lawn and garden companies
and product lines are acquired. The Company believes that its ability to
efficiently integrate new businesses and product lines into its existing
infrastructure will result in significant savings in the areas of
management, distribution, marketing and customer service. The Company also
believes that its infrastructure, including its on-line inventory tracking
and order fulfillment capabilities, allows it to be an effective and
efficient source of lawn and garden products for Retail Accounts.
o Focus on High-Volume Retailers. National high-volume retailers such as
the Company's Retail Accounts are gaining an increasing share of the lawn
and garden retail market. By focusing on the emergence of high-volume
retailers and their needs, including providing broad product lines, order
fulfillment capabilities and marketing and merchandising programs, the
Company believes that it will increase its market share and enhance its
position as a leading single source supplier of lawn and garden products.
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Recent and Proposed Acquisitions
Since August 1992, the Company has consummated the following seven (7)
acquisitions of lawn and garden companies or product lines for a total of over
$75.0 million in consideration:
o Golden West Chemical Distributors, Inc. A manufacturer of humic
acid-based products designed to improve crop yield, which was acquired in
August 1992 for approximately $1.1 million in cash and $1.1 million of
promissory notes.
o Easy Gardener, Inc. A manufacturer of multiple fabric landscaping
products including WeedBlock(R), which was acquired in September 1994 for
approximately $21.3 million consisting of $8.8 million in cash, a $10.5
million promissory note and two convertible notes each in the principal
amount of $1.0 million. Approximately $2.2 million of additional purchase
price was contingent on Easy Gardener meeting certain income requirements.
A total of approximately $1.2 million of the additional amount has been
paid to date and the remaining $1.0 million is payable in fiscal 1999.
o Emerald Products LLC. A manufacturer of decorative landscape edging,
which was acquired in August 1995 for $835,000 in cash and a $100,000
promissory note.
o Weatherly Consumer Products Group, Inc. A manufacturer of fertilizer
spikes and other lawn and garden products, which was acquired in August
1996 for 1,000,000 shares of Common Stock valued at $3.0 million and
approximately $22.9 million in cash.
o Plasti-Chain Product Line of Plastic Molded Concepts, Inc. A line of
plastic chain links and decorative edgings, which was acquired from
Plastic Molded Concepts, Inc. in May 1997 for approximately $4.3 million
in cash.
o Weed Wizard, Inc. A manufacturer and distributor of weed trimmer
replacement heads, which was acquired in February 1998 for approximately
$16.0 million, of which approximately $5.0 million was based on the value
of certain net assets acquired. For its 1996 and 1997 fiscal years, Weed
Wizard Inc. achieved net income of $900,000 and $900,000 on revenues of
$8.0 and $7.1 million, respectively. The decrease in revenues was primarily
the result of a decrease in aggregate sales of Weed Wizard and Weed Wizard
II (the "Weed Wizard Line") of over $3.0 million in 1997 from their 1996
levels. Sales of the Weed Wizard Line decreased mainly due to (i) Weed
Wizard Inc's decision to allow its retail customers to replace their
inventories of older models of the Weed Wizard Line for improved models of
such products at no cost and (ii) unfavorable weather conditions in
1997. Although Weed Wizard Inc. believes that allowing the replacement of
the older inventory at no cost generated goodwill with its retail
customers, no assurance can be given that sales of the Weed Wizard Line
will return to their 1996 levels.
o Landmaster Products, Inc. A manufacturer and distributor of polyspun
landscape fabrics for use by consumers and professional landscapers,
substantially all of whose assets were acquired in March 1998 for
approximately $3.0 million, of which approximately $750,000 was based on
the value of certain assets acquired.
In addition, the Company has entered into a non-binding letter of intent
to purchase a manufacturer and distributor of lawn and garden products for
approximately $4.8 million.
Products
Landscape Fabric. The Company markets different types of landscape fabric
in varying thicknesses and strengths under the trade names WeedBlock, WeedBlock
6TM, MicroPore(R), Pro WeedBlockTM and WeedShieldTM. Landscape fabrics allow
water, nutrients and oxygen to filter through to soil but prevent weed growth
by blocking sunlight to prevent seeds from germinating. The Company's primary
landscape fabrics are made from non-woven fabrics which are generally
manufactured with extruded polymers, pressed or vacuum formed into thin sheets
having the feel and texture of light plastics. For the fiscal years ended June
30, 1995, 1996 and 1997, sales of landscape fabrics represented 71%, 66% and
44%, respectively, of the Company's net sales.
Fertilizer, Plant Food and Insecticide Spikes. Fertilizer and plant food
spikes deliver plant nutrients directly to the root of the plant, as an
alternative method of maintaining plant health to surface-delivered liquid or
solid fertilizers. Some of the Company's fertilizer spikes have the added
feature of containing an insecticide for the control of unwanted insects. The
Company markets a variety of indoor and outdoor specialty fertilizer and plant
food spikes primarily under the Jobe's tradename, one of the most recognized
brands in the consumer lawn and garden industry. For the fiscal year ended June
30, 1997, sales of fertilizer, plant food and insecticide spikes represented
approximately 24% of the Company's net sales.
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Landscape Edging. The Company markets a variety of resin-based decorative
landscape edgings under trade names including Emerald Edge and Terra Cotta
Tiles. The Company's decorative edgings are used by consumers to enclose or
define the perimeter of planting areas with a variety of designs which include
stone, log, terra cotta tiles and picket fences. The Company recently acquired
the Plasti-Chain line of products, which include additional styles of
decorative landscape edgings.
Shade Cloth. The Company markets shade cloth fabrics in a variety of sizes
and colors. Shade cloth is utilized generally in conjunction with some type of
outdoor structure such as a patio veranda, and provides shade, privacy and/or
protection from wind for people, plants and pets. The Company markets shade
cloth fabrics as an exclusive United States retail distributor of a shade cloth
manufacturer pursuant to an agreement that expires on September 30, 1998
(unless renewed at the option of the Company for an additional two-year
period).
Fertilizers and Root Feeders. The Company markets fertilizers under the
Ross trade name. The Ross fertilizer, when applied through a Ross root feeder,
a long steel irrigation tube with a hose connector that is inserted deep into
the ground, provides the homeowner with a means of deep feeding and irrigating
trees and shrubs. The Ross root feeder may also be used without fertilizer as a
deep watering device.
Weed Trimmer Replacement Heads. The Company also manufactures and
distributes replacement heads for string weed trimmer products under the Weed
Wizard trademark. The Company's weed trimmer replacement head products consist
of a replacement casing containing either a chain link for heavy duty use or a
plastic blade for routine weed and grass trimming. The products are part of a
multi fit system offered by the Company, which allows the replacement heads to
fit on virtually all consumer gas weed trimmers and most consumer electric weed
trimmers.
Other Products. In addition to landscape fabrics, fertilizer, plant food
and insecticide spikes, landscape edging, shade cloth and root feeders, the
Company also sells complementary lawn and garden products for the home
gardener. The products include a line of animal repellents that are formulated
to deter dogs, cats, deer and rabbits from destroying garden and landscape
environs, a variety of protective plant and tree covers, bird and animal mesh
blocks, protective garden and tree netting to prevent animal damage, synthetic
mulch and fabric pegs.
Agricultural Products. The Company, through Golden West, manufactures and
distributes certain humic acid-based agricultural products for use on farms and
orchards. Golden West generally sells its products to agricultural
distributors, which in turn market Golden West's products to farms and
orchards. The principal agricultural products manufactured and/or distributed
by the Company are: Energizer(R), a formulation of humic acids which, when
applied in conjunction with liquid fertilizers, permits crops to absorb a
greater amount of the nutrients in the fertilizer; Penox(R), a surfactant, or
penetrating wetting agent, that contains humic acid which, when applied in
conjunction with herbicides, defoliants and other agricultural products,
increases their effectiveness and Powergizer(R), a foliar nutrient, or plant
food, containing humic acid which promotes growth and vigor in many types of
crops. Sales of the Company's agricultural products accounted for less than 2%
of the Company's net sales in fiscal 1997.
Conversion, Manufacturing and Supply
Lawn and Garden Products
Except for the materials for WeedBlock, which are obtained from a single
source, the basic materials for the Company's lawn and garden products are
purchased from a variety of suppliers. All of such materials are converted,
packaged and shipped by the Company from either its Waco, Texas facility or its
Paris, Kentucky facility.
The Company purchases all of the landscape fabric used to manufacture
WeedBlock from Tredegar. The Company purchases large rolls of various types of
landscape fabric for shipment to its Waco, Texas facility where it sizes, cuts
and packages the fabric for consumer sale. Although the Company has purchased
all of its supply from Tredegar for over 10 years and believes that its
relationship with Tredegar is good, Tredegar is free to terminate its
relationship with the Company at any time and accordingly could market its
fabrics to other companies, including competitors of the Company. Nevertheless,
the Company owns the registered trademark "WeedBlock(R)" and, to the extent
that it establishes alternative supply arrangements, its rights to market
products under the WeedBlock brand name would continue without restriction.
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The Company manufactures and packages its Jobe's fertilizer spikes at its
Paris, Kentucky facility. The raw materials that comprise the Company's indoor
fertilizer spikes are mixed with a binding agent and then passed through an
extrusion process which feeds a continuous strand of fertilizer through a
heat-drying system. The strand is then cut into ready to use fertilizer spikes
which are then machine counted and packaged as shelf-ready product. The
Company's outdoor fertilizer spikes are manufactured in a similar manner except
rather than passing through an extrusion process, the outdoor spikes are
processed through molds which shape the spikes into their final form. The
outdoor spikes are packaged in either a foil pouch, bag or box.
The specifications for the Company's landscape edging, shade cloth and
root feeder products and packaging are designed by the Company and independent
design consultants. The products are then manufactured and packaged by third
party manufacturers according to the Company's specifications.
The nylon product body (rotary head) and the plastic blades and the chain
links used in the Company's weed trimmer replacement heads are manufactured for
the Company pursuant to open purchaser orders. The Company assembles and
packages the weed trimmer replacement heads with the aid of an electronic
packaging machine.
Agricultural Products
The Company does not own or lease any manufacturing facilities for its
agricultural products. Substantially all of the Company's humic acid-based
agricultural products, including Energizer, Penox and Powergizer, are processed
by Western Farm Services, Inc. ("Western Farm") pursuant to purchase orders
placed by the Company from time to time in the ordinary course of business. The
Company, through Western Farm, also has an open purchase order arrangement with
an entity which supplies it with leonardite ore, a source of humic acid used in
its agricultural products.
Customers
The Company's customers include home improvement centers, mass
merchandisers, hardware stores, nurseries and garden centers and other retail
channels throughout the United States. The Company's three largest customers
for fiscal 1997, Home Depot, Lowe's and Kmart, accounted for approximately 26%,
10% and 7%, respectively, of its net sales during such year. During fiscal
1996, Home Depot, Lowe's, Kmart and Builder's Square accounted for 27%, 9%, 7%
and 5%, respectively, of the Company's net sales. During fiscal 1995, sales to
Home Depot, Kmart, Builder's Square and Lowe's accounted for approximately 27%,
9%, 7% and 6%, respectively, of the Company's net sales. The Company's ten
largest customers as a group accounted for 69% and 65% of its net sales during
fiscal 1996 and 1997, respectively. Sales to such customers are not governed by
any contractual arrangement and are made pursuant to standard purchase orders.
While the Company believes that relations with its largest customers are good,
the loss of any of these customers could have an adverse effect upon the
results of operations of the Company. The Company's sales are concentrated in
the United States, with international sales (primarily Europe and Canada)
accounting for less than 2% of the Company's net sales for fiscal 1996 and
fiscal 1997. The Company is currently attempting to develop relationships with
distributors outside of the United States.
Sales and Marketing
The Company's sales efforts are coordinated by its national sales manager,
whose duties include overseeing key accounts and directing the activities of
the Company's 8 regional sales managers. Because of the service-oriented nature
of the Company's business, the national and regional sales managers devote a
substantial amount of their time to servicing and maintaining relationships
with the Company's largest customers in addition to managing the overall sales
operations. The Company also utilizes the services of over 39 non-exclusive
independent sales organizations, on a commission basis, who are responsible
primarily for sales to customers not serviced regularly by the regional sales
managers. Sales of the Company's agricultural products are coordinated
primarily by two full-time employees who are compensated on a salary plus
commission basis.
The Company's marketing activities are coordinated by its marketing
manager. The marketing manager designs and develops the Company's distinctive
packaging and point-of-sale displays and oversees, among other things, the
Company's advertising campaigns, which are created and placed by advertising
and public relations firms.
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The Company expects that its lawn and garden products will continue to be
marketed by retailers primarily through the use of special displays and
in-store consumer promotions in Retail Accounts, hardware stores, nurseries and
garden centers. In addition, the Company believes that a substantial portion of
lawn and garden sales are impulse driven and not overly price sensitive.
Therefore, the Company seeks to increase consumer awareness, understanding and
brand identification of its products through its distinctive packaging and
point-of-sale displays. Retail Accounts and the Company's other customers
receive the Company's products in packaging that is easily displayed. The
retail product packaging is informative to the end-user and incorporates
attention-getting, eye-pleasing color schemes. The Company also tailors its
displays to the evolving needs of retailers. Because many home improvement and
mass merchant retailers maintain outdoor sales areas for their lawn and garden
products, the Company utilizes waterproof displays for many of its products. In
addition, the Company meets the specific needs of many of its larger customers
by tailoring the size of its displays to the dimensions requested by such
customers. The Company's independent sales representatives periodically visit
individual retail outlets to replenish product, rearrange displays and
otherwise assist Retail Accounts in achieving innovative and optimal use of the
Company's distinctive store displays.
In order to anticipate and react quickly to changing consumer preferences,
the Company also engages in market research. During fiscal 1997 the Company
conducted consumer market research and a regional media advertising campaign of
its Jobe's spikes product line to determine the effectiveness of such
advertising in increasing product line sales. Based on the positive data
derived from such research, the Company intends to focus its advertising and
promotional campaign on the Jobe's brand name, as well as on the Easy Gardener
and Emerald Edge brand names.
Prior to the Company's acquisition of Weatherly, brand recognition of
Jobe's product line was not heavily promoted. In order to enhance the consumer
recognition of the Jobe's name, the Company has recently or intends to:
o Modernize Packaging. The Company has recently redesigned the packaging of
the Jobe's products to make more attention getting, eye-pleasing and
informative and instructional as to product purpose and use in order to
increase impulse purchasing.
o Assist Retail Accounts. The Company will continue its current process of
assisting Retail Accounts in their inventory purchasing, in-store product
placement and the implementation of innovative and optimal use of the
distinctive displays for Jobe's products.
o Advertise Nationally. The Company has recently commenced a national
television advertising campaign designed to target the "baby boomer"
consumer segment, which represents the largest lawn and garden consumer
segment. The campaign, which was created by the Company's advertising
agency, will appear primarily on programming on national cable channels
with favorable "baby boomer" viewing demographics, such as CNN or CNBC.
The Company will also continue to engage in co-operative advertising with
its Retail Accounts primarily through national and regional weekly print
advertising circulars during the primary lawn and garden season.
The Company anticipates spending approximately $4.0 million, including
anticipated use of a portion of existing trade credits, in the fiscal year
ending June 30, 1998 on a combination of media development, print, radio and
television advertising, co-operative advertising (advertising done in
conjunction with retailers), and attendance at trade shows and public relations
to promote awareness, understanding and brand identification of its lawn and
garden products.
The Company intends to utilize a substantial portion of its marketing
budget for the fiscal year ending June 30, 1998 on the enhancement of
brand-name recognition of the Jobe's product line. There can be no assurance
that any attempt to increase such recognition will be successful or have any
favorable effect on the Company's net sales.
Information Systems
The Company maintains a sophisticated retail data information system which
enables it to track orders and provide timely and efficient order fulfillment
to its Retail Accounts and other customers. Internally, the Company's
information systems track orders and deliveries and provide exception reports
if product is not delivered on
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time. The systems "push" the necessary information to the proper personnel,
allowing the Company to react quickly to information. The Company's purchase
order process can be paperless, with most Retail Accounts placing their orders
through an electronic data interchange with the Company.
Seasonality
The Company sales are seasonal due to the nature of the lawn and garden
business, in parallel with the annual growing season. The Company's sales and
shipping are most active from late December through May when home lawn and
garden customers are purchasing supplies for spring planting and retail stores
are increasing their inventory of lawn and garden products. Sales typically
decline by early to mid-summer. Sales of the Company's agricultural products
are also seasonal. Most shipments occur during the agricultural cultivation
period from March through October.
Inventory and Distribution
In order to meet product demand, the Company keeps relatively large
amounts of product inventory on hand, particularly from December to May, the
months of highest demand. Despite maintaining these relatively high levels of
inventory, historically the Company has experienced minimal inventory
obsolescence. There can be no assurance that inventory obsolescence will not be
higher in the future. Retail Accounts generally require delivery within five
business days. Orders are generally processed within 48 hours and shipped by
common carrier.
Competition
The consumer lawn and garden care industry is highly competitive and
somewhat fragmented. The Company competes with a combination of national and
regional companies ranging from large petrochemical companies to garden catalog
businesses and companies specializing in the manufacture of lawn and garden
care products. Several of such companies, such as Solaris Group, a division of
Monsanto Company, and the Scotts Miracle Gro Company have captured a
significant, and in certain cases controlling, share of such markets. Many of
the Company's competitors have achieved significant national, regional and
local brand name and product recognition and engage in frequent and extensive
advertising and promotional programs, both generally and in response to efforts
by new competitors entering the market or existing competitors introducing new
products. Many of these companies have substantially greater financial,
technical, marketing and other resources than the Company. There can be no
assurance that the Company will be able to compete successfully or that
reacting to competitive pressures will not materially adversely affect the
Company.
Large, dominant manufacturers, which manufacture and sell lawn and garden
products, such as the Solaris Group and other lawn and garden care companies
have, in the past, manufactured and marketed landscape fabrics. Currently, few
of such competitors compete with the Company in this industry. Nevertheless,
well capitalized companies and smaller regional firms may develop and market
landscape fabrics and compete with the Company for customers who purchase such
products.
Among the Company's competitors in the lawn and garden market for the
Jobe's line of fertilizer and insecticide spikes are large agri-chemical
companies such as Solaris Group and Scotts Miracle-Gro Products, Inc.
Competition for the Company's agricultural products consist of other
manufacturers of products that are humic acid based but that utilize formulas
that are different from Golden West's. These competitors include American
Colloid Company, Monterey Chemical Corporation and Custom Chemicide Inc. The
Company competes with a variety of regional lawn and garden manufacturers in
the markets for landscape edging, shade cloth and root feeders. Competition for
the Company's weed trimmer replacement heads consists of other manufacturers of
weed trimming replacement part products using nylon based lines and blades.
These include The Source Company.
Government Regulation
The Company is subject to many laws and governmental regulations and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
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Fertilizer and Pesticide Regulation. Products marketed, or which may be
marketed, by the Company as fertilizers or pesticides are subject to an
extensive and frequently evolving statutory and regulatory framework, at both
the Federal and state levels. The distribution and sale of pesticides is
subject to regulation by the U.S. Environmental Protection Agency ("EPA")
pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"),
as well as regulation by many states in a manner similar to FIFRA. Under FIFRA
and similar state laws, all pesticides must be registered with the EPA and
state and must be approved for their intended use. FIFRA and state regulations
also impose other stringent requirements on the marketing of such products.
Moreover, many states also impose similar requirements upon products marketed
for use as fertilizing materials, which are not typically regulated under
FIFRA. Failure to comply with the requirements of FIFRA and state laws that
regulate marketing and distribution of pesticides and fertilizers could result
in the imposition of sanctions, including, but not limited to, suspension or
restriction of product distribution, civil penalties or criminal sanctions.
The Company markets certain animal repellent and pesticide products that
are subject to FIFRA and to similar state regulations. The Company also markets
certain fertilizer products that are subject to regulation in some states. The
Company believes that it is in material compliance with FIFRA and applicable
state regulations regarding its material business operations. However, there
can be no assurance that the Company will be able to comply with future
regulations in every jurisdiction in which the Company's material business
operations are conducted without substantial cost or interruption of
operations. Moreover, there can be no assurance that future products marketed
by the Company will not also be subject to FIFRA or to state regulations. If
future costs of compliance with regulations governing pesticides or fertilizers
increase or exceed the Company's budgets for such items, the Company's business
could be adversely affected. If any of the Company's products are distributed
and/or marketed in violation of any of these regulations, the Company could be
subject to a recall of, or a sales limitation placed on, one or more of its
products, or civil or criminal sanctions, any of which could have a material
adverse effect upon the Company's business.
Environmental Regulation. The Company's manufacturing operations are
subject to various evolving federal, state and local laws and regulations
relating to the protection of the environment, which laws govern, among other
things, emissions to air, discharges to ground, surface water and groundwater,
and the generation, handling, storage, transportation, treatment and disposal
of a variety of hazardous and non-hazardous substances and wastes. Federal and
state environmental laws and regulations often require manufacturers to obtain
permits for these emissions and discharges. Failure to comply with
environmental laws or to obtain, or comply with, the necessary state and
federal permits can subject the manufacturer to substantial civil and criminal
penalties. Easy Gardener operates two manufacturing facilities and Weatherly
and Weed Wizard each operate one manufacturing facility. The Company believes
that all of its facilities are in substantial compliance with all applicable
material environmental laws. However, it is possible that there are material
environmental liabilities of which the Company is unaware. If the costs of
compliance with the various existing or future environmental laws and
regulations including any penalties which may be assessed for failure to obtain
necessary permits, exceed the Company's budgets for such items, the Company's
business could be adversely affected.
Potential Environmental Cleanup Liability. The Federal Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
and many similar state statutes, impose joint and several liability for
environmental damages and cleanup costs on past or current owners and operators
of facilities at which hazardous substances have been discharged, as well as on
persons who generate, transport or arrange for disposal of hazardous substances
at a particular site. In addition, the operator of a facility may be subject to
claims by third parties for personal injury, property damage or other costs
resulting from contamination present at or emanating from property on which its
facility is located. Easy Gardener operates two manufacturing facilities and
Weatherly and Weed Wizard each operate one manufacturing facility. Moreover,
the Company or its predecessors have owned or operated other manufacturing
facilities in the past and may have liability for remediation of such
facilities in the future, to the extent any is required. In this regard,
Weatherly previously owned a facility that was the subject of certain soil
remediation activities. Although this facility was sold by Weatherly prior to
the Company's acquisition of Weatherly, there can be no assurance that the
Company will not be liable for any previously existing environmental
contamination at the facility. Moreover, although the purchaser of the facility
indemnified Weatherly for any environmental contamination liability and the
sellers of Weatherly, in turn, indemnified the Company from such liability,
there can be no assurance that, if required, the indemnifying parties will be
able to fulfill their respective obligations to indemnify the Company.
Furthermore, certain business
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operations of the Company's subsidiaries also involve shipping hazardous waste
off-site for disposal. As a result, the Company could be subject to liability
under these statutes. The Company could also incur liability under CERCLA or
similar state statutes for any damage caused as a result of the release of
hazardous substances owned by the Company but processed and manufactured by
others on the Company's behalf. As a result, there can be no assurance that the
manufacture of the products sold by the Company will not subject the Company to
liability pursuant to CERCLA or a similar state statute. Furthermore, there can
be no assurance that Easy Gardener, Weatherly or Weed Wizard will not be
subject to liability relating to manufacturing facilities owned and/or operated
by them currently or in the past.
Other Regulations. The Company is also subject to various other federal,
state and local regulatory requirements such as worker health and safety,
transportation, and advertising requirements. Failure to comply with these
requirements could result in the imposition of fines by governmental
authorities or awards of damages to private litigants.
Trademarks, Proprietary Information and Patents
The Company believes that product recognition is an important competitive
factor in the lawn and garden care products industry. Accordingly, in
connection with its marketing activities of its lawn and garden care products,
the Company promotes, and intends to promote, certain tradenames and trademarks
which are believed to have value to the Company.
In connection with its acquisition of the assets of Easy Gardener Inc. in
September 1994, the Company acquired certain trademarks used by Easy Gardener
Inc. in connection with its business including, but not limited to, the
trademarks WeedBlock(R), Easy Gardener(R), WeedShield, MicroPore and
Birdblock(R). In connection with its acquisition of Weatherly, the Company
acquired certain patents, as well as certain trademarks used in connection with
Weatherly's business including, but not limited to, Jobe's(R), Ross(R), Green
Again(R), Gro-Stakes(R), Tree Gard(R) and XP-20(R). The Company also acquired
certain patents and trademarks when it acquired the assets of Emerald Products
LLC and acquired trademarks with certain assets of Plastic Molded Concepts,
Inc. In connection with its acquisition of Weed Wizard, the Company acquired
the Weed WizardTM product patent and trademark. There can be no assurance that
the Company will apply for any additional trademark or patent protections
relating to its products or that its current trademarks and patents will be
enforceable or adequately protect the Company from infringement of its
proprietary rights.
Although the Company believes that the products sold by it do not infringe
upon the patents or violate the proprietary rights of others, it is possible
that such infringement or violation has or may occur. In the event that
products sold by the Company are deemed to infringe upon the patents or
proprietary rights of others, the Company could be required to pay damages and
modify its products or obtain a license for the manufacture or sale of such
products. There can be no assurance that, in such an event, the Company would
be able to do so in a timely manner, upon acceptable terms and conditions or at
all, and the failure to do any of the foregoing could have a material adverse
effect upon the Company.
Product Liability
The Company, as a manufacturer of lawn and garden care and pesticide
products, may be exposed to significant product liability claims by consumers.
Although the Company has obtained product liability insurance coverage for U.S.
Home & Garden Inc. and Golden West in the aggregate amount of $3.0 million, and
for Easy Gardener, Weatherly and Weed Wizard in the aggregate amount of $2.0
million (with all policies limited to $1.0 million per occurrence), and has
obtained three umbrella policies in the amounts of $5.0 million, $15.0 million,
and $20.0 million, respectively, there can be no assurance that such insurance
will provide coverage for any claim against the Company or will be sufficient
to cover all possible liabilities. In the event a successful suit is brought
against the Company, unavailability or insufficiency of insurance coverage
could have a material adverse effect on the Company. Moreover, any adverse
publicity arising from claims made against the Company, even if such claims
were not successful, could adversely affect the reputation and sales of the
Company's products.
Legal Proceeding
In response to a claim for trademark infringement filed July 30, 1997 by
Easy Gardener against Dalen Products, Inc. ("Dalen") in the United States
District Court for the Western District of Texas, Waco Division,
49
<PAGE>
Dalen filed a counterclaim against Easy Gardener and a third party complaint
against the Company. Dalen alleges, among other things, that the Company and
Easy Gardener monopolized or attempted to monopolize the market for landscape
fabrics; that the Company and Easy Gardener tortiously interfered with Dalen's
contractual and prospective contractual relationships; and that Easy Gardener
infringed upon a Dalen trademark, deceptively advertised the thickness of one
of its products, and misrepresented the porosity of a Dalen product. Dalen's
counterclaim and third party complaint seek an award of unspecified damages and
the entry of unspecified injunctive relief. An adverse ruling could have a
material adverse effect on the Company.
Employees
As of March 13, 1998, the Company had 192 full-time employees. Of such
employees, three are executive officers of the Company, 41 were engaged in
administration and finance, 19 were engaged in sales and marketing, 33 were
engaged in warehouse, shipping and receiving, and 96 were engaged in
production. An additional 20 temporary employees were engaged in warehouse and
production. None of the Company's employees is covered by collective bargaining
agreements. The Company believes that it has a good relationship with its
employees.
Properties
The Company's executive offices are currently located in San Francisco,
California, in approximately 3,000 square feet of office space for which the
Company pays $10,275 per month in rent, which amount includes the costs of
utilities and janitorial services. The Company believes that its office space,
which it rents pursuant to a lease expiring in February 2001, is adequate for
the Company's planned future operations.
Easy Gardener leases approximately 200,000 square feet of office and
warehouse space in Waco, Texas for which the Company pays $17,918 per month in
rent, which will increase to $18,544 per month in February 1998, pursuant to a
lease agreement that expires on February 28, 2001. Easy Gardener's facilities
contain landscape fabric converters, packaging equipment and warehouse and
shipping facilities.
Weatherly leases approximately 72,000 square feet of manufacturing and
warehouse space in Paris, Kentucky for $10,000 per month pursuant to a lease
that expires on June 30, 1998. The Company also leases an additional 53,000
feet of warehouse space in Paris, Kentucky for $5,417 per month in rent
pursuant to a lease that expires on May 6, 1998. If the Company is unable to
extend such leases it believes that it will be able to lease a replacement
facility and warehouse space on commercially reasonable terms.
Golden West's offices are located in Merced, California in approximately
900 square feet of space it leases for $1,150 per month base rent, with rent
increases at a rate of 4% a year. The lease expires in June 1999 subject to the
Company's option to renew the lease for an additional three year period.
With respect to the Company's weed trimmer replacement heads, the Company
leases, for nominal rent, a one story office/manufacturing facility of
approximately 50,600 feet in Dahlonega, Georgia pursuant to a lease that
expires in August 1998. If the Company is unable to extend such lease it
believes that it will be able to lease a replacement facility on commercially
reasonable terms.
The Trust
The Trust is a statutory business trust created under Delaware law
pursuant to (i) the trust agreement of the Trust among the Company, as
depositor, the Delaware Trustee and an Administrative Trustee, and (ii) the
filing of a Certificate of Trust with the Delaware Secretary of State on March
16, 1998. The Trust's business and affairs are conducted by the Property
Trustee, the Delaware Trustee and three individual Administrative Trustees who
are officers of the Company. The Trust exists for the exclusive purposes of (i)
issuing and selling the Trust Securities, (ii) using the proceeds from the sale
of the Trust Securities to acquire the Junior Subordinated Debentures issued by
the Company, and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. The Junior Subordinated Debentures will be the
sole assets of the Trust, and payment by the Company under the Junior
Subordinated Debentures and the Expense Agreement will be the sole revenues of
the Trust. All of the Common Securities will be owned by the Company. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Trust Preferred Securities, except that upon the occurrence and
during
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the continuance of an event of default under the Trust Agreement resulting from
an event of default under the Indenture, the rights of the Company as holder of
the Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Trust Preferred Securities. See "Description of the Trust
Preferred Securities--Subordination of Common Securities of the Trust Held by
the Company." The Company will acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust has
a term of 31 years, but may dissolve earlier as provided in the Trust
Agreement.
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<PAGE>
MANAGEMENT
Directors, Executive Officers and Certain Key Employees
The current directors, executive officers and certain key employees of the
Company are as follows:
<TABLE>
<CAPTION>
Directors and Executive Officers Age Position
- ---------------------------------- ----- ---------
<S> <C> <C>
Robert Kassel(1) ................. 57 Chairman of the Board, Chief Executive Officer, President and
Treasurer
Richard Raleigh(2) ............... 44 Chief Operating Officer and Director
Maureen Kassel ................... 50 Vice President of Public Relations and Advertising, Secretary and
Director
Jon Schulberg(1)(2) .............. 39 Director
Fred Heiden(1)(2) ................ 57 Director
Certain Key Employees
- ---------------------------
Richard M. Grandy ................. 52 President, Easy Gardener
Lynda Gustafson ................... 33 Vice President of Finance
Sheila Jones ...................... 43 Vice President of Operations, Easy Gardener
Paul Logue ........................ 41 National Sales Manager, Easy Gardener
</TABLE>
- ------------
(1) Member, Compensation Committee
(2) Member, Audit Committee
Directors and Executive Officers:
Robert Kassel co-founded the Company and has been Chairman of the Board,
Chief Executive Officer, President and Treasurer of the Company since October
1990. From 1985 to August 1991, he was a consultant to Comtel Communications,
Inc. ("Comtel"), a company specializing in the installation and operation of
telephone systems in hotels. From 1985 to 1990, Mr. Kassel was also a real
estate developer in Long Island, New York and Santa Barbara, California. From
1965 to 1985, he was a practicing attorney in New York City, specializing in
corporate and securities law.
Richard Raleigh has been a Director of the Company since March 1993, Chief
Operating Officer of the Company since June 1992 and served as the Company's
Executive Vice President-Operations from December 1991 to June 1992. Prior to
joining the Company, Mr. Raleigh was a free-lance marketing consultant to the
lawn and garden industry from January 1991 to December 1991. From April 1988 to
January 1991, he was Director of Marketing, Lawn and the Company of Monsanto
Agricultural Co. From December 1986 to April 1988, he was Vice President of
Sales and Marketing of The Andersons, a company engaged in the sale of consumer
and professional lawn and garden products. From November 1978 to December 1986,
he held a variety of positions at The Andersons, including Operations Manager
and New Products Development Manager.
Maureen Kassel, the wife of Robert Kassel, co-founded the Company and has
been Vice President of Public Relations and Advertising and a director of the
Company since November 1990 and Secretary of the Company since February 1992.
For the last ten years, she has assisted in the general administration and
operation of real estate and other businesses. Ms. Kassel is Chairman of the
Board of Comtel.
Jon Schulberg, a director of the Company since March 1993, has been
employed as President of Schulberg MediaWorks, a company engaged in the
independent production of television programs and television advertising since
January 1992. From January 1989 to January 1992, he was a producer for
Guthy-Renker Corporation, a television production company. From September 1987
to January 1989, he was Director of Development for Eric Jones Productions.
Fred Heiden, a director of the Company since March 1993, has been a
private investor since November 1989. From April 1984 to November 1989, Mr.
Heiden was President and principal owner of Bonair Construction, a
Florida-based home improvement construction company.
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Certain Key Employees:
Richard M. Grandy has been President of Easy Gardener since July 1997 and
served as its Vice President from the date of the Company's acquisition of Easy
Gardener, Inc. in September 1994 until July 1997. Mr. Grandy co-founded Easy
Gardener, Inc. in 1983 after serving as Marketing Director at International
Spike, Inc. from 1977 through 1983. From 1968 through 1977, Mr. Grandy was a
sales representative of lawn and garden products for the Ortho Division of
Chevron Chemical Co.
Lynda Gustafson has been Vice President of Finance of the Company since
September 1997 and served as Controller of the Company from November 1993 to
September 1997. From September 1990 through October 1993, Ms. Gustafson was a
supervisor of the Business Consulting Department of the certified public
accounting firm of Hood & Strong. From September 1988 to August 1990, she held
the positions of Staff Accountant and Senior Accountant at the certified public
accounting firm of Schwartz, McGuire & Co.
Sheila Jones has been Vice President of Easy Gardener since July 1997 and
has also served as its General Manager from September 1994. Prior to the
acquisition of Easy Gardener, Inc. by the Company, Ms. Jones was employed by
Easy Gardener, Inc. from its inception in September 1983 to September 1994,
where she advanced to the positions of Vice President and General Manager. From
April 1977 to September 1983, she was employed by International Spike, Inc.,
where she held various project management positions.
Paul Logue has been National Sales Manager of Easy Gardener since its
acquisition by the Company in September 1994. Prior to joining the Company, Mr.
Logue was employed by Easy Gardener, Inc. from September 1989 to September
1994, where he advanced from the position of Northeastern Regional Sales
Manager to National Sales Manager. From March 1988 to September 1989, he was
Regional Sales Manager for Hoffman Brand Fertilizers.
Executive Compensation
The following table discloses the compensation awarded by the Company, for
the three fiscal years ended June 30, 1995, 1996 and 1997, to Mr. Robert
Kassel, its Chief Executive Officer, and Mr. Richard J. Raleigh, its Chief
Operating Officer (together, the "Named Executives"). During the fiscal year
ended June 30, 1997, no other executive officer of the Company received a
salary that exceeded $100,000 during such fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------------------------------------
Long Term All Other
Name and Principal Position Year Salary($) Bonus($) Compensation Compensation (1)
- ----------------------------------- ------ ----------- ---------- ------------------ -----------------
Securities
Underlying
Options(#)
------------------
<S> <C> <C> <C> <C> <C>
Robert Kassel, 1997 350,000 250,000 1,200,000(2) 5,995
Chairman, Chief Executive 1996 250,000 100,000 200,000(3) --
Officer, President and Treasurer 1995 150,000 100,000 687,653(4) --
Richard Raleigh, 1997 195,000 111,275 500,000(2) 8,390
Chief Operating Officer 1996 150,000 10,000 100,000(3) --
1995 120,000 10,000 50,000(4) --
</TABLE>
- ------------
(1) Represents Company contributions to the Named Executives' 401(k) accounts.
(2) Includes options to purchase 200,000 shares previously granted to Mr.
Kassel and options to purchase 100,000 shares previously granted to Mr.
Raleigh whose exercise prices were repriced to reflect a reduction in the
market price of the Common Stock at the time of repricing. Does not
include options to purchase 50,000 shares previously granted to Mr.
Raleigh the expiration date of which was extended during fiscal 1997.
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<PAGE>
(3) Includes five-year options to purchase 200,000 shares granted to Mr. Kassel
and five-year options to purchase 100,000 shares granted to Mr. Raleigh in
June 1995 under the Company's 1995 Stock Option Plan, which grants were
subject to stockholder approval of the plan obtained in February 1996.
(4) Does not include the options referenced in footnote (3) above.
The following table discloses information concerning options granted in
fiscal 1997 to the Named Executives.
Option Grants in Fiscal Year Ended June 30, 1997
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Annual Rates of Stock
Securities Percent of Total Price
Underlying Options Granted to Exercise Appreciation for
Options Granted Employees in Fiscal Price Expiration Option
Name (#)(1) Year(%) ($/Sh) Date Term ($)(2)
- ----------------- ----------------- --------------------- ---------- ------------ ---------------------
5% 10%
--------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert Kassel 350,000 19.8 2.06 7/24/01 199,199 440,177
450,000 25.5 2.06 8/30/01 256,113 565,943
200,000 11.3 2.06 12/24/01 113,828 251,530
200,000 11.3 2.06 6/01/00 113,828 251,530
Richard Raleigh 125,000 7.0 2.06 7/24/01 71,142 157,706
175,000 9.5 2.06 8/30/01 99,599 220,089
100,000 5.7 2.06 12/24/01 56,914 125,765
100,000 5.7 2.06 6/01/00 56,914 125,765
</TABLE>
- ------------
(1) All of such options were exercisable in full from the date of grant.
(2) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the
compounded rates specified over the term of the options. These numbers do
not take into account provisions of options providing for termination of
the option following termination of employment or nontransferability of
the options and do not make any provision for taxes associated with
exercise. Because actual gains will depend upon, among other things,
future performance of the Common Stock, there can be no assurance that the
amounts reflected in this table will be achieved.
The following table sets forth information concerning the number of options
owned by the Named Executives and the value of any in-the-money unexercised
options as of June 30, 1997. No options were exercised by the Named Executives
during fiscal 1997:
Aggregated Option Exercises
And Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
June 30, 1997 June 30, 1997(1)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Robert Kassel ........... 2,067,653 -0- $3,214,598 $-0-
Richard Raleigh ......... 637,500 -0- $ 887,938 $-0-
</TABLE>
- ------------
(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end
market value of the Common Stock. An option is "in-the-money" if the fiscal
year-end fair market value of the Common Stock exceeds the option exercise
price. The last sale price (the fair market value) of the Common Stock on
June 30, 1997 was $3.375 per share.
54
<PAGE>
Employment Agreements
The Company has entered into employment agreements with Messrs. Kassel and
Raleigh, each dated as of April 1, 1996. Mr. Kassel currently serves as Chief
Executive Officer and President pursuant to the employment agreement for a term
expiring on March 31, 1999, subject to automatic renewal unless terminated. His
current annual salary is $450,000, and is subject to such bonuses and increases
as are approved at the discretion of the Board of Directors. Mr. Raleigh
currently serves as Chief Operating Officer pursuant to the employment
agreement for a term expiring on March 31, 1999, subject to automatic renewal
unless terminated. His current annual salary is $195,000, and is subject to
such bonuses and increases as are approved at the discretion of the Board of
Directors. Each of the employment agreements requires that substantially all of
the employee's business time be devoted to the Company and that the employee
not compete, or engage in a business competitive with, the Company's current or
anticipated business for the term of the agreement and for two years thereafter
(although they each may own not more than 5% of the securities of any publicly
traded competitive company). Each of Mr. Kassel and Mr. Raleigh is, in addition
to salary, entitled to certain fringe benefits, including the use of an
automobile and payment of related expenses.
Mr. Kassel's employment agreement also provides that if his employment is
terminated under certain circumstances, including termination of Mr. Kassel
upon a change of control of the Company, (as defined in the agreement) a
failure by the Company to comply with its obligations under the agreement, the
failure of the Company to obtain the assumption of the agreement by any
successor corporation, or a change in Mr. Kassel's duties and obligations from
those contemplated by the agreement, and termination by the Company of Mr.
Kassel's employment other than for disability or cause, he will be entitled to
receive severance pay equal to the greater of (i) $350,000 ($3.5 million in the
event of a change of control), or (ii) the total compensation earned by Mr.
Kassel from the Company during the one-year period (multiplied by ten in the
event of a change of control) prior to the date of his termination.
Mr. Raleigh's employment agreement also provides that if his employment is
terminated under certain circumstances, including termination of Mr. Raleigh
upon a change of control of the Company, (as defined in the agreement) a
failure by the Company to comply with its obligations under the agreement, the
failure of the Company to obtain the assumption of the agreement by any
successor corporation, or a change in Mr. Raleigh's duties and obligations from
those contemplated by the agreement, and termination by the Company of Mr.
Raleigh's employment other than for disability or cause, he will be entitled to
receive severance pay equal to the greater of (i) $162,500 ($812,500 in the
event of a change of control), or (ii) the total compensation earned by Mr.
Raleigh from the Company during the one-year period (multiplied by five in the
event of a change of control) prior to the date of his termination.
Easy Gardener has entered into an employment agreement with Mr. Grandy,
dated as of September 1, 1994 which expires on August 31, 1998. Mr. Grandy
currently serves as President of Easy Gardener. His current annual salary is
$200,000. The Agreement requires Mr. Grandy to devote substantially all of his
business time to Easy Gardener, and in the event Mr. Grandy's employment
agreement is terminated by Easy Gardener without cause (as defined in the
agreement) or if Mr. Grandy resigns with "Good Reason" (as defined in the
agreement), Mr. Grandy will be entitled to receive his base salary through the
expiration of the agreement.
Committees of the Board of Directors
The Company recently established an Audit Committee comprised of Messrs.
Raleigh, Heiden and Schulberg. The Audit Committee will, among other things,
make recommendations to the Board of Directors with respect to the engagement
of the Company's independent certified public accountants and the review of the
scope and effect of the audit engagement. The Company recently established a
Compensation Committee of its Board of Directors, comprised of Messrs. Kassel,
Schulberg and Heiden. The Compensation Committee will, among other things, make
recommendations to the Board of Directors with respect to the compensation of
the executive officers of the Company. The Company maintains a Stock Option
Committee comprised of Messrs. Schulberg and Heiden, which determines the
persons to whom options should be granted under the Company's 1995 and 1997
Stock Option Plans and the number and other terms of options to be granted to
each person under such plans.
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<PAGE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Company did not have a Compensation Committee of its Board of
Directors during fiscal 1997. Decisions as to compensation during fiscal 1997
were made by the Company's Board of Directors. Messrs. Kassel and Raleigh, in
their capacity as directors, each participated in the Board of Directors
deliberations concerning compensation of executive officers for fiscal 1997.
During fiscal 1997, none of the executive officers of the Company served on the
Board of Directors or the compensation committee of any other entity, any of
whose officers served on the Board of Directors of the Company.
Stock Option Plans
In September 1991, the Company adopted a stock option plan (the "1991
Plan") pursuant to which 700,000 shares of Common Stock have been reserved for
issuance upon the exercise of options designated as either (i) options intended
to constitute incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended (the "Code") or (ii) non-qualified options ("NQO's"). ISOs
may be granted under the 1991 Plan to employees and officers of the Company.
NQO's may be granted to consultants, directors (whether or not they are
employees), employees or officers of the Company.
The purpose of the 1991 Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and give them a greater personal
interest in the success of the Company. The 1991 Plan is administered by the
Board of Directors. The Board, within the limitations of the 1991 Plan,
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate of exercise of each option, the option purchase price per
share and the manner of exercise, the time, manner and form of payment upon
exercise of an option, and whether restrictions such as repurchase rights in
the Company are to be imposed on shares subject to options.
ISOs granted under the 1991 Plan may not be granted at a price less than
the fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more of the voting stock of
the Company). The aggregate fair market value of shares for which ISOs granted
to any employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and any related
corporation) may not exceed $100,000. NQO's granted under the 1991 Plan may not
be granted at a price less than the fair market value of the Common Stock on
the date of grant. Options granted under the 1991 Plan will expire not more
than ten years from the date of grant (five years in the case of ISOs granted
to persons holding 10% or more of the voting stock of the Company). Options to
acquire an aggregate of approximately 522,000 shares are outstanding under the
1991 Plan.
The Company has adopted, a Non-Employee Director Stock Option Plan (the
"Director Plan"). Only non-employee directors of the Company are eligible to
receive grants under the Director Plan. The Director Plan provides that
eligible directors automatically receive a grant of options to purchase 5,000
shares of Common stock at fair market value upon first becoming a director and,
thereafter, an annual grant, in January of each year, of 5,000 options at fair
market value. Options to purchase an aggregate of up to 100,000 shares of
Common Stock available for the automatic grants under the Director Plan.
Options to acquire an aggregate of 10,000 shares are outstanding under the
Director Plan.
The Company has also adopted a 1995 Stock Option Plan ("1995 Plan") which
provides for grants of options to purchase up to 1,500,000 shares of Common
Stock. The Board of Directors or the Stock Option Committee (the "Committee"),
as the case may be, will have discretion to determine the number of shares
subject to each NQO (subject to the number of shares available for grant under
the 1995 Plan and other limitations on grant set forth in the 1995 Plan), the
exercise price thereof (provided such price is not less than the par value of
the underlying shares of Common Stock), the term thereof (but not in excess of
10 years from the date of grant, subject to earlier termination in certain
circumstances), and the manner in which the option becomes exercisable
(amounts, intervals and other conditions). Directors who are employees of the
Company will be eligible to be granted ISOs or NQOs under such plan. The Board
or Committee, as the case may be, also has discretion to determine the number
of shares subject to each ISO, the exercise price and other terms and
conditions thereof,
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<PAGE>
but their discretion as to the exercise price, the term of each ISO and the
number of ISOs that may vest may be in any year is limited by the same Code
provisions applicable to ISOs granted under the 1991 Plan. Options to acquire
an aggregate of approximately 1,460,000 shares are outstanding under the 1995
Plan.
The Company has adopted a 1997 Stock Option Plan ("1997 Plan") which
provides for grants of options to purchase up to 1,500,000 shares of Common
Stock. The Board of Directors or the Committee of the 1997 Plan, as the case
may be, will have discretion to determine the number of shares subject to each
NQO (subject to the number of shares available for grant under the 1997 Plan
and other limitations on grant set forth in the 1997 Plan), the exercise price
thereof (provided such price is not less than the par value of the underlying
shares of Common Stock), the term thereof (but not in excess of 10 years from
the date of grant, subject to earlier termination in certain circumstances),
and the manner in which the option becomes exercisable (amounts, intervals and
other conditions). Directors who are employees of the Company will be eligible
to be granted ISOs or NQOs under such plan. The Board or Committee, as the case
may be, also has discretion to determine the number of shares subject to each
ISO, the exercise price and other terms and conditions thereof, but their
discretion as to the exercise price, the term of each ISO and the number of
ISOs that may vest may be in any year is limited by the same Code provisions
applicable to ISOs granted under the 1991 Plan. Options to acquire an aggregate
of 615,000 shares are outstanding under the 1997 Plan.
The Company from time to time has also granted non-plan options to certain
officers, employees and consultants. See Note 9 of Notes to Consolidated
Financial Statements.
The Company has adopted a policy not to grant in the future to its
officers, directors, employees, 5% or greater stockholders or to affiliates of
the Company, any option or warrant having an exercise price less than 85% of
the then fair market value of the Common Stock.
The Company will not issue further options, warrants or other securities
convertible into the Common Stock prior to December 10, 1998, except for (i)
options, warrants, or convertible securities issued in connection with mergers
or acquisitions or in connection with financings obtained from unaffiliated
third parties and (ii) options to purchase shares of Common Stock pursuant to
the Director Plan.
Director Compensation
During fiscal 1997 each of the Company's two non-employee directors,
Messrs. Schulberg and Heiden, received $5,000 for serving as directors of the
Company.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information at February 28, 1998, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Executive and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Percentage
of Beneficial Owner(1) Ownership(2)(3) of Class
- ------------------------------- ------------------------------ -----------
<S> <C> <C>
Maureen Kassel ................ 680,650(4) 3.4%
Robert Kassel ................. 4,482,095(5)(6) 20.2
Richard Raleigh ............... 621,731(7) 3.0
Fred Heiden ................... 258 *
Jon Schulberg ................. 258 *
Joseph Owens II(8) ............ 1,101,896(8) 5.5
Richard Grandy(8) ............. 1,101,896(8) 5.5
Warburg Pincus Asset
Management, Inc.(9) .......... 1,310,500(9) 6.6
All executive officers
and directors as a
group (five persons) ......... 5,429,342(4)(5)(6) 23.4
</TABLE>
- ------------
*less than 1%
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from February 28, 1998 upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from February 28, 1998 have been exercised.
(3) The address of Maureen and Robert Kassel is c/o the Company.
(4) Includes presently exercisable options and warrants issued to Ms. Kassel
to purchase an aggregate of 325,000 shares of the Company's Common Stock.
(5) Of such shares, (i) 355,650 are owned of record by Maureen Kassel;
however, because Ms. Kassel has appointed her husband as her proxy and
attorney-in-fact to vote all 355,650 of the shares owned of record by her,
Robert Kassel may also be deemed to have beneficial ownership of such
shares; (ii) an aggregate of 914,396 shares are owned of record by each of
Messrs. Joseph Owens and Richard Grandy, who have each entered into a
voting trust agreement (the "Voting Agreement") providing Mr. Kassel with
the right to vote the shares until September 1, 2001.
(6) Includes 2,297,653 shares of Common Stock issuable upon exercise of
options and warrants.
(7) Represents shares of Common Stock issuable upon exercise of options and
warrants.
(8) Includes 162,500 shares of Common Stock issuable to each of Messrs. Grandy
and Owens upon exercise of options. The address of Mr. Grandy is c/o the
Company. The address of Mr. Owens is 8 Hillendale, Waco, Texas 76710.
(9) According to a Schedule 13G filed with the Commission, the shares are held
by accounts for which Warburg Pincus Asset Management, Inc. acts as
investment advisor. The address of Warburg Pincus Asset Management, Inc.
is 466 Lexington Avenue, New York, New York 10017.
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<PAGE>
CERTAIN TRANSACTIONS
To obtain a portion of the financing for the Company's acquisition of Easy
Gardner, Inc., Mr. Kassel provided for the benefit of the lender $500,000 cash
collateral and a personal guarantee of $333,000. In consideration of providing
such collateral and guarantee, the Company granted Mr. Kassel options to
purchase an aggregate of 526,300 shares of Common Stock for an aggregate
exercise price of approximately $822,000.
In connection with certain acquisitions, during fiscal 1997, the Company
granted five year non-plan options to Messrs. Kassel and Raleigh to purchase an
aggregate of 650,000 and 275,000 shares of Common Stock, respectively at an
exercise price of $2.0625 per share.
The Company will not issue further options, warrants or other securities
convertible into the Common Stock prior to December 10, 1998, except for (i)
options, warrants or convertible securities issued in connection with mergers
or acquisitions or in connection with financings obtained from unaffiliated
third parties and (ii) options to purchase shares of Common Stock which are
issued pursuant to the Director Plan. In addition, pursuant to an agreement
with the underwriters of its December 1997 public offering, the Company has
agreed not to issue any options, warrants or any other securities convertible
into Common Stock for the remainder of fiscal 1999, other than options,
warrants or any other securities convertible into up to an aggregate of 750,000
shares of Common Stock.
From time to time Messrs. Kassel and Raleigh have borrowed monies from the
Company. During fiscal 1997, the highest amounts owed to the Company by Messrs.
Kassel and Raleigh were $607,472 and $225,294, respectively, and at December
31, 1997, the balance of such indebtedness was $589,560 and $239,802,
respectively. The loans bear interest at 7% per annum and mature on June 30,
2002. Company loans to all officers of the Company are restricted to a maximum
of $850,000 by the terms of the Credit Agreement. Messrs. Kassel and Raleigh
will make annual payments of principal and interest on the outstanding
principal balance of their loans through the maturity of the loans as follows:
As to Mr. Kassel -- $50,000, $50,000, $100,000, $150,000 and the balance of
approximately $240,000 respectively. As to Mr. Raleigh, $25,000, $25,000,
$50,000, $50,000 and the balance of approximately $90,000, respectively.
The above transactions and loans were approved or ratified by the
independent directors of the Company who did not have an interest in such
transactions or loans. All future transactions or loans between the Company and
its officers, directors or 5% or greater stockholders will be made or entered
into on terms no less favorable to the Company than those that can be obtained
from unaffiliated third parties. Furthermore, the Company has adopted a policy
that any future material transactions and loans between the Company and its
officers, directors and 5% or greater stockholders, and any forgiveness of any
such loans, must be approved by a majority of the Company's independent
directors who do not have an interest in the transactions and who have access,
at the Company's expense, to the Company's or independent legal counsel.
Notwithstanding the foregoing, there can be no assurance that conflicts of
interest will not arise with respect to any such transactions, or that if
conflicts do arise, they will be resolved in a manner favorable to the Company.
59
<PAGE>
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Trust Agreement. The Trust Agreement will be qualified as an indenture under
the Trust Indenture Act. Initially, Wilmington Trust Company will be the
Delaware Trustee and the Property Trustee. The Property Trustee is the
independent trustee whose sole responsibility is to fulfill the trustee
obligations specified in the Trust Indenture Act. Wilmington Trust Company will
act as trustee for the purpose of fulfilling these obligations. The terms of
the Trust Preferred Securities will include those stated in the Trust Agreement
and those made part of the Trust Agreement by the Trust Indenture Act. This
summary of certain terms and provisions of the Trust Preferred Securities and
the Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement (as
amended or supplemented from time to time) are referred to herein, such defined
terms are incorporated herein. The form of the Trust Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.
General
Pursuant to the terms of the Trust Agreement, the Administrative Trustees
on behalf of the Trust will issue the Trust Preferred Securities and the Common
Securities (collectively, the "Trust Securities"). The Trust Preferred
Securities will represent preferred undivided beneficial interests in the
assets of the Trust and the holders thereof will be entitled to a preference
over the Common Securities of the Trust (which will be held by the Company) in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation, as well as other benefits as described in the Trust
Agreement.
The Trust Preferred Securities will rank pari passu, and payments will be
made thereon pro rata, with the Common Securities of the Trust, except as
described under "--Subordination of Common Securities of the Trust Held by the
Company" below. Legal title to the Junior Subordinated Debentures will be held
by the Property Trustee in trust for the benefit of the holders of the Trust
Securities. The Guarantee executed by the Company for the benefit of the
holders of the Trust Preferred Securities (the "Guarantee") will be a guarantee
on a subordinated basis with respect to the Trust Preferred Securities but will
not guarantee payment of Distributions or amounts payable on redemption or on
liquidation of the Trust Preferred Securities if the Trust does not have funds
on hand available to make such payments. See "Description of Guarantee."
Distributions
Payment of Distributions. Distributions on the Trust Preferred Securities
will be payable at the annual rate of % of the stated Liquidation Amount of
$25, payable monthly in arrears on the day of each calendar month of each
year to the holders of the Trust Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). The amount of each Distribution due with
respect to the Trust Preferred Securities will include amounts accrued through
the Distribution Date. Distributions on the Trust Preferred Securities will be
payable to the holders thereof as they appear on the register of the Trust on
the relevant record date which will be, so long as such securities remain in
book-entry form, one Business Day (as defined below) prior to the relevant
Distribution Date or, in the event that the Trust Preferred Securities are not
then in book-entry form, the relevant record date will be the date 15 days
prior to the relevant Distribution Date. Distributions will accumulate from the
date of original issuance. The first Distribution Date for the Trust Preferred
Securities will be , 1998.
The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day, payment of the Distribution payable on such date will be made on
the next Business Day (and without any interest or other payment in respect of
any such delay), with the same force and effect as if made on the date such
payment was originally payable. As used in this Prospectus, a "Business Day"
shall mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in the State of California are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office
of the Property Trustee or the Indenture Trustee is closed for business.
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<PAGE>
The funds of the Trust available for distribution to holders of its Trust
Preferred Securities will be limited to payments by the Company under the
Junior Subordinated Debentures in which the Trust will invest the proceeds from
the issuance and sale of its Trust Preferred Securities. See "Description of
Junior Subordinated Debentures." If the Company does not make interest payments
on the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Trust Preferred Securities. The payment
of Distributions (if and to the extent the Trust has funds legally available
for the payment of such Distributions and cash sufficient to make such
payments) is guaranteed by the Company. See "Description of Guarantee."
Extension Period. So long as no Debenture Event of Default has occurred
and is continuing, the Company has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 60 consecutive months with respect to
each such period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the Junior Subordinated
Debentures. As a consequence of any such election, monthly Distributions on the
Trust Preferred Securities will be deferred by the Trust during any such
Extension Period. Distributions to which holders of Trust Preferred Securities
are entitled will accumulate additional amounts thereon at the rate per annum
of % thereof, compounded monthly from the relevant Distribution Date, to the
extent permitted under applicable law. The term "Distribution," as used herein,
shall include any such additional accumulated amounts. During any such
Extension Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu with or junior in interest to the Junior Subordinated
Debentures or make any guarantee payments with respect to any guarantee by the
Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in the
Company's capital stock (which includes common and preferred stock), (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee and (d) purchases of common stock related to
the issuance of common stock or rights under any of the Company's benefit plans
for its directors, officers, employees or consultants) or (iii) redeem,
purchase or acquire less than all of the Junior Subordinated Debentures or any
of the Trust Preferred Securities. Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 60
consecutive months or extend beyond the Stated Maturity. Upon the termination
of any such Extension Period and the payment of all amounts then due, and
subject to the foregoing limitations, the Company may elect to begin a new
Extension Period. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extension Period. The
Company has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debentures.
Redemption
Mandatory Redemption. Upon the repayment or redemption at any time, in
whole or in part, of any Junior Subordinated Debentures, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of a date of redemption (the "Redemption Date"),
at the Redemption Price (as defined below). See "Description of Junior
Subordinated Debentures--Redemption." If less than all of the Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption shall be allocated to the
redemption of the Trust Securities on a pro rata basis. The amount of premium,
if any, paid by the Company upon the redemption of all or any part of the
Junior Subordinated Debentures to be repaid or redeemed on a Redemption Date
shall be allocated to the redemption pro rata of the Trust Securities.
Optional Redemption. The Company will have the right to redeem the Junior
Subordinated Debentures (i) on or after , 2003, in whole at any time or in
part from time to time at a redemption price equal to the
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<PAGE>
accrued and unpaid interest on the Junior Subordinated Debentures so redeemed
to the date fixed for redemption, plus 100% of the principal amount thereof, or
(ii) at any time, in whole (but not in part), upon the occurrence of a Tax
Event or an Investment Company Event at a redemption price equal to the accrued
and unpaid interest on the Junior Subordinated Debentures so redeemed to the
date fixed for redemption, plus 100% of the principal amount thereof. See
"Description of Junior Subordinated Debentures--Redemption."
Tax Event Redemption, Investment Company Event Redemption or Distribution
of Junior Subordinated Debentures. If a Tax Event or an Investment Company
Event shall occur and be continuing, the Company has the right to redeem the
Junior Subordinated Debentures in whole (but not in part) and thereby cause a
mandatory redemption of the Trust Securities in whole (but not in part) at the
Redemption Price (as defined below) within 90 days following the occurrence of
such Tax Event or Investment Company Event. If a Tax Event or an Investment
Company Event has occurred and is continuing and the Company does not elect to
redeem the Junior Subordinated Debentures and thereby cause a mandatory
redemption of the Trust Securities or to dissolve the Trust and cause the
Junior Subordinated Debentures to be distributed to holders of the Trust
Securities in liquidation of the Trust as described below, such Trust
Securities will remain outstanding and Additional Sums (as defined below) may
be payable on the Junior Subordinated Debentures.
Definitions
"Additional Sums" means the additional amounts as may be necessary to be
paid by the Company with respect to the Junior Subordinated Debentures in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Trust Securities of the Trust shall not be reduced as a result of
any additional taxes, duties and other governmental charges to which the Trust
has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Trust Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities
in connection with a dissolution and liquidation of the Trust, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date.
Distribution of Junior Subordinated Debentures
Subject to the Company and the Trust having received an opinion of counsel
to the effect that such distribution will not be a taxable event to the holders
of the Trust Preferred Securities, the Company will have the right at any time
to dissolve the Trust and, after satisfaction of the liabilities of creditors
of the Trust as provided by applicable law, cause the Junior Subordinated
Debentures to be distributed to the holders of Trust Securities in liquidation
of the Trust. After the liquidation date fixed for any distribution of Junior
Subordinated Debentures for Trust Preferred Securities (i) such Trust Preferred
Securities will no longer be deemed to be outstanding, and (ii) certificates
representing Trust Preferred Securities that are not then held by the
Depositary or its nominee will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of such
Trust Preferred Securities, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on the Trust Preferred
Securities until such certificates are presented to the Administrative Trustees
or their agent for transfer or exchange.
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution and liquidation of
the Trust were to occur. Accordingly, the Trust Preferred Securities that an
investor may purchase, or the Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of the Trust, may trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
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Redemption Procedures
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions
of the Trust Preferred Securities shall be made and the Redemption Price shall
be payable on each Redemption Date only to the extent that the Trust has funds
on hand available for the payment of such Redemption Price. See "--
Subordination of Common Securities of the Trust Held by the Company" herein and
"Description of Guarantee."
If the Trust gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, Eastern time on the Redemption Date,
to the extent funds are available and to the extent the Trust Preferred
Securities are no longer in book-entry form, the Property Trustee will deposit
with the paying agent for such Trust Preferred Securities funds sufficient to
pay the aggregate Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Trust Preferred
Securities. If such Trust Preferred Securities are only in book-entry form, the
Property Trustee, to the extent funds are available, will deposit with the
Depositary funds sufficient to pay the aggregate Redemption Price and will give
the Depositary irrevocable instructions and authority to pay the Redemption
Price to the holders of such Trust Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date shall be
payable to the holders of such Trust Preferred Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of the Trust Preferred Securities will
cease, except the right of the holders of the Trust Preferred Securities to
receive the applicable Redemption Price, but without interest on such
Redemption Price, and such Trust Preferred Securities will cease to be
outstanding. In the event that any date fixed for redemption of such Trust
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding Business Day
(and without any interest or other payment in respect of any such delay), with
the same force and effect as if made on the date such payment was originally
payable. In the event that payment of the Redemption Price in respect of Trust
Preferred Securities called for redemption is improperly withheld or refused
and not paid either by the Trust or by the Company pursuant to the Guarantee,
Distributions on such Trust Preferred Securities will continue to accrue at the
then applicable rate, from the Redemption Date originally established by the
Trust for such Trust Preferred Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price. See "Description
of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and further provided that the Company is not then
exercising its right to defer interest payments on the Junior Subordinated
Debentures, the Company may at any time and from time to time purchase
outstanding Trust Preferred Securities by tender, in the open market or by
private agreement.
Payment of the Redemption Price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register for such Trust Preferred Securities on the relevant record
date, which date shall be, so long as such securities remain in book-entry
form, one Business Day prior to the Redemption Date or Liquidation Date, as
applicable. In the event that the Trust Preferred Securities are not in
book-entry form, the relevant record date for such Trust Preferred Securities
shall be the date 15 days prior to the relevant Redemption Date.
If less than all of the Trust Securities issued by the Trust are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the Trust
Preferred Securities and Common Securities based upon the relative Liquidation
Amounts of such classes. The particular Trust Preferred Securities to be
redeemed shall be selected by the Property Trustee from the outstanding Trust
Preferred Securities not previously called for redemption, by such method as
the Property Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (equal to $25 or an integral multiple
thereof) of the Liquidation Amount of Trust Preferred Securities. The Property
Trustee shall promptly notify the Securities Registrar (as defined below) in
writing of the Trust Preferred Securities selected for redemption and, in the
case of any Trust Preferred Securities selected for partial redemption, the
Liquidation
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<PAGE>
Amount thereof to be redeemed. For all purposes of the Trust Agreement, unless
the context otherwise requires, all provisions relating to the redemption of
Trust Preferred Securities shall relate to the portion of the aggregate
Liquidation Amount of Trust Preferred Securities which has been or is to be
redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at such
holder's registered address. Unless the Trust defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Trust Preferred Securities called for redemption.
Subordination of Common Securities of the Trust Held by the Company
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amounts of the Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Trust Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
applicable Redemption Price, the full amount of such Redemption Price on all of
the outstanding Trust Preferred Securities then called for redemption, shall
have been made or provided for, and all funds available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions on,
or the Redemption Price of, the Trust Preferred Securities then due and
payable.
In the case of any Event of Default under the Trust Agreement resulting
from a Debenture Event of Default, the Company as holder of the Common
Securities, will be deemed to have waived any right to act with respect to any
such Event of Default until the effect of all such Events of Default have been
cured, waived or otherwise eliminated. Until any such Events of Default have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Trust Preferred Securities and not on
behalf of the Company as holder of the Common Securities, and only the holders
of the Trust Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities. See "--Distribution of Junior
Subordinated Debentures" above. The Company might exercise its right to
dissolve the Trust under circumstances where a "Tax Event," "Investment Company
Event" or other undesirable event could be avoided simply by dissolving the
Trust and causing the Junior Subordinated Debentures to be distributed to
holders of the Trust Preferred Securities.
In addition, pursuant to the Trust Agreement, the Trust shall
automatically dissolve upon expiration of its term and shall earlier dissolve
on the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of the Company; (ii) the distribution of a Like Amount of the
Junior Subordinated Debentures to the holders of its Trust Securities, if the
Company, as Depositor, has delivered written direction to the Property Trustee
to dissolve the Trust (which direction is optional and, except as described
above, wholly within the discretion of the Company, as Depositor); (iii)
redemption of all of the Trust Preferred Securities as described under
"--Redemption" and (iv) the entry of an order for the dissolution of the Trust
by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), or (iv)
above, the Trust shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be
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practical, in which event such holders will be entitled to receive out of the
assets of the Trust available for distribution to holders, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, an
amount equal to, in the case of holders of Trust Preferred Securities, the
aggregate of the Liquidation Amount plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such liquidation on a pro rata basis with the holders of the Trust
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Trust Preferred Securities shall have a priority over
the Common Securities.
Under current United States federal income tax law and interpretations,
and assuming that the Trust is treated as a grantor trust, a distribution of
the Junior Subordinated Debentures should not be a taxable event to holders of
the Trust Preferred Securities. Should there be a change in law, a change in
distribution, a Tax Event or other circumstances, however, the distribution
could be a taxable event to the Trust and to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences." If the Company
elects neither to redeem the Junior Subordinated Debentures prior to maturity
nor to liquidate the Trust and distribute the Junior Subordinated Debentures to
holders of the Trust Preferred Securities, the Trust Preferred Securities will
remain outstanding until the repayment of the Junior Subordinated Debentures.
If the Company elects to dissolve the Trust and thereby causes the Junior
Subordinated Debentures to be distributed to holders of the Trust Preferred
Securities in liquidation of the Trust, the Company shall continue to have the
right to shorten the Stated Maturity of such Junior Subordinated Debentures.
See "Description of Junior Subordinated Debentures--General."
Events of Default; Notice
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Trust Preferred Securities (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--
Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Property Trustee in the Trust Agreement (other
than a default or breach in the performance of a covenant or warranty which is
addressed in clause (ii) or (iii) above), and continuation of such default or
breach, for a period of 60 days after there has been given, by registered or
certified mail, to the defaulting Property Trustee by the holders of at least
25% in aggregate Liquidation Amount of the outstanding Trust Preferred
Securities, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under the
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Trust Preferred
Securities, the Administrative Trustees and the Company, as Depositor, unless
such Event of Default shall have
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been cured or waived. The Company, as Depositor, and the Administrative
Trustees are required to file annually with the Property Trustee a certificate
as to whether or not they are in compliance with all the conditions and
covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Common Securities upon
dissolution of the Trust as described above. See "--Liquidation Distribution
upon Dissolution" herein. Upon a Debenture Event of Default (other than with
respect to certain events in bankruptcy, insolvency or reorganization), unless
the principal of all the Junior Subordinated Debentures has already become due
and payable, either the Property Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debentures then
outstanding may declare all of the Junior Subordinated Debentures to be due and
payable immediately by giving notice in writing to the Company (and to the
Property Trustee, if notice is given by holders of the Junior Subordinated
Debentures). If the Property Trustee or the holders of the Junior Subordinated
Debentures fail to declare the principal of all of the Junior Subordinated
Debentures due and payable upon a Debenture Event of Default, the holders of at
least 25% in Liquidation Amount of the Trust Preferred Securities then
outstanding shall have the right to declare the Junior Subordinated Debentures
immediately due and payable. In either event, payment of principal and interest
on the Junior Subordinated Debentures shall remain subordinated to the extent
provided in the Indenture. In addition, holders of the Trust Preferred
Securities have the right in certain circumstances to bring a Direct Action (as
hereinafter defined). See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Trust Preferred
Securities."
If a Debenture Event of Default with respect to certain events in
bankruptcy, insolvency or reorganization occurs, the Junior Subordinated
Debentures shall automatically, and without any declaration or other action on
the part of the Property Trustee or the holders of the Junior Subordinated
Debentures, become immediately due and payable. In such event, payment of
principal and interest on the Junior Subordinated Debentures will also remain
subordinated to the extent provided in the Indenture.
Removal of Trustees
Unless a Debenture Event of Default has occurred and is continuing, any of
the Property Trustee, the Delaware Trustee or the Administrative Trustees may
be removed at any time by the holder of the Common Securities. For example, the
holder of the Common Securities may seek to remove such trustees upon
substandard performance or non-performance of their duties or upon a
significant increase in a trustee's fee. If a Debenture Event of Default has
occurred and is continuing, the Property Trustee and the Delaware Trustee also
may be removed at such time by the holders of a majority in Liquidation Amount
of the outstanding Trust Preferred Securities. In no event will the holders of
the Trust Preferred Securities have the right to vote to appoint, remove or
replace the Administrative Trustees, which voting rights are vested exclusively
in the Company as the holder of the Common Securities. No resignation or
removal of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Trust Agreement.
Co-Trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust property
may at the time be located, the Company, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
Merger or Consolidation of Trustees
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee (that is not a
natural person) may be merged or converted or with which it may be
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consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any person
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below or as described in "--Liquidation Distribution Upon
Dissolution." The Trust may, at the request of the Company, with the consent of
the Administrative Trustees and without the consent of the holders of the Trust
Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (a) expressly assumes all of the
obligations of the Trust with respect to the Trust Preferred Securities or (b)
substitutes for the Trust Preferred Securities other securities having
substantially the same terms as the Trust Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity, possessing the same powers and duties as the
Property Trustee, as the holder of the Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange, national stock
market or other organization on which the Trust Preferred Securities are then
listed, if any, (iv) such merger, consolidation, amalgamation, conveyance,
transfer or lease does not cause the Trust Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized statistical
rating organization which gives ratings to the Trust Preferred Securities, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Trust Preferred Securities (including any Successor Securities)
in any material respect, (vi) such successor entity has a purpose substantially
identical to that of the Trust, (vii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Company has
received an opinion from independent counsel to the Trust experienced in such
matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Trust nor such successor entity will be required to register
as an investment company under the Investment Company Act and (viii) the Company
or any permitted successor or designee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or loan its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or loan would cause the Trust or the successor entity to be
classified as other than a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "Description of Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Trust Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or (ii) to modify, eliminate
or add to
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any provisions of the Trust Agreement to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any holder of Trust Securities, and any such
amendments of the Trust Agreement shall become effective when notice thereof is
given to the holders of the Trust Securities. The Trust Agreement may be
amended by the Issuer Trustees and the Company with (i) the consent of holders
representing not less than a majority of the aggregate Liquidation Amount of
the outstanding Trust Securities, and (ii) receipt by the Issuer Trustees of an
opinion of counsel to the effect that such amendment or the exercise of any
power granted to the Issuer Trustees in accordance with such amendment will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from status as an "investment company"
under the Investment Company Act, provided that without the consent of each
holder of Trust Securities to be affected thereby, the Trust Agreement may not
be amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date
or (ii) restrict the right of a holder of Trust Securities to institute suit
for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the holders of a majority in aggregate Liquidation Amount of all outstanding
Trust Preferred Securities; provided, however, that where a consent under the
Indenture would require the consent of each holder of Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the Trust Preferred
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Trust Preferred
Securities except by subsequent vote of the holders of the Trust Preferred
Securities. The Property Trustee shall notify each holder of the Trust
Preferred Securities of any notice of default with respect to the Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of
such holders of the Trust Preferred Securities, prior to taking any of the
foregoing actions, the Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that such action will not cause the
Trust to fail to be classified as a grantor trust for United States federal
income tax purposes.
Any required approval of holders of the Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which holders of the Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of record of the Trust
Preferred Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of the Trust Preferred Securities will
be required for the Trust to redeem and cancel the Trust Preferred Securities
in accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Trust Preferred Securities that are owned by the Company, the Issuer
Trustees or any affiliate of the Company or any Issuer Trustees, shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
Global Trust Preferred Securities
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee ("Global
Trust Preferred Security"). Beneficial interests in the Global Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary. Except as
described below, Trust Preferred Securities in certificated form will not be
issued in exchange for the global certificates. See "Book-Entry Issuance."
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A global security shall be exchangeable for Trust Preferred Securities
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies the Company that it is unwilling or unable
to continue as a depositary for such global security and no successor
depositary shall have been appointed, or if at any time the Depositary ceases
to be a clearing agency registered under the Exchange Act, at a time when the
Depositary is required to be so registered to act as such depositary, (ii) the
Company in its sole discretion determines that such global security shall be so
exchangeable, or (iii) there shall have occurred and be continuing an Event of
Default under the Indenture. Any global security that is exchangeable pursuant
to the preceding sentence shall be exchangeable for definitive certificates
registered in such names as the Depositary shall direct. It is expected that
such instructions will be based upon directions received by the Depositary with
respect to ownership of beneficial interests in such global security. In the
event that Trust Preferred Securities are issued in definitive form, such Trust
Preferred Securities will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices of the Depositary
described below.
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of the Depositary to such Depositary
or another nominee of such Depositary or by the Depositary or any nominee to a
successor Depositary or any nominee of such successor.
Payments on Trust Preferred Securities represented by a global security
will be made to the Depositary, as the record holder of the Trust Preferred
Securities. In the event the Trust Preferred Securities are issued in
definitive form, Distributions will be payable, the transfer of the Trust
Preferred Securities will be registrable, and Trust Preferred Securities will
be exchangeable for Trust Preferred Securities of other denominations of a like
aggregate Liquidation Amount, at the corporate office of the Property Trustee,
or at the offices of any paying agent or transfer agent appointed by the
Administrative Trustees, provided that payment of any Distribution may be made
at the option of the Administrative Trustees by check mailed to the address of
the persons entitled thereto or by wire transfer, provided that payments will
be made by wire transfer if so requested by a holder of more than $1 million
aggregate Liquidation Amount. In addition, if the Trust Preferred Securities
are issued in definitive, certificated form, the record dates for payment of
Distributions will be the first day of the month in which the relevant
Distribution Date occurs. For a description of the terms of the depositary
arrangements relating to payments, transfer, voting rights, redemptions and
other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Trust Preferred Security, and the deposit of
such Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Trust Preferred Security or its nominee will credit,
on its book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Trust Preferred Securities represented by
such Global Trust Preferred Securities to the accounts of Participants (as
defined below). Such accounts shall be designated by the dealers, underwriters
or agents with respect to such Trust Preferred Securities. Ownership of
beneficial interests in a Global Trust Preferred Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Trust Preferred Security will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the applicable Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owner of such Global Trust Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Trust Preferred Securities represented by such Global
Trust Preferred Security for all purposes under the Trust Agreement governing
such Trust Preferred Securities. Except as provided below, owners of beneficial
interests in a Global Trust Preferred Security will not be entitled to have any
of the individual Trust Preferred Securities represented by such Global Trust
Preferred Security registered in their names, will not receive or be entitled
to receive physical delivery of any such Trust Preferred Securities in
definitive form and will not be considered the owners or holders thereof under
the Trust Agreement.
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None of the Company, the Property Trustee, any Paying Agent, or the
Securities Registrar for such Trust Preferred Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global Trust
Preferred Security representing such Trust Preferred Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary for Trust Preferred Securities or
its nominee, upon receipt of any payment of the Liquidation Amount or
Distributions in respect of a permanent Global Trust Preferred Security
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Trust Preferred Security as shown on the
records of such Depositary or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in such Global Trust
Preferred Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
If the Depositary for the Trust Preferred Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Trust will issue
individual Trust Preferred Securities in exchange for the Global Trust
Preferred Security. In addition, the Trust may at any time and in its sole
discretion, subject to any limitations described herein relating to such Trust
Preferred Securities, determine not to have any Trust Preferred Securities
represented by one or more Global Trust Preferred Securities and, in such
event, will issue individual Trust Preferred Securities in exchange for the
Global Trust Preferred Security or Securities representing the Trust Preferred
Securities. In any such instance, an owner of a beneficial interest in a Global
Trust Preferred Security will be entitled to physical delivery of individual
Trust Preferred Securities represented by such Global Trust Preferred Security
equal in Liquidation Amount to such beneficial interest and to have such Trust
Preferred Securities registered in its name. Individual Trust Preferred
Securities so issued will be issued in denominations, unless otherwise
specified by the Trust, of $25 and integral multiples thereof.
Payment and Paying Agent
Payments in respect of the Trust Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Trust Preferred Securities are
not held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. The paying agent (the "Paying Agent") shall initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable
to the Administrative Trustees and the Company. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees, the Property Trustee and the Company. In the event
that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees and the Company) to act
as Paying Agent.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Trust Preferred Securities. Registration of transfers of the Trust Preferred
Securities will be effected without charge by or on behalf of the Trust, but
upon payment by the holder of any tax or other governmental charges that may be
imposed in connection with any transfer or exchange. The Trust will not be
required to register or cause to be registered the transfer of the Trust
Preferred Securities after such Trust Preferred Securities have been called for
redemption.
Information Concerning the Property Trustee
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the
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conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by
the Trust Agreement at the request of any holder of Trust Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby. If no Event of Default has occurred
and is continuing and the Property Trustee is required to decide between
alternative causes of action or to construe ambiguous provisions in the Trust
Agreement or is unsure of the application of any provision of the Trust
Agreement, and the matter is not one on which holders of the Trust Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee shall take such action as is directed by the Company and, if not so
directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or fail to be classified as a grantor trust for United
States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Trust Preferred Securities. Holders of the Trust Preferred Securities have no
preemptive or similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Trust Preferred Securities, the
Trust will invest the proceeds thereof, together with the consideration paid by
the Company for the Common Securities, in Junior Subordinated Debentures issued
by the Company. The Junior Subordinated Debentures will be issued as unsecured
debt under the Junior Subordinated Indenture, dated as of , 1998 (the
"Indenture"), between the Company and the Indenture Trustee. The following
summary of the terms and provisions of the Junior Subordinated Debentures and
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Indenture, which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, and to the Trust Indenture Act. The Indenture is qualified under the
Trust Indenture Act. Whenever particular defined terms of the Indenture are
referred to herein, such defined terms are incorporated herein by reference.
General
The Junior Subordinated Debentures will bear interest at the annual rate
of % of the principal amount thereof, payable monthly in arrears on the
day of each calendar month of each year (each, an "Interest Payment Date"),
commencing , 1998, to the person in whose name each Junior Subordinated
Debenture is registered, subject to certain exceptions, at the close of
business on the day of the month in which such payment is made.
Notwithstanding the above, in the event that either the (i) Junior Subordinated
Debentures are held by the Property Trustee and the Trust Preferred Securities
are registered in book-entry only form or (ii) the Junior Subordinated
Debentures are represented by a Global Subordinated Debenture (as defined
herein), the record date for such payment shall be the Business Day next
preceding such Interest Payment Date. The amount of each interest payment due
with respect to the Junior Subordinated Debentures will include amounts accrued
through the date the interest payment is due. It is anticipated that, until the
liquidation, if any, of the Trust, each Junior Subordinated Debenture will be
held in the name of the Property Trustee, in trust for the benefit of the
holders of the Trust Preferred Securities. The amount of interest payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will
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be made on the next Business Day (and without any interest or other payment in
respect of any such delay), in each case with the same force and effect as if
made on the date such payment was originally payable. Accrued interest that is
not paid on the applicable Interest Payment Date will bear additional interest
on the amount thereof (to the extent permitted by law) at the rate per annum of
% thereof. The term "interest" as used herein shall include monthly interest
payments, interest on monthly interest payments not paid on the applicable
Interest Payment Date and Additional Sums (as defined below), as applicable.
The Junior Subordinated Debentures will mature on , 2028 (such date, as
it may be shortened as hereinafter described, the "Stated Maturity"). Such date
may be shortened at any time by the Company to any date not earlier than ,
2003. The Company might exercise its right to shorten the maturity of the
Junior Subordinated Debentures under circumstances where a "Tax Event,"
"Investment Company Event" or other undesirable event could be avoided simply
by shortening the maturity of the Junior Subordinated Debentures. In the event
that the Company elects to shorten the Stated Maturity of the Junior
Subordinated Debentures, it shall give notice to the Indenture Trustee, and the
Indenture Trustee shall give notice of such shortening to the holders of the
Junior Subordinated Debentures no less than 60 days prior to the effectiveness
thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt and Subordinated Debt
of the Company. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of any subsidiaries upon
any such subsidiaries' liquidation or reorganization or otherwise (and thus the
ability of holders of the Trust Preferred Securities to benefit indirectly from
such distribution), is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures
will be effectively subordinated to all existing and future liabilities of any
subsidiaries of the Company, and holders of Junior Subordinated Debentures
should look only to the assets of the Company for payments on the Junior
Subordinated Debentures. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior
Debt and Subordinated Debt, whether under the Indenture or any existing or
other indenture that the Company may enter into in the future or otherwise. See
"--Subordination" below.
Option to Defer Interest Payment Period
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture at any time during the term of
the Junior Subordinated Debentures to defer the payment of interest at any time
or from time to time for a period not exceeding 60 consecutive months (each
such period an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity. At the end of such Extension Period, the
Company must pay all interest then accrued and unpaid (together with interest
thereon at the annual rate of %, compounded monthly, to the extent permitted
by applicable law). During an Extension Period, interest will continue to
accrue and holders of Junior Subordinated Debentures will be required to accrue
interest income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
Neither the default by the Company on any Senior Debt and Subordinated Debt,
nor a default with respect to Senior Debt and Subordinated Debt resulting in
acceleration of the maturity thereof, constitutes a Debenture Event of Default.
See "--Debenture Events of Default" below.
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including other Junior Subordinated Debentures) that
rank pari passu with or junior in interest to the Junior Subordinated
Debentures, (iii) make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in capital
stock of the Company (which includes common and preferred stock), (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, and (d) purchases of common stock related to
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the issuance of common stock or rights under any of the Company's benefit plans
for its directors, officers or employees), or (iv) redeem, purchase or acquire
less than all of the Junior Subordinated Debentures or any of the Trust
Preferred Securities. Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 60 consecutive months
or extend beyond the Stated Maturity. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period subject to
the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give notice to
the Property Trustee, the Administrative Trustees and the Indenture Trustee of
its election of any Extension Period at least one Business Day prior to the
earlier of (i) the date the distributions on the Trust Preferred Securities
would have been payable but for the election to begin or extend such Extension
Period, (ii) the date the Administrative Trustees are required to give notice
to the American Stock Exchange, the New York Stock Exchange, The Nasdaq Stock
Market or any applicable stock exchange or automated quotation system on which
the Trust Preferred Securities are then listed or quoted or to the holders of
the Trust Preferred Securities on the record date or (iii) the date such
distributions are payable, but in any event not less than one Business Day
prior to such record date. The Indenture Trustee shall give notice of the
Company's election to begin or extend a new Extension Period to the holders of
the Trust Preferred Securities. There is no limitation on the number of times
that the Company may elect to begin an Extension Period.
Distributions on the Trust Preferred Securities will be deferred by the
Trust during any such Extension Period. See "Description of the Trust Preferred
Securities--Distributions." For a description of certain federal income tax
consequences and special considerations applicable to any such Junior
Subordinated Debentures, see "Certain Federal Income Tax Consequences."
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures such amounts
("Additional Sums") as shall be required so that the Distributions payable by
the Trust shall not be reduced as a result of any such additional taxes, duties
or other governmental charges.
Redemption
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of the Company (i) on or after , 2003, in whole at any time or in
part from time to time, or (ii) at any time in whole (but not in part), within
90 days following the occurrence of a Tax Event or an Investment Company Event,
in each case at a redemption price equal to the accrued and unpaid interest on
the Junior Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless the
Company defaults in payment of the redemption price, on and after the
redemption date interest ceases to accrue on such Junior Subordinated
Debentures or portions thereof called for redemption.
If the Trust is required to pay additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums
(as defined herein).
The Junior Subordinated Debentures will not be subject to any sinking
fund.
Distribution Upon Liquidation
As described under "Description of the Trust Preferred Securities--
Liquidation Distribution Upon Dissolution," under certain circumstances
involving the dissolution of the Trust, the Junior Subordinated Debentures may
be distributed to the holders of the Trust Preferred Securities in liquidation
of the Trust after satisfaction of liabilities to creditors of the Trust as
provided by applicable law. If the Junior Subordinated Debentures are
distributed to the holders of Trust Preferred Securities upon the liquidation
of the Trust, the Company will use its
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best efforts to list the Junior Subordinated Debentures on the American Stock
Exchange or the NASDAQ SmallCap Market or such other stock exchanges or
automated quotation system, if any, on which the Trust Preferred Securities are
then listed or quoted. There can be no assurance as to the market price of any
Junior Subordinated Debentures that may be distributed to the holders of Trust
Preferred Securities.
Restrictions on Certain Payments
If at any time (i) there shall have occurred a Debenture Event of Default,
(ii) the Company shall have given notice of its election of an Extension Period
as provided in the Indenture with respect to the Junior Subordinated Debentures
and shall not have rescinded such notice, or such Extension Period, or any
extension thereof, shall be continuing, or (iii) while the Junior Subordinated
Debentures are held by the Trust, the Company shall be in default with respect
to its payment of any obligation under the Guarantee, then the Company will not
(1) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock, (2) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company (including
other Junior Subordinated Debt) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Junior Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee and (d) purchases of common stock related to issuance of common stock
or rights under any of the Company's benefit plans for its directors, officers,
employees or consultants) or (3) redeem, purchase or acquire less than all of
the Junior Subordinated Debentures or any of the Trust Preferred Securities.
Subordination
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Debt and Subordinated
Debt whether now existing or hereafter incurred. Senior Debt and Subordinated
Debt may include indebtedness of the Company which is subordinated to other
indebtedness of the Company but nevertheless senior to the Junior Subordinated
Debentures. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Junior Subordinated Debentures may be made
if (a) there is a default in the payment of principal, premium, interest or any
other payment due on any Senior Debt and Subordinated Debt, or (b) the maturity
of any Senior Debt and Subordinated Debt has been accelerated because of a
default. Upon any payment by the Company or distribution of assets of the
Company to creditors upon any dissolution, winding-up, liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due on
all Senior Debt and Subordinated Debt must be paid in full before the holders
of the Junior Subordinated Debentures are entitled to receive or retain any
payment. Upon payment in full of all amounts due on the Senior Debt and
Subordinated Debt then outstanding, the rights of the holders of the Junior
Subordinated Debentures will be subrogated to the rights of the holders of
Senior Debt and Subordinated Debt to receive payments or distributions
applicable to such Senior Debt and Subordinated Debt until all amounts owing on
the Junior Subordinated Debentures are paid in full.
"Debt" means, with respect to any person, whether recourse is to all or a
portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; (vi) all
indebtedness of such person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another person and all
dividends of another person the payment of which, in either case, such person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor or otherwise.
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"Senior Debt and Subordinated Debt" means the principal of (and premium,
if any) and interest, if any (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt of the Company whether incurred on or prior to the date of
the Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Junior Subordinated Debentures or to other Debt which is pari passu with, or
subordinated to, the Junior Subordinated Debentures; provided, however, that
Senior Debt and Subordinated Debt shall not be deemed to include (i) any Debt
of the Company which when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to the Company, (ii) any Debt of the Company to any of its
subsidiaries, (iii) Debt to any employee of the Company, and (iv) any other
debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of additional Senior Debt
and Subordinated Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt and
Subordinated Debt.
Registration, Denomination and Transfer
The Junior Subordinated Debentures will initially be registered in the
name of the Property Trustee. If the Junior Subordinated Debentures are
distributed to holders of Preferred Securities, it is anticipated that the
depository arrangements for the Junior Subordinated Debentures will be
substantially identical to those in effect for the Trust Preferred Securities.
See "Description of the Trust Preferred Securities--Global Trust Preferred
Securities" and "Book-Entry Issuance."
Although the Depositary has agreed to the procedures described above, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. If the Depositary is at any
time unwilling or unable to continue as depositary and a successor depositary
is not appointed by the Company within 90 days of receipt of notice from the
Depositary to such effect, the Company will cause the Junior Subordinated
Debentures to be issued in definitive form.
Payments on Junior Subordinated Debentures represented by a global
certificate will be made to Cede & Co., the nominee for the Depositary as the
registered holder of the Junior Subordinated Debentures, as described under
"Description of the Trust Preferred Securities--Global Trust Preferred
Securities." If Junior Subordinated Debentures are issued in certificate form,
principal and interest will be payable, the transfer of the Junior Subordinated
Debentures will be registrable, and Junior Subordinated Debentures will be
exchangeable for Junior Subordinated Debentures of other authorized
denominations of a like aggregate principal amount, at the corporate trust
office of the Indenture Trustee in Wilmington, Delaware or at the offices of
any paying agent or transfer agent appointed by the Company, provided that
payment of interest may be made at the option of the Company by check mailed to
the address of the persons entitled thereto, However, a holder of $1 million or
more in aggregate principal amount of Junior Subordinated Debentures may
receive payments of interest (other than interest payable at the Stated
Maturity) by wire transfer of immediately available funds upon wirtten request
to the Debenture Trustee not later than 15 calendar days prior to the date on
which the interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations and of a
like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar (the "Securities
Registrar") appointed under the Indenture or at the office of any transfer
agent designated by the Company for such purpose without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. The Company will appoint the Indenture Trustee as Securities
Registrar under the Indenture. The Company may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Company nor the Indenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be
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redeemed and ending at the close of business on the date of mailing of the
relevant notice of redemption or (ii) transfer or exchange any Junior
Subordinated Debentures so selected for redemption, except in the case of any
Junior Subordinated Debentures being redeemed in part, any portion thereof not
to be redeemed.
Payment and Paying Agents
Payment of principal of (and premium, if any) and any interest on the
Junior Subordinated Debentures will be made at the office of the Indenture
Trustee, except that at the option of the Company payment of any interest may be
made (i) except in the case of Global Junior Subordinated Debentures, by check
mailed to the address of the person entitled thereto as such address shall
appear in the securities register, (ii) by transfer to an account maintained by
the person entitled thereto as specified in the securities register, provided
that proper transfer instructions have been received by the regular record date,
or (iii) if the Junior Subordinated Debentures are held by the Property Trustee,
by agreement between the Company and the Property Trustee. Payment of any
interest on Junior Subordinated Debentures will be made to the person in whose
name such Junior Subordinated Debenture is registered at the close of business
on the regular record date for such interest. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however the Company will at all times be required to maintain a Paying
Agent in each place of payment for the Junior Subordinated Debentures. Any
moneys deposited with the Indenture Trustee or any Paying Agent, or then held by
the Company in trust, for the payment of the principal of or interest on the
Junior Subordinated Debentures and remaining unclaimed for two years after such
principal of (and premium, if any) or interest has become due and payable
shall, at the request of the Company, be repaid to the Company and the holder
of such Junior Subordinated Debenture shall thereafter look, as a general
unsecured creditor, only to the Company for payment thereof.
Modification of Indenture
From time to time the Company and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interests of the holders of the Junior
Subordinated Debentures or the Trust Preferred Securities so long as they
remain outstanding) and qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Company and the Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of the Junior Subordinated Debentures; provided, that
no such modification may, without the consent of the holder of each outstanding
Junior Subordinated Debenture, (i) change the Stated Maturity of the Junior
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures, the holders
of which are required to consent to any such modification of the Indenture;
provided that so long as any of the Trust Preferred Securities remain
outstanding, no such modification may be made that adversely affects the
holders of such Trust Preferred Securities in any material respect, and no
termination of the Indenture may occur, and no waiver of any Debenture Event of
Default or compliance with any covenant under the Indenture may be effective,
without the prior consent of the holders of at least a majority of the
aggregate Liquidation Amount of the Trust Preferred Securities unless and until
the principal of the Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions have been
satisfied. Where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debentures, no such consent shall be given
by the Property Trustee without the prior consent of each holder of Trust
Preferred Securities. In addition, the Company and the Indenture Trustee may
execute, without the consent of any holder of Junior Subordinated Debentures,
any supplemental Indenture for the purpose of creating any new series of Junior
Subordinated Debentures.
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Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default," with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the case of an
Extension Period), or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption, by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Indenture Trustee or to the Company and the Indenture Trustee
by the holders of at least 25% in aggregate outstanding principal amount of the
Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company or certain of its Subsidiaries.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. If
the Indenture Trustee or such holders of such Junior Subordinated Debentures
fail to make such declaration, the holders of at least 25% in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee.
Should the holders of the Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures affected thereby may, on behalf of the holders
of all the Junior Subordinated Debentures, waive any past default, except a
default in the payment of principal or interest (unless such default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Indenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Junior Subordinated Debenture.
In case a Debenture Event of Default shall occur and be continuing as to
the Junior Subordinated Debentures, the Property Trustee, as holder of the
Junior Subordinated Debentures, will have the right to declare the principal of
and the interest on such Junior Subordinated Debentures, and any other amounts
payable under the Indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to such Junior Subordinated Debentures.
The Company is required to file annually with the Indenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
Enforcement of Certain Rights by Holders of Trust Preferred Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Trust Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Trust Preferred Securities of such holder (a "Direct
Action"). The Company may not amend the Indenture to remove the
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foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the Trust Preferred Securities outstanding. If the right
to bring a Direct Action is removed, the Trust may become subject to the
reporting obligations under the Exchange Act. The Company shall have the right
under the Indenture to set off any payment made to such holder of Trust
Preferred Securities by the Company in connection with a Direct Action.
The holders of the Trust Preferred Securities would not be able to
exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See
"Description of the Trust Preferred Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless (i)
in case the Company consolidates with or merges into another Person or conveys,
transfers or leases its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or the District of Columbia, and such successor Person
expressly assumes the Company's obligations on the Junior Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
occurred and be continuing; and (iii) certain other conditions an prescribed in
the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other similar transaction involving the Company that may adversely affect
holders of the Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Indenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year, and the Company deposits or
causes to be deposited with the Indenture Trustee trust funds, in trust, for
the purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Indenture Trustee for cancellation, for the principal and interest to the
date of the deposit or to the Stated Maturity, as the case may be, then the
Indenture will cease to be of further effect (except as to the Company's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Indenture.
Covenants of the Company
The Company will covenant in the Indenture, as to the Junior Subordinated
Debentures, that if and so long as (i) the Property Trustee on behalf of the
Trust is the holder of all such Junior Subordinated Debentures, (ii) a Tax
Event in respect of the Trust has occurred and is continuing and (iii) the
Company has elected, and has not revoked such election, to pay Additional Sums
(as defined under "Description of the Trust Preferred Securities--Redemption")
in respect of the Trust Preferred Securities, the Company will pay to the Trust
such Additional Sums. The Company will also covenant, as to the Junior
Subordinated Debentures, (i) to maintain directly or indirectly 100% ownership
of the Common Securities of the Trust to which Junior Subordinated Debentures
have been issued, provided that certain successors which are permitted to do so
pursuant to the Indenture may succeed to the Company's ownership of the Common
Securities, (ii) not to voluntarily dissolve, wind up or liquidate the Trust,
except (a) in connection with a distribution of Junior Subordinated Debentures
to the holders of the Trust Preferred Securities in liquidation of the Trust or
(b) in connection with certain mergers, consolidations, or amalgamations
permitted by the Trust Agreement and (iii) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Trust to remain classified as a grantor trust and not an association taxable as
a corporation for United States federal income tax purposes.
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Governing Law
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York, except that
the immunities and standard of care of the Indenture Trustee will be governed
by Delaware law.
Information Concerning the Indenture Trustee
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
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BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and, if the Junior Subordinated Debentures are distributed
to holders of Trust Preferred Securities, the Junior Subordinated Debentures.
The Trust Preferred Securities and, in such event, the Junior Subordinated
Debentures will be issued only as fully-registered securities registered in the
name of Cede & Co. (the Depositary's nominee). One or more fully-registered
global certificates will be issued for the Trust Preferred Securities and the
Junior Subordinated Debentures and will be deposited with the Depositary.
The Depositary is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds secur-ities that its Participants deposit with the
Depositary. The Depositary also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the Depositary
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on the Depositary's records. The ownership interest of
each actual purchaser of each Trust Preferred Security and each Junior
Subordinated Debenture ("Beneficial Owner") will be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased Trust
Preferred Securities or Junior Subordinated Debentures. Transfers of ownership
interests in the Trust Preferred Securities or Junior Subordinated Debentures
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Trust Preferred Securities or Junior
Subordinated Debentures, except in the event that use of the book-entry system
for the Junior Subordinated Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the
Trust Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures are
being redeemed, the Depositary will determine by lot or pro rata the amount of
the Trust Preferred Securities of each Direct Participant to be redeemed.
Although voting with respect to the Trust Preferred Securities or the
Junior Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in those
instances in which a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities or
Junior Subordinated Debentures. Under its usual procedures,
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the Depositary would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts such Trust Preferred Securities or Junior Subordinated
Debentures are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, the Trust or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to the Depositary is the responsibility of the
relevant Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Trust Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the relevant
Trustee and the Company. In the event that a successor securities depositary is
not obtained, definitive Trust Preferred Securities or Junior Subordinated
Debenture certificates representing such Trust Preferred Secur-ities or Junior
Subordinated Debentures are required to be printed and delivered. The Company,
at its option, may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor depositary). After a Debenture
Event of Default, the holders of a majority in liquidation preference of Trust
Preferred Securities or aggregate principal amount of Junior Subordinated
Debentures may determine to discontinue the system of book-entry transfers
through the Depositary. In any such event, definitive certificates for such
Trust Preferred Securities or Junior Subordinated Debentures will be printed
and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Trust
and the Company believe to be accurate, but the Trust and the Company assume no
responsibility for the accuracy thereof. Neither the Trust nor the Company has
any responsibility for the performance by the Depositary or its Participants of
their respective obligations as described herein or under the rules and
procedures governing their respective operations.
DESCRIPTION OF GUARANTEE
The Guarantee Agreement will be executed and delivered by the Company
concurrently with the issuance of the Trust Preferred Securities for the
benefit of the holders of the Trust Preferred Securities. Wilmington Trust
Company will act as Guarantee Trustee under the Guarantee Agreement for the
purposes of compliance with the Trust Indenture Act, and the Guarantee
Agreement will be qualified as an indenture under the Trust Indenture Act. The
following summary of certain provisions of the Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Guarantee Agreement, including the definition therein
of certain terms, and the Trust Indenture Act. The form of the Guarantee
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The Guarantee Trustee will hold the Guarantee for
the benefit of the holders of the Trust Preferred Securities.
General
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Trust Preferred Securities, but will apply
only to the extent that the Trust has funds sufficient to make such payments,
and is not a guarantee of collection.
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to
the holders of the Trust Preferred Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Trust Preferred Securities, to the extent not paid by or on behalf of the Trust
(the "Guarantee Payment"), will be subject to the Guarantee: (i) any
accumulated and
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unpaid Distributions required to be paid on the Trust Preferred Securities, to
the extent that the Trust has funds on hand available therefor at such time,
(ii) the redemption price with respect to any Trust Preferred Securities called
for redemption, to the extent that the Trust has funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary dissolution,
winding up or liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Trust Preferred Securities), the
lesser of (a) the Liquidation Distribution and (b) the amount of assets of the
Trust remaining available for distribution to holders of Trust Preferred
Securities after satisfaction of liabilities to creditors of the Trust as
required by law. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of the Trust Preferred Securities or by causing the Trust to pay such
amounts to such holders.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by the Trust, the Trust will not be able to pay Distributions
on the Trust Preferred Securities and will not have funds legally available
therefor. The Guarantee will rank subordinate and junior in right of payment to
all Senior Debt and Subordinated Debt of the Company. See "--Status of the
Guarantee" below. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the Guarantee will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, and
claimants should look only to the assets of the Company for payments
thereunder. Except as otherwise described herein, the Guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Debt and Subordinated Debt whether under the Indenture, any
other indenture that the Company may enter into in the future, or otherwise.
The Company has, through the Guarantee Agreement, the Trust Agreement, the
Junior Subordinated Debentures, the Indenture and the Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of the Trust's
obligations under the Trust Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Preferred
Securities. See "Relationship Among the Trust Preferred Secur-ities, the Junior
Subordinated Debentures and the Guarantee."
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The Guarantee
will be held for the benefit of the holders of the Trust Preferred Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payment
in full to the extent not paid by the Trust or upon distribution of the Junior
Subordinated Debentures to the holders of the Trust Preferred Securities. The
Guarantee does not place a limitation on the amount of additional Senior Debt
and Subordinated Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt and
Subordinated Debt.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Trust Preferred Securities (in which case
no vote will be required), the Guarantee Agreement may not be amended without
the prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of such outstanding Trust Preferred Securities. See
"Description of the Trust Preferred Securities--Vot-ing Rights; Amendment of
the Trust Agreement." All guarantees and agreements contained in the Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Trust Preferred Securities then outstanding.
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Events of Default
An event of default under the Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee
Agreement. Any holder of the Trust Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee
Agreement.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, has undertaken to
perform only such duties as are specifically set forth in the Guarantee
Agreement and, after default with respect to the Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee Agreement at the request of any holder of the Trust Preferred
Securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Trust Preferred Securities, upon
full payment of the amounts payable upon liquidation of the Trust or upon
distribution of Junior Subordinated Debentures to the holders of the Trust
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Trust
Preferred Securities must restore payment of any sums paid under the Trust
Preferred Securities or the Guarantee.
Governing Law
The Guarantee Agreement will be governed by and construed in accordance
with the laws of the State of New York.
EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by the Company under the
Trust Agreement, the Company will irrevocably and unconditionally guarantee to
each person or entity to whom the Trust becomes indebted or liable, the full
payment of any costs, expenses or liabilities of the Trust (including, without
limitation, expenses relating to the offering of the Trust Preferred Securities
and any expenses the Property Trustee may incur relating to the enforcement of
the rights of the holders of the Trust Preferred Securities or the Junior
Subordinated Debentures pursuant to the Trust Agreement and the Indenture,
respectively) other than obligations of the Trust to pay to the holders of the
Trust Preferred Securities or other similar interests in the Trust the amounts
due such holders pursuant to the terms of the Trust Preferred Securities or
such other similar interests, as the case may be. The Expense Agreement may be
enforced against the Company by any person or entity to whom the Trust is or
becomes indebted or liable.
RELATIONSHIP AMONG THE TRUST PREFERRED
SECURITIES, THE JUNIOR SUBORDINATED
DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and
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to the extent set forth under "Description of Guarantee." Taken together, the
Company's obligations under the Junior Subordinated Debentures, the Indenture,
the Trust Agreement, the Expense Agreement and the Guarantee Agreement provide,
in the aggregate, a full, irrevocable and unconditional guarantee of payments
of distributions and other amounts due on the Trust Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Trust Preferred Securities. If and to the extent that the Company does not make
payments on the Junior Subordinated Debentures, the Trust will not pay
Distributions or other amounts due on the Trust Preferred Securities. The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of the Trust Preferred Securities is to institute a legal proceeding
directly against the Company for enforcement of payment of such Distributions
to such holder. The obligations of the Company under the Guarantee are
subordinate and junior in right of payment to all Senior Debt and Subordinated
Debt of the Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior
Subordinated Debentures will be equal to the sum of the aggregate Liquidation
Amount of the Trust Preferred Securities and Common Securities; (ii) the
interest rate and interest and other payment dates on the Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Trust Preferred Securities; (iii) the Company shall pay for all
and any costs, expenses and liabilities of the Trust except the Trust's
obligations to holders of Trust Preferred Securities; and (iv) the Trust
Agreement further provides that the Trust will not engage in any activity that
is not consistent with its limited purposes.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
Enforcement Rights of Holders of the Trust Preferred Securities Under the
Guarantee
A holder of any of the Trust Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Debt and Subordinated Debt
would not constitute a default or Event of Default. However, in the event of
payment defaults under, or acceleration of, Senior Debt and Subordinated Debt,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Junior Subordinated Debentures until such Senior Debt
and Subordinated Debt has been paid in full or any payment default thereunder
has been cured or waived. Failure to make required payments on Junior
Subordinated Debentures would constitute an Event of Default.
Limited Purpose of the Trust
The Trust Preferred Securities evidence a beneficial interest in the
Trust, and the Trust exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in Junior Subordinated
Debentures. A principal difference between the rights of a holder of the Trust
Preferred Securities and a holder of a Junior Subordinated Debenture is that a
holder of a Junior Subordinated Debenture is entitled to receive from the
Company the principal amount of and interest accrued on Junior Subordinated
Debentures held, while a holder of the Trust Preferred Securities is entitled
to receive Distributions from the Trust (or from the Company under the
Guarantee) if and to the extent the Trust has funds available for the payment
of such Distributions.
Rights upon Dissolution
Upon any voluntary or involuntary dissolution, winding-up or liquidation
of the Trust involving the liquidation of the Junior Subordinated Debentures,
after satisfaction of liabilities to creditors of the Trust as provided
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by applicable law, the holders of Trust Preferred Securities will be entitled
to receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of the Trust Preferred Securities-- Liquidation
Distribution Upon Dissolution." Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the Junior
Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Debt and Subordinated Debt as
set forth in the Indenture, but entitled to receive payment in full of
principal and interest, before any stockholders of the Company receive payments
or distributions. Since the Company is the guarantor under the Guarantee and
has agreed to pay for all costs, expenses and liabilities of the Trust (other
than the Trust's obligations to the holders of its Trust Preferred Securities),
the positions of a holder of the Trust Preferred Securities and a holder of
Junior Subordinated Debentures relative to other creditors and to stockholders
of the Company in the event of liquidation or bankruptcy of the Company are
substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is the opinion of Tenzer Greenblatt LLP, counsel to the Company
("Counsel") that the following is accurate in all material respects and,
subject to the limitations stated herein, represents the material federal
income tax consequences to holders of the Trust Preferred Securities arising
from the purchase, ownership and disposition thereof. The following opinions
assume the accuracy of the facts set forth in the prospectus. The opinions set
forth in this section, unless otherwise stated, deal only with Trust Preferred
Securities held as capital assets by United States Persons (defined below) who
purchase the Trust Preferred Securities upon original issuance at their
original offering price. As used herein, a "United States Person" means a
person that is (i) a citizen or resident of the United States as determined for
United States federal income tax purposes, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, or
(iv) a trust if a U.S. court is able to exercise primary supervision over the
administration of such trust and one or more United States persons have the
authority to control all substantial decisions of such trust. The tax treatment
of holders may vary depending on their particular situation. The following
opinions do not address all the tax consequences that may be relevant to a
particular holder or to holders who may be subject to special tax treatment,
such as banks, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
foreign investors, investors that hold the Trust Preferred Securities as part
of a hedging, straddle, constructive sale, or conversion or other risk
reduction transaction or whose functional currency is not the U.S. dollar. In
addition, the following opinions do not include any description of any
alternative minimum tax consequences or the tax laws of any state, local or
foreign government that may be applicable to a holder of Trust Preferred
Securities. The opinions set forth herein are based on the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis.
The following opinions do not address the tax consequences that might be
relevant to persons that are not United States Persons ("non-United States
Persons"). Non-United States Persons should consult their own tax advisors as
to the specific United States federal income and other tax consequences of the
purchase, ownership and disposition of Trust Preferred Securities.
The authorities on which the opinions set forth herein are based are
subject to various interpretations, and opinions of Counsel are not binding on
the Internal Revenue Service ("Service") or the courts, either of which could
take a contrary position. Moreover, no rulings have been or will be sought from
the Service with respect to the transactions described herein. Accordingly,
there can be no assurance that the Service will not challenge the opinions
expressed herein or that a court would not sustain such a challenge.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION
OF THE TRUST PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS,
SEE "DESCRIPTION OF THE TRUST PREFERRED SECURITIES--REDEMPTION."
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Classification of the Trust
In connection with the issuance of the Trust Preferred Securities, Counsel
will render its opinion that, under current law and assuming compliance with
the terms of the Trust Agreement, and based on certain facts and assumptions
contained in such opinion, the Trust will be classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes. As a result, each beneficial owner of the Trust Preferred
Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Junior Subordinated Debentures. Accordingly, each
Securityholder will be required to include in its gross income its pro rata
share of the interest income or original issue discount ("OID") that is paid or
accrued on the Junior Subordinated Debentures. See "-- Interest Income and
Original Issue Discount" herein.
Classification of the Junior Subordinated Debentures
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Trust
Preferred Security, each holder covenants to treat the Junior Subordinated
Debentures as indebtedness and the Trust Preferred Securities as evidence of an
indirect beneficial ownership interest in the Junior Subordinated Debentures.
Counsel has not delivered any opinion relating to the classification of the
Junior Subordinated Debentures as indebtedness and no assurance can be given
that such position of the Company will not be challenged by the Service or, if
challenged, that such a challenge will not be successful. The remainder of this
"Certain Federal Income Tax Consequences" section assumes that the Junior
Subordinated Debentures will be classified for United States federal income tax
purposes as indebtedness of the Company. No amount included in income with
respect to the Junior Subordinated Debentures and Trust Preferred Securities
will be eligible for the dividends received deduction.
Interest Income and Original Issue Discount
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be included in income by a Securityholder at the time
such interest income is paid or accrued in accordance with such Secur-
ityholder's regular method of tax accounting. Under the applicable Treasury
regulations, the Junior Subordinated Debentures will not be considered to have
been issued with OID within the meaning of Section 1273(a) of the Code, so long
as the Junior Subordinated Debentures have terms and conditions that render the
likelihood of the Company's exercising its right to defer payments of interest
on the Junior Subordinated Debentures to be remote. The Company believes that
the terms and conditions of the Junior Subordinated Debentures (including the
restrictions on other payments during the Extension Period) are such that the
likelihood of its exercising such right is remote, and intends to take the
position that the Junior Subordinated Debentures are not issued with OID.
Because this issue is inherently factual, Counsel is unable to express any
opinion regarding whether the Junior Subordinated Debentures are issued with
OID. If, however, the Company exercises its right to defer payments of interest
on the Junior Subordinated Debentures, the Junior Subordinated Debentures will
become OID instruments at such time and all Securityholders will be required to
accrue the stated interest on the Junior Subordinated Debentures as it accrues
on a daily basis during the Extension Period, even though the Company will not
pay such interest until the end of the Extension Period, and even though some
Securityholder otherwise may use the cash method of tax accounting. Moreover, if
the Company exercises such right, the Junior Subordinated Debentures thereafter
will be taxed as OID instruments for as long as they remain outstanding. Thus,
even after the end of the Extension Period, all Securityholders will be required
to continue to include the stated interest on the Junior Subordinated Debentures
in income on a daily economic accrual basis, regardless of their method of tax
accounting and in advance of receipt of the cash attributable to such interest
income. Under the economic accrual rules, a Securityholder is required to accrue
an amount of interest income each year that approximates the stated interest
payments called for under the Junior Subordinated Debentures, and actual cash
payments of interest on the Junior Subordinated Debentures are not reported
separately as taxable income. A Securityholder's basis in Trust Preferred
Securities will be increased by any OID includible in income.
The Company's determination that there is a remote likelihood of exercising
its right to defer the payment of interest on the Trust Preferred Securities is
binding on each Securityholder unless the holder explicitly discloses in the
manner required by applicable Treasury regulations that its determination is
different from the Company's. The Company's determination is not, however,
binding on the Service.
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The Treasury regulations described above have not yet been addressed in
any definitive interpretations by the Service, and it is possible that the
Service could take a contrary position. If the Service were to assert
successfully that the stated interest on the Junior Subordinated Debentures was
OID regardless of whether the Company exercises its right to defer payments of
interest on such debentures, all Securityholders will be required to include
such stated interest in income on a daily economic accrual basis as described
above.
Distribution of Junior Subordinated Debentures to Holders of Trust Preferred
Securities
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the captions "Description of the Trust Preferred
Securities--Distribution of Junior Subordinated Debentures" and "Liquidation
Distribution Upon Dissolution" will be non-taxable and will result in the
Securityholder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust, with a holding period
and aggregate tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Trust Preferred Securities before such distribution. A
Securityholder would continue to recognize interest income in respect of Junior
Subordinated Debentures received from the Trust in the manner described above
under "--Interest Income and Original Issue Discount" herein. If, however, the
liquidation of the Trust were to occur because the Trust is subject to United
States federal income tax with respect to income accrued or received on the
Junior Subordinated Debentures as a result of a Tax Event or otherwise, the
distribution of Junior Subordinated Debentures to Securityholders by the Trust
could be a taxable event to the Trust and each Securityholder, and a
Securityholder could be required to recognize gain or loss as if the
Securityholder had exchanged its Trust Preferred Securities for the Junior
Subordinated Debentures it received upon the liquidation of the Trust, and the
Securityholder's holding period for the Junior Subordinated Debentures received
would not include the holding period for the Trust Preferred Securities
surrendered in the liquidation.
Sales or Redemption of Trust Preferred Securities
Gain or loss will be recognized by a Securityholder on a sale of Trust
Preferred Securities (including a redemption for cash) in an amount equal to
the difference between the amount realized (which for this purpose, will
exclude amounts attributable to accrued interest or OID not previously included
in income) and the Secur-ityholder's adjusted tax basis in the Trust Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Trust Preferred Securities held for more than one year will generally be
taxable as long-term capital gain or loss, although the preferential 20% rate
applicable to individuals applies only in the case of a capital asset sold or
exchanged having a holding period in excess of 18 months. Amounts attributable
to accrued interest or OID with respect to a Securityholder's pro rata share of
the Junior Subordinated Debentures not previously included in income will be
taxable as ordinary income.
Backup Withholding Tax and Information Reporting
The amount of interest and OID accrued on the Trust Preferred Securities
held of record by United States Persons (other than certain exempt
Securityholders), if any, will be reported to the Service. "Backup" with-holding
at a rate of 31% will apply to payments of interest to non-exempt United States
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that
such number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions. Any amounts withheld from a
Securityholder under the backup withholding rules will be allowed as a refund
or a credit against such Securityholder's United States federal income tax
liability, provided the required information is timely furnished to the
Service.
Possible Tax Law Changes Affecting the Trust Preferred Securities
There can be no assurance that future legislative proposals or final
legislation will not affect the ability of the Company to deduct interest on
the Junior Subordinated Debentures. Such a change could give rise to a Tax
Event, which may permit the Company to cause a redemption of the Trust
Preferred Securities. See "Description of the Trust Preferred
Securities--Redemption--Tax Event Redemption, Investment Company Event
Redemption or Distribution of Junior Subordinated Debentures" and "Description
of Junior Subordinated Debentures--Redemption."
87
<PAGE>
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") should consider the fiduciary standards of ERISA in the context of
the plan's particular circumstances before authorizing an investment in the
Trust Preferred Securities. Among other factors, the fiduciary should consider
whether such an investment is in accordance with the documents governing the
plan and whether an investment is appropriate for the plan in view of its
overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and the Code prohibit an employee benefit
plan subject to either ERISA or Section 4975 of the Code (which generally
includes individual retirement accounts and so-called "Keogh" plans as well as
other employer-sponsored plans) from engaging in certain transactions involving
"plan assets" with parties which are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. Therefore, a
fiduciary of an employee benefit plan should also consider whether an
investment in the Trust Preferred Securities might constitute or give rise to a
prohibited transaction under ERISA and the Code.
If the assets of the Trust were deemed to be plan assets of employee
benefit plans that are holders of the Trust Preferred Securities (including
holders, who are not employee benefit plans themselves but are investing "plan
assets" of an employee benefit plan), the plan's investment in the Trust
Preferred Securities might be deemed to constitute a delegation under ERISA of
the duty to manage plan assets by an ERISA plan fiduciary investing in Trust
Preferred Securities, and certain transactions involving the operation of the
Trust might be deemed to constitute prohibited transactions under ERISA and the
Code.
The U.S. Department of Labor (the "DOL") has issued a regulation with
regard to whether the underlying assets of an entity in which employee benefit
plans acquire equity investments would be deemed to be plan assets. The
regulation provides that the underlying assets of an entity will not be
considered to be plan assets if the interests of the entity acquired by the
employee benefit plan are "publicly-offered securities" -- that is, they are
(1) widely held (i.e., owned by more than 100 investors independent of the
entity and of each other), (2) freely transferable, and (3) sold as part of an
offering pursuant to an effective registration statement under the Securities
Act and timely registered under Section 12(b) or 12(g) of the Exchange Act. It
is expected that the Trust Preferred Securities will meet the criteria of
"publicly offered securities" above. The Underwriters expect that the Trust
Preferred Securities will be held by at least 100 independent investors at the
conclusion of the offering. There are no restrictions imposed on the transfer
of the Trust Preferred Securities and the Trust Preferred Securities will be
sold as part of an offering pursuant to an effective registration statement
under the Securities Act, and will be timely registered under the Exchange Act.
Even if the assets of the Trust were deemed to be "plan assets" of
employee benefit plans that are holders of the Trust Preferred Securities,
there are five class exemptions issued by the DOL which could apply to except
certain transactions involving assets of the Trust from the prohibited
transaction provisions of ERISA and the Code--Prohibited Transaction Exemption
84-14, for certain transactions determined by qualified professional asset
managers; Prohibited Transaction Exemption 90-1, for certain transactions
involving insurance company pooled separate accounts; Prohibited Transaction
Exemption 91-38, for certain transactions involving bank collective investment
funds; Prohibited Transaction Exemption 95-60, for certain transactions
involving insurance company general accounts; and Prohibited Transaction
Exemption 96-23, for certain transactions determined by in-house asset
managers.
Even if the assets of the Trust are not deemed "plan assets" of employee
benefit plans that hold Trust Preferred Securities, the Company might be
considered a party in interest or a disqualified person with respect to certain
such employee benefit plans by reason of pre-existing relationships, such as
plans for which the Company, or an affiliate serves as trustee. Therefore,
before such employee benefit plans purchase Trust Preferred Securities, they
should determine that either (a) neither the Company nor any affiliate is a
party in interest on disqualified person with respect to such plan or (b) one
of the class exemptions referred to in the preceding paragraph or any other
exemption from the prohibited transacted rules under ERISA and the Code is
applicable to their purchase and holding of the Trust Preferred Securities.
88
<PAGE>
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is important that an employee
benefit plan considering the purchase of Trust Preferred Securities consult
with its counsel regarding the consequences under ERISA of the acquisition and
ownership of Trust Preferred Securities. Employee benefit plans which are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) generally are not subject to ERISA
requirements of the prohibited transaction provisions of the Code.
UNDERWRITING
Subject to the terms and certain conditions of the Underwriting Agreement
(the "Underwriting
Agreement"), the underwriters named below (the "Underwriters"), for whom EVEREN
Securities, Inc. and Josephthal & Co. Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase an aggregate of 2,200,000
Trust Preferred Securities from the Trust. The number of Trust Preferred
Securities that each Underwriter has agreed to purchase is set forth opposite
its name below:
Underwriters Number of Trust Preferred Securities
------------ ------------------------------------
EVEREN Securities, Inc. ..........
Josephthal & Co. Inc. ............
Total .......................... 2,200,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters who are parties thereunder are subject to certain conditions. If
any of the Trust Preferred Securities are purchased by the Underwriters
pursuant to the Underwriting Agreement, all of such Trust Preferred Securities
(other than the Trust Preferred Securities covered by the over-allotment option
described below) must be so purchased.
The Trust and the Company have been advised by the Representatives that
the Underwriters propose to offer the Trust Preferred Securities to the public
initially at the price to the public set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not to exceed
$ per Trust Preferred Security. The Underwriters may allow, and such dealers
may reallow, discounts not to exceed $ per Trust Preferred Security to
certain other dealers. After the initial public offering of the Trust Preferred
Securities, the public offering price and the other selling terms may be
changed by the Representatives.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation to the Underwriters arranging the investment therein of such
proceeds, an amount in immediately available funds of $1.00 per Trust Preferred
Security (or $2,200,000 in the aggregate) for the accounts of the Underwriters.
The Trust has granted to the Underwriters an option to purchase up to an
additional $8,250,000 aggregate liquidation amount of Trust Preferred
Securities at the price to the public set forth on the cover page of this
Prospectus, solely to cover over-allotments, if any. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option Trust Preferred
Securities proportionate to such Underwriter's initial commitment as indicated
in the preceding table.
The Trust and the Company have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Act, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.
The Trust Preferred Securities are a new issue of securities with no
established trading market. The Trust Preferred Securities have been approved
for listing on the American Stock Exchange, subject to notice of issuance. In
order to meet the listing requirements of the American Stock Exchange, the
Representatives have undertaken to distribute the Trust Preferred Securities to
a minimum of 400 public stockholders. The Representatives have advised the
Trust and the Company that the Underwriters presently intend to make a market
in the Trust Preferred Securities after the commencement of trading on the
American Stock Exchange, but no assurances can be made
89
<PAGE>
as to the liquidity of the Trust Preferred Securities or that an active and
liquid trading market will develop or, if developed, that it will continue. The
offering price and distribution rate have been determined by negotiations among
representatives of the Company and the Representatives, and the offering price
of the Trust Preferred Securities may not be indicative of the market price
following the offering. The Underwriters will have no obligation to make a
market in the Trust Preferred Securities, however, and may cease market-making
activities, if commenced, at any time.
The Trust and the Company have agreed with the Underwriters not to (other
than in connection with this offering), directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise issue any Trust Preferred Securities or any securities convertible
into or exercisable or exchangeable for Trust Preferred Securities, enter into
any swap or other agreement to do any of the foregoing, or file any
registration statement relating to any of the foregoing on behalf of itself or
any other person, for a period of 180 days after the date of this Prospectus,
without the written consent of EVEREN Securities, Inc.
In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Trust Preferred
Securities. Such transactions may include stabilization transactions effected
in accordance with the Securities Exchange Act of 1934 pursuant to which such
persons may bid for or purchase Trust Preferred Securities for the purpose of
stabilizing its market price. The Underwriters also may create a short position
for the account of the Underwriters by selling more Trust Preferred Securities
in connection with this offering than they are committed to purchase from the
Trust, and in such case may purchase Trust Preferred Securities in the open
market following completion of the offering to cover all or a portion of such
Trust Preferred Securities or may exercise the Underwriters' over-allotment
option referred to above. In addition, the Representatives, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby they may reclaim from an Underwriter (or dealer
participating in the offering), for the account of the other Underwriters, the
selling concession with respect to Trust Preferred Securities that are
distributed in this offering but subsequently purchased for the account of the
Underwriters in the open market.
Josephthal & Co. Inc. has performed investment banking and advisory
services for the Company since April 1997 for which it received a $100,000 cash
payment and warrants to purchase 250,000 shares of Common Stock at a price of
$4.25 per share. The warrants issued to Josephthal & Co. Inc. (the "Josephthal
Warrants") are exercisable at any time during the four-year period ending
December 10, 2002 (the "Warrant Exercise Term"). The Josephthal Warrants and
the shares of Common Stock issuable upon exercise of the Josephthal Warrants
may not be sold, transferred, pledged or hypothecated for a period ending
December 10, 1998. Josephthal & Co. Inc. has the right to require the Company
to register the shares of Common Stock issuable upon exercise of the Josephthal
Warrants under the Act, on one occasion, during the Warrant Exercise Term. The
Josephthal Warrants provide that the exercise price will be proportionately
adjusted in the event of a stock split, subdivisions combination of the Common
Stock or the issuance of a stock dividend on the Common Stock.
In connection with the Company's December 1997 public offering, the
Company granted EVEREN Secur-ities, Inc. and Josephthal & Co. Inc. certain
rights of first refusal to underwrite or place any public or private offering
of equity or debt securities of the Company for a period ending December 15,
1998.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the creation
of the Trust will be passed upon by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Company and the Trust. The validity of
the Guarantee and the Junior Subordinated Debentures will be passed upon for the
Company by Tenzer Greenblatt LLP, counsel to the Company. Certain legal matters
relating to the offering will be passed upon for the Underwriters by Gibson,
Dunn & Crutcher, LLP. Tenzer Greenblatt LLP and Gibson, Dunn & Crutcher LLP will
rely on the opinions of Richards, Layton & Finger, P.A. as to certain matters of
Delaware law. Certain matters relating to United States federal income tax
considerations will be passed upon for the Company by Tenzer Greenblatt LLP.
Certain partners of Tenzer Greenblatt LLP are the beneficial owners of options
and/or warrants to purchase Common Stock.
90
<PAGE>
EXPERTS
The financial statements and schedule included in this Prospectus and in
the Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such reports given upon the authority of said
firm as experts in auditing and accounting.
91
<PAGE>
Index to Financial Statements
U.S. Home & Garden Inc. and Subsidiaries
<TABLE>
<CAPTION>
Page
---------------
<S> <C>
Report of Independent Certified Public Accountants ...................................... F-2
Consolidated Financial Statements
Consolidated balance sheets as of June 30, 1996 and 1997 and December 31, 1997
(unaudited) .......................................................................... F-3
Consolidated statements of income for the years ended June 30, 1995, 1996 and 1997
and for the six months ended December 31, 1996 and 1997 (unaudited) .................. F-4
Consolidated statements of stockholders' equity for the years ended June 30, 1995,
1996 and 1997 and for the six months ended December 31, 1997 (unaudited) ............. F-5
Consolidated statements of cash flows for the years ended June 30, 1995, 1996 and
1997 and for the six months ended December 31, 1996 and 1997 (unaudited) ............. F-6
Summary of Accounting Policies ........................................................ F-7 - F-9
Notes to Consolidated Financial Statements ............................................ F-10 - F-23
Weatherly Consumer Products Group, Inc. and Subsidiaries
Report of Independent Public Accountants ................................................ F-24
Consolidated Financial Statements
Consolidated statements of operations for the year ended September 30, 1995 and the
period October 1, 1995 through August 9, 1996 ........................................ F-25
Consolidated statements of stockholders' equity for the year ended September 30,
1995 and the period October 1, 1995 through August 9, 1996 ........................... F-26
Consolidated statements of cash flows for the year ended September 30, 1995 and the
period October 1, 1995 through August 9, 1996 ........................................ F-27
Notes to Financial Statements ......................................................... F-28-F-32
Proforma Condensed Consolidated Financial Statements
Proforma condensed consolidated financial statements - background ..................... F-33
Proforma condensed consolidated statement of operations for the year ended June 30,
1997 ................................................................................. F-34
Notes to proforma condensed consolidated financial statements ......................... F-35
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
U.S. Home & Garden Inc.
and Subsidiaries
San Francisco, California
We have audited the accompanying consolidated balance sheets of U.S. Home &
Garden Inc. and Subsidiaries as of June 30, 1996 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of U.S. Home & Garden
Inc. and Subsidiaries at June 30, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1997 in conformity with generally accepted accounting principles.
BDO Seidman, LLP
San Francisco, California
August 1, 1997, except for Note 15 which
is as of September 15, 1997
F-2
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------------- ---------------
1996 1997 1997
--------------- -------------- ---------------
(unaudited)
<S> <C> <C> <C>
Assets (Notes 1 and 6)
Current
Cash and cash equivalents ....................................... $ 680,000 $ 2,083,000 $ 12,734,000
Accounts receivable, less allowance for doubtful accounts
and sales returns of $155,000, $314,000 and $375,000 ........... 7,109,000 11,542,000 7,533,000
Inventories (Note 3) ............................................ 3,392,000 5,254,000 7,673,000
Prepaid expenses and other current assets ....................... 462,000 419,000 674,000
Deferred tax asset (Note 10) .................................... 1,333,000 448,000 1,079,000
------------ ------------ ------------
Total current assets .......................................... 12,976,000 19,746,000 29,693,000
Furniture, fixtures and equipment, net (Note 4) .................... 1,216,000 2,315,000 2,401,000
Intangible assets (Note 1)
Excess of cost over net assets acquired (Note 5) ................ 15,784,000 41,834,000 41,010,000
Deferred financing costs, net of accumulated
amortization of $467,000, $302,000 and $533,000 ................ 1,005,000 1,621,000 1,389,000
Product rights, patents and trademarks, net of accumulated
amortization of $56,000, $75,000 and $83,000 ................... 198,000 180,000 172,000
Non-compete agreement, net of accumulated
amortization of $22,000 and $35,000 ............................ 478,000 465,000
Package design, net of accumulated amortization of $56,000,
$110,000 and $155,000........................................... 180,000 251,000 438,000
Trade credits (Note 2) ............................................. 1,295,000 1,149,000 1,044,000
Officer receivables (Note 7) ....................................... 617,000 694,000 829,000
Other assets ....................................................... 313,000 207,000 195,000
------------ ------------ ------------
$ 33,584,000 $ 68,475,000 $ 77,636,000
============ ============ ============
Liabilities and Stockholders' Equity (Note 1)
Current
Line of credit (Notes 1, 6 and 13) .............................. $ 1,288,000 $ $ 2,246,000
Current maturities of notes payable (Notes 1, 6 and 13) 2,362,000 8,990,000 3,840,000
Accounts payable ................................................ 1,285,000 1,774,000 2,974,000
Accrued expenses ................................................ 901,000 3,983,000 2,415,000
Accrued co-op advertising ....................................... 185,000 1,098,000 890,000
Accrued commissions ............................................. 546,000 859,000 372,000
Accrued interest (Note 6) ....................................... 592,000 261,000 225,000
Accrued purchase consideration (Note 1) ......................... 489,000 489,000 978,000
------------ ------------ ------------
Total current liabilities ..................................... 7,648,000 17,454,000 13,940,000
Accrued purchase consideration (Note 1) ............................ 978,000
Deferred tax liability (Note 10) ................................... 328,000 547,000 650,000
Notes payable, less current maturities (Notes 1, 6 and 13) ......... 6,238,000 17,570,000 16,430,000
------------ ------------ ------------
Total liabilities .................................................. 14,214,000 36,549,000 31,020,000
------------ ------------ ------------
Commitments, contingency and subsequent events (Notes 1, 6, 8,
9 and 15)
Stockholders' equity (Note 9)
Preferred stock, $.001 par value - shares authorized,
1,000,000; no shares outstanding ...............................
Common stock, $.001 par value -- shares authorized,
30,000,000; 10,507,000, 14,073,000 and
19,860,000 shares issued and outstanding at June
30, 1996 and 1997, and December 31, 1997 ....................... 11,000 14,000 20,000
Additional paid-in capital ...................................... 21,413,000 30,783,000 49,775,000
Retained earnings (deficit) ..................................... (2,054,000) 1,129,000 (3,179,000)
------------ ------------ ------------
Total stockholders' equity .................................... 19,370,000 31,926,000 46,616,000
------------ ------------ ------------
$ 33,584,000 $ 68,475,000 $ 77,636,000
============ ============ ============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Six months ended
Years ended June 30, December 31,
------------------------------------------------- ---------------------------------
1995 1996 1997 1996 1997
--------------- --------------- --------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net sales (Note 11) ...................... $ 19,692,000 $ 27,031,000 $ 52,046,000 $ 12,939,000 $ 15,538,000
Cost of sales ............................ 9,151,000 12,670,000 23,649,000 5,825,000 7,379,000
------------ ------------ ------------ ------------ ------------
Gross profit ............................. 10,541,000 14,361,000 28,397,000 7,114,000 8,159,000
------------ ------------ ------------ ------------ ------------
Operating expenses
Selling and shipping .................... 4,374,000 6,264,000 11,232,000 3,990,000 4,661,000
General and administrative .............. 2,778,000 4,348,000 6,513,000 3,322,000 3,891,000
------------ ------------ ------------ ------------ ------------
7,152,000 10,612,000 17,745,000 7,312,000 8,552,000
------------ ------------ ------------ ------------ ------------
Income (loss) from operations ............ 3,389,000 3,749,000 10,652,000 (198,000) (393,000)
Other income (expense)
Investment income ....................... 34,000 69,000 76,000 43,000 104,000
Interest expense (Note 6) ............... (1,810,000) (2,009,000) (3,338,000) (1,375,000) (1,597,000)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes and
extraordinary expense ................... 1,613,000 1,809,000 7,390,000 (1,530,000) (1,886,000)
Income tax (expense) benefit (Note 10) (38,000) 715,000 (3,200,000) 475,000 800,000
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary
expense ................................. 1,575,000 2,524,000 4,190,000 (1,055,000) (1,086,000)
Extraordinary expense of $1,459,000
on debt refinancing, net of income
taxes of $452,000 (Note 13) ............. (1,007,000) (1,007,000)
------------ ------------ ------------ ------------ ------------
Net income (loss) ........................ $ 1,575,000 $ 2,524,000 $ 3,183,000 $ (2,062,000) $ (1,086,000)
============ ============ ============ ============ ============
Basic earnings (loss) per share:
Income (loss) per common share before
extraordinary expense (Note 14) ......... $ 0.19 $ 0.25 $ 0.31 $ (.08) $ (.07)
Extraordinary expense (Notes 13 and
14) ..................................... (0.08) (.07)
------------ ------------ ------------ ------------ ------------
Net income (loss) per common share
(Note 14) ............................... $ 0.19 $ 0.25 $ 0.23 $ (.15) $ (.07)
============ ============ ============ ============ ============
Dilutive earnings (loss) per share:
Income (loss) per common share before
extraordinary expense (Note 14) ......... $ 0.16 $ 0.19 $ 0.26 $ (.08) $ (.07)
Extraordinary expense (Notes 13 and
14) ..................................... (0.06) (.07)
------------ ------------ ------------ ------------ ------------
Net income (loss) per common share
(Note 14) ............................... $ 0.16 $ 0.19 $ 0.20 $ (.15) $ (.07)
============ ============ ============ ============ ============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- ------------------------------
Number of Number of
Shares Amount Shares Amount
----------- -------- ------------------ ----------
<S> <C> <C> <C> <C>
Balance, July 1, 1994 (Note 9) ...................... 4,600,000 $ 5,000
Sale of common stock, net of stock issuance
costs of approximately $1,300,000.................. 3,775,000 4,000
Issuance of common stock for payment of trade
payables .......................................... 417,000
Exercise of stock options and warrants ............. 31,000
Issuance of unit purchase options ..................
Conversion of debt and accrued interest into
common stock (Note 1) ............................. 914,000 1,000
Net income .........................................
----- ----- --------- -------
Balance, June 30, 1995 (Note 9) ..................... 9,737,000 10,000
Exercise of stock warrants, net of stock
issuance costs of approximately $114,000........... 770,000 1,000
Net income .........................................
----- ----- --------- -------
Balance, June 30, 1996 (Note 9) ..................... 10,507,000 11,000
Exercise of stock options, warrants,
and UPOs, net of issuance costs of
approximately $300,000............................. 2,566,000(1) 2,000
Stock issued for Weatherly acquisition
(Note 1) .......................................... 1,000,000 1,000
Options and warrants issued for acquisition and
consulting services and bank
refinancing (Note 1) ..............................
Net income .........................................
----- ----- ------------ -------
Balance, June 30, 1997 (Note 9) ..................... 14,073,000 14,000
Conversion of debt into common stock
(unaudited) ........................................ 154,000
Repurchase of UPOs (unaudited) (Note 9) .............
Sale of common stock, net of stock issuance costs
of approximately $950,000 (unaudited) .............. 4,290,000 5,000
Exercise of stock options and warrants
(unaudited) ........................................ 1,343,000 1,000
Net loss (unaudited) ................................
----- ----- ------------ -------
Balance, December 31, 1997 (unaudited) .............. 19,860,000 $20,000
===== ===== ============ =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Additional Retained Total
Paid-in Earnings Stockholders'
Capital (Deficit) Equity
-------------- ----------------- --------------
<S> <C> <C> <C>
Balance, July 1, 1994 (Note 9) ...................... $ 9,298,000 $ (6,153,000) $ 3,150,000
Sale of common stock, net of stock issuance
costs of approximately $1,300,000.................. 7,432,000 7,436,000
Issuance of common stock for payment of trade
payables .......................................... 683,000 683,000
Exercise of stock options and warrants ............. 35,000 35,000
Issuance of unit purchase options .................. 400,000 400,000
Conversion of debt and accrued interest into
common stock (Note 1) ............................. 2,059,000 2,060,000
Net income ......................................... 1,575,000 1,575,000
----------- ------------- ------------
Balance, June 30, 1995 (Note 9) ..................... 19,907,000 (4,578,000) 15,339,000
Exercise of stock warrants, net of stock
issuance costs of approximately $114,000........... 1,506,000 1,507,000
Net income ......................................... 2,524,000 2,524,000
----------- ------------- ------------
Balance, June 30, 1996 (Note 9) ..................... 21,413,000 (2,054,000) 19,370,000
Exercise of stock options, warrants,
and UPOs, net of issuance costs of
approximately $300,000............................. 5,292,000 5,294,000
Stock issued for Weatherly acquisition
(Note 1) .......................................... 2,999,000 3,000,000
Options and warrants issued for acquisition and
consulting services and bank
refinancing (Note 1) .............................. 1,079,000 1,079,000
Net income ......................................... 3,183,000 3,183,000
----------- ------------- ------------
Balance, June 30, 1997 (Note 9) ..................... 30,783,000 1,129,000 31,926,000
Conversion of debt into common stock
(unaudited) ........................................ 350,000 350,000
Repurchase of UPOs (unaudited) (Note 9) ............. (3,222,000) (3,222,000)
Sale of common stock, net of stock issuance costs
of approximately $950,000 (unaudited) .............. 15,934,000 15,939,000
Exercise of stock options and warrants
(unaudited) ........................................ 2,708,000 2,709,000
Net loss (unaudited) ................................ (1,086,000) (1,086,000)
----------- ------------- ------------
Balance, December 31, 1997 (unaudited) .............. $49,775,000 $ (3,179,000) $ 46,616,000
=========== ============= ============
</TABLE>
- --------
(1) Includes 38,000 shares of common stock issued for services relating to cash
proceeds and approximately 60,000 issued relating to cashless exercise of
4 UPOs (Note 9).
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Years ended June 30,
----------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) .......................... $ 1,575,000 $ 2,524,000 $ 3,183,000
Adjustments to reconcile net
income (loss) to net cash pro-
vided by (used in) operating
activities:
Extraordinary expense .................... 1,007,000
Loss on disposal of assets ............... 226,000
Bad debt expense ......................... 3,000 167,000 323,000
Depreciation and other
amortization ............................ 637,000 834,000 1,990,000
Amortization of deferred
financing costs ......................... 219,000 264,000 323,000
Changes in operating assets and
liabilities, net of assets
acquired and liabilities
assumed:
Accounts receivable ..................... (2,523,000) (2,622,000) (2,763,000)
Inventories ............................. 637,000 (940,000) 444,000
Prepaid expenses and other
current assets ........................ (201,000) (159,000) 324,000
Accounts payable and
accrued expenses ...................... 54,000 1,393,000 2,838,000
Trade credits ........................... 200,000 257,000 46,000
Other assets ............................ (163,000) (95,000) 262,000
Deferred taxes .......................... (1,005,000) 2,342,000
-------------- -------------- --------------
Net cash provided by (used in) oper-
ating activities ........................... 438,000 618,000 10,545,000
-------------- -------------- --------------
Cash flows from investing activities
Payment for purchase of busi-
nesses, net of cash acquired ............... (15,387,000) (1,602,000) (28,358,000)
Payment for non-compete
agreement ................................ (500,000)
Sale of short-term investments ............. 501,000
Increase in officer receivables ............ (352,000) (131,000) (77,000)
Purchase of product rights ................. (105,000)
Purchase of furniture, fixtures and
equipment ................................ (151,000) (261,000) (528,000)
Purchase of package design ................. (82,000) (109,000) (131,000)
-------------- -------------- --------------
Net cash used in investing activities . (15,576,000) (2,103,000) (29,594,000)
-------------- -------------- --------------
Cash flows from financing activities .
Proceeds from issuances of stock . 7,452,000 1,507,000 5,294,000
Buyout of unit purchase options ............
Proceeds from bank line of credit . 11,514,000 17,496,000 41,791,000
Payment on bank line of credit ............. (12,109,000) (16,208,000) (43,079,000)
Proceeds from notes payable ................ 11,000,000 21,345,000
Payments of notes payable .................. (800,000) (1,600,000) (3,385,000)
Acquisition finance costs .................. (1,036,000) (1,514,000)
-------------- -------------- --------------
Net cash provided by financing
activities ................................. 16,021,000 1,195,000 20,452,000
-------------- -------------- --------------
Net increase (decrease) in cash and
cash equivalents ........................... 883,000 (290,000) 1,403,000
Cash and cash equivalents, begin-
ning of period ............................. 87,000 970,000 680,000
-------------- -------------- --------------
Cash and cash equivalents, end of period $ 970,000 $ 680,000 $ 2,083,000
============== ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six months ended
December 31,
----------------------------------
1996 1997
---------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income (loss) .......................... $ (2,062,000) $ (1,086,000)
Adjustments to reconcile net
income (loss) to net cash pro-
vided by (used in) operating
activities:
Extraordinary expense .................... 1,007,000
Loss on disposal of assets ...............
Bad debt expense .........................
Depreciation and other
amortization ............................ 958,000 1,263,000
Amortization of deferred
financing costs ......................... 119,000 232,000
Changes in operating assets and
liabilities, net of assets
acquired and liabilities
assumed:
Accounts receivable ..................... 2,119,000 4,008,000
Inventories ............................. (4,464,000) (2,419,000)
Prepaid expenses and other
current assets ........................ 541,000 (255,000)
Accounts payable and
accrued expenses ...................... 1,084,000 (651,000)
Trade credits ........................... 105,000
Other assets ............................ 92,000 13,000
Deferred taxes .......................... (934,000) (528,000)
------------- ------------
Net cash provided by (used in) oper-
ating activities ........................... (1,540,000) 682,000
------------- ------------
Cash flows from investing activities
Payment for purchase of busi-
nesses, net of cash acquired ............... (23,801,000) (561,000)
Payment for non-compete
agreement ................................ (500,000)
Sale of short-term investments .............
Increase in officer receivables ............ (136,000) (135,000)
Purchase of product rights .................
Purchase of furniture, fixtures and
equipment ................................ (230,000) (486,000)
Purchase of package design ................. (232,000)
------------- ------------
Net cash used in investing activities . (24,667,000) (1,414,000)
------------- ------------
Cash flows from financing activities .
Proceeds from issuances of stock . 5,193,000 18,648,000
Buyout of unit purchase options ............ (3,221,000)
Proceeds from bank line of credit . 17,884,000 6,010,000
Payment on bank line of credit ............. (11,975,000) (3,764,000)
Proceeds from notes payable ................ 16,783,000
Payments of notes payable .................. (703,000) (6,290,000)
Acquisition finance costs .................. (1,399,000)
------------- ------------
Net cash provided by financing
activities ................................. 25,783,000 11,383,000
------------- ------------
Net increase (decrease) in cash and
cash equivalents ........................... (424,000) 10,651,000
Cash and cash equivalents, begin-
ning of period ............................. 680,000 2,083,000
------------- ------------
Cash and cash equivalents, end of period $ 256,000 $ 12,734,000
============= ============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Summary of Accounting Policies
Nature of Business
U.S. Home & Garden Inc. (the "Company" -- formerly known as Natural Earth
Technologies, Inc. until July 1995), through its wholly-owned subsidiaries, is
a manufacturer and distributor of lawn and garden care products to retailers
primarily throughout North America.
Golden West Agri-Products, Inc. ("Golden West"), a wholly-owned
subsidiary, is a manufacturer and distributor of humic acid based agricultural
products. Golden West currently sells its products in the Western United
States, Mexico and Central America.
On September 1, 1994, the Company, through its wholly-owned subsidiary
Easy Gardener Acquisition Corporation ("Easy Gardener"), acquired all of the
assets of Easy Gardener, Inc., a developer, manufac turer and marketer of lawn
and garden care products. Easy Gardener primarily sells its products throughout
North America.
On August 11, 1995, Emerald Products Corporation, a wholly-owned
subsidiary of Easy Gardener, acquired the assets of Emerald Products, LLC.
Emerald Products sells its product, Emerald Edge(R), throughout North America.
On August 9, 1996, Easy Gardener acquired all of the outstanding stock of
Weatherly Consumer Products Group, Inc. ("Weatherly"), a lawn and garden care
company which primarily sells its products throughout North America.
On May 12, 1997, Easy Gardener acquired the Plasti-Chain product line from
Plastic Molded Concepts, Inc. ("Plastic").
Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries and the results of operations of Weatherly, Easy
Gardener, Plastic, Golden West and Emerald Products since their date of
acquisition (Note 1). Significant intercompany accounts and transactions have
been eliminated.
Inventories
Inventories, which consist of raw materials, finished goods, and packaging
materials, are stated at the lower of cost or market; cost is determined by the
first-in, first-out (FIFO) cost method.
Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are stated at cost. Depreciation is
computed by the straight-line method over the estimated five to seven year
useful lives of the assets.
Intangible Assets
Excess of Cost over Net Assets Acquired The excess of cost over net assets
acquired, which relates to the Company's acquisitions of Weatherly, Easy
Gardener, Plastic, Golden West, and Emerald Products, are being amortized over
periods of twenty to thirty years using the straight-line method. Periodically,
the recoverability of goodwill is evaluated by comparing undiscounted estimated
future net cash flows to the estimated net cash flows projected at the time of
acquisition.
Deferred Financing Costs Direct costs associated with the Company's
long-term financing arrangements are being amortized over the life of the
loans, a period of approximately six years.
Package Design Package design costs associated with Easy Gardener and
Weatherly products are being amortized over a five-year period using the
straight-line method.
F-7
<PAGE>
Product Rights Product rights are being amortized over a 15-year
estimated useful life.
Non-Compete Agreement The non-compete agreement was entered into with the
acquisition of Weatherly. The agreement is being amortized over its 20 year
term.
Revenue Recognition
Sales are recorded as products are shipped to customers.
Net Income Per Share
Effective for the six months ended December 31, 1997, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 128, Earnings
Per Share (SFAS 128). SFAS 128 provides for the calculation of basic and
diluted earnings per share. Basic earnings per share includes no dilution and
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution of securities that could share in the
earnings of an entity. As required by SFAS 128, all prior earnings have been
restated to reflect the retroactive application of this accounting
pronouncement. (Note 14).
Income Taxes
Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
Reclassification
Certain 1996 financial statement amounts have been reclassified to conform
to the 1997 presentation.
Advertising Costs
The Company incurs advertising expense primarily relating to cooperative
advertising credits granted to customers based on qualified expenses incurred
by the customers to advertise the Company's products. Cooperative advertising
credits are usually limited to a percentage of an agreed-upon sales volume. The
Company also incurs advertising expense relating to the distribution of
catalogs and the broadcasting of radio and television commercials. Advertising
costs are expensed as incurred. Advertising expense was $1,236,000, $1,823,000
and $2,945,000 during the years ended June 30, 1995, 1996 and 1997,
respectively, and $757,000 and $963,000 for the six months ended December 31,
1996 and 1997, respectively (unaudited).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all short-term investments purchased with an initial
maturity of three months or less to be cash equivalents.
Stock Based Compensation
Effective July 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. Under this standard, companies are encouraged, but not required,
to adopt the fair value method of accounting for employee stock-based
transactions. The fair value method is required for all stock based
compensation issued to non-employees. Under the fair value method, compensation
cost is measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
Companies are permitted to continue to account for employee
F-8
<PAGE>
stock-based transactions under Accounting Principles Board Opinion (APB) No.
25, "Accounting for Stock Issued to Employees," but are required to disclose
pro forma net income and earnings per share as if the fair value method had
been adopted. The Company has elected to continue to account for stock-based
compensation under APB No. 25 (see Note 9).
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS
130), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS 130 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Management does not believe that the Company's current financial
statement disclosures will need to be modified based upon current operations.
Results of operations and financial position, however, will be unaffected by
future implementation of this standard.
In June 1997, the Financial Accounting Standards Board issued SFAS No.131,
Disclosures about Segments of an Enterprise and Related Information, (SFAS 131)
which supersedes SFAS No. 14., Financial reporting for Segments of a Business
Enterprises. SFAS 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS 131 defines operating segments as components of a company about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker in deciding how to allocate resources and
in assessing performance.
SFAS 131 is effective for financial statements for period beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. The Company believes it operates under one business segment and has
already substantially complied with the required financial statement
disclosures. Results of operations and financial position, however, will be
unaffected by implementation of this standard.
Financial Instruments
The Company's financial instruments consist of cash, accounts receivable
and debt. The carrying value of cash and accounts receivable approximate fair
value based upon the liquidity and short-term nature of the assets. The
carrying value of short-term and long-term debt approximates the fair value
based upon short-term and long-term borrowings at market rate interest.
Cash and cash equivalents are held principally at three high quality
financial institutions. At times such balances may be in excess of the FDIC
insurance limit.
Basis of Presentation
The accompanying balance sheet as of December 31, 1997 and the statements
of operations and cash flows for each of the six months ended December 31, 1996
and 1997 have not been audited. However, in the opinion of management, they
include all adjustments necessary for a fair presentation of the financial
position and the results of operations for the periods presented. The results
of operations for the six months ended December 31, 1997 are not necessarily
indicative of results to be expected for any future period.
F-9
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information for December 31, 1996 and 1997 is Unaudited)
1. Business Acquisitions
On May 12, 1997, Easy Gardener acquired from Plastic substantially all of
the assets, including product rights and all other intangible assets, of
Plastic used in connection with Plastic's home lawn and garden care
distribution business for approximately $4,300,000.
On August 9, 1996, Easy Gardener acquired all of the outstanding stock of
Weatherly, a lawn and garden care company, for 1,000,000 shares of the
Company's common stock (valued at $3 per share) and $22,937,000, less an amount
required to discharge certain outstanding indebtedness of the acquired company,
and adjusted dollar for dollar based upon the ultimate value of the acquired
company's net current assets (approximately $2.5 million). The acquisition was
accounted for as a purchase and, accordingly, the results of operations of
Weatherly have been included in the consolidated statement of income since
August 9, 1996. The Company operates the acquired company as a subsidiary of
Easy Gardener. In connection with the above acquisition, the Company's
outstanding notes payable were refinanced and a new line of credit arrangement
was established (See Note 6).
On August 11, 1995, Emerald Products Corporation, a newly-formed,
wholly-owned subsidiary of Easy Gardener, acquired from Emerald Products, LLC
("Emerald") all of the assets, including product rights and all other
intangible assets, of Emerald used in connection with Emerald's home lawn and
garden care distribution business. The purchase price, subject to adjustment as
described below, was $835,000 in cash and a $100,000 non-interest bearing
promissory note, which was paid off during fiscal 1996 using cash from
operations. The purchase price is subject to increase based upon the Company
achieving certain annual gross sales levels of acquired product lines through
September 2002. This additional consideration is payable in cash annually and
based upon 2.5% of annual Emerald gross sales of up to $4,000,000, 1.5% of
annual gross sales between $4,000,001 and $5,000,000 and 1% of annual gross
sales greater than $5,000,000.
On September 1, 1994 (the "Closing Date"), Easy Gardener Acquisition
Corp., a newly formed, wholly-owned subsidiary of the Company, acquired from
Easy Gardener, Inc. (the "Seller"), all of the assets of the Seller used in
connection with the Seller's home lawn and garden care products distribution
business (the "Purchased Assets") pursuant to an assets purchase agreement
dated as of June 19, 1994. The purchase price was $20,500,000 (subject to
adjustment as described below) which was paid by the delivery of (i) $8,000,000
in cash (ii) a promissory note (the "Note") issued by Easy Gardener Acquisition
Corp. in the initial principal amount of $10,500,000, and (iii) two convertible
promissory notes (the "Convertible Notes") issued by the Company each in the
initial principal amount of $1,000,000. The Note was paid from the proceeds of
the Company's bank financing in September 1994. The Convertible Notes plus
accrued interest were each converted into 457,198 shares of the Company's
common stock and Class B warrants to acquire 457,198 shares of common stock at
an exercise price of $2.28 per share. The Convertible Notes were automatically
converted upon the February 1995 approval by the stockholders of the Company of
an Amendment to the Company's Certificate of Incorporation increasing the
amount of the Company's authorized common stock to 30,000,000 shares. The
shares of common stock issued upon exercise of the Convertible Notes, and the
shares of common stock issuable upon exercise of the warrants, are subject to a
seven-year voting agreement with Mr. Robert Kassel, Chairman of the Company.
The purchase price was subject to increase, if and to the extent that on the
Closing Date current assets of Easy Gardener, Inc. exceeded current liabilities
by $6,600,000. This additional amount approximated $783,000 at the date of
closing and was paid in October 1994.
Approximately $2,200,000 was contingently payable to the Seller over the
four years following the Closing Date based upon the acquired business
generating certain specified levels of net income. As of June 30, 1997, the
entire $2,200,000 has been added to the excess of cost over net assets acquired
of Easy Gardener based upon operating results obtained through June 30, 1997
and forecasted results for fiscal year 1998. As of June 30, 1997, approximately
$1,467,000 is payable for this additional purchase price.
F-10
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
1. Business Acquisitions -- (Continued)
The following unaudited pro forma summary combines the consolidated
results of operations of the Company, Weatherly and Easy Gardener as if the
acquisitions had occurred at the beginning of the year of acquisition and the
beginning of the prior year. Accordingly, Easy Gardener is reflected as if the
acquisition occurred on July 1, 1994 and Weatherly as if the acquisition
occurred July 1, 1995. The proforma information gives effect to certain
adjustments, including the amortization of excess of cost over net assets
acquired, the elimination of certain expenses incurred by Weatherly related to
its acquisition and additional interest expense on the notes payable. This pro
forma summary does not necessarily reflect the results of operations as they
would have been if the Company, Weatherly and Easy Gardener had constituted a
single entity during such periods and is not necessarily indicative of results
which may be obtained in the future. The pro forma effect of the Emerald and
Plastic acquisitions have not been reflected since their prior revenue was not
material to the Company's operations.
<TABLE>
<CAPTION>
Six months ended
Years ended June 30, December 31,
--------------------------------------------------------- -----------------
1995 1996 1997 1996
----------------- ----------------- ----------------- -----------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales .................................. $ 21,349,000 $ 46,102,000 $ 52,788,000 $ 13,680,000
============= ============= ============= ============
Net income (loss) before extraordinary
expense and income taxes .................. $ 1,420,000 $ 2,369,000 $ 6,540,000 $ (2,379,000)
============= ============= ============= ============
Net income (loss) before extraordinary
expense ................................... $ 1,382,000 $ 3,462,000 $ 3,648,000 $ (1,429,000)
============= ============= ============= ============
Net income (loss) .......................... $ 1,382,000 $ 1,542,000 $ 2,121,000 $ (2,955,000)
============= ============= ============= ============
Diluted earnings (loss) per share:
Net income (loss) per common share
before extraordinary expenses ............. $ .11 $ .21 $ .22 $ (.10)
============= ============= ============= ============
Net income (loss) per common share ......... $ .11 $ .09 $ .13 $ (.21)
============= ============= ============= ============
</TABLE>
2. Trade Credits
In April 1996, the Company entered into an agreement to exchange unsold
assets held for sale for credit against the future purchase of products and
services. This transaction has been reported at the estimated fair market value
of the assets exchanged by the Company. No gain or loss was recognized on such
transaction as the Company had previously written down its assets held for sale
to their estimated fair market value. The agreement requires the Company to pay
a portion of the purchase price of the product or services received. Depending
on the nature of the products or services purchased, the Company will receive a
credit against the future price ranging from 10% to 45% of the cash purchase
price. The Company will also receive a percentage of the cash proceeds from the
ultimate sale of the assets. As of June 30, 1996, included in accounts
receivable is approximately $105,000 of cash subsequently received on the sale
of a portion of the assets by the third party. The agreement provides that the
Company will receive maximum total credits and cash totaling $1.6 million. The
agreement expires in April 1999 and requires the Company to use all credits by
this date. The Company expects to use the credits primarily by purchasing
operating assets and advertising time. The Company expects to use all available
credits by the expiration date and will continually evaluate this asset based
upon credits utilized and future operating goals.
F-11
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
3. Inventories
Inventories consist of:
June 30, December 31,
----------------------------- -------------
1996 1997 1997
------------ -------------- -------------
(unaudited)
Raw materials .......... $ 82,000 $ 578,000 $ 257,000
Finished goods ......... 3,310,000 4,676,000 7,416,000
--------- ----------- ----------
3,392,000 $ 5,254,000 $7,673,000
========= =========== ==========
4. Furniture, Fixtures and Equipment
Furniture, fixtures and equipment consist of:
<TABLE>
<CAPTION>
June 30, December 31,
----------------------------- -------------
1996 1997 1997
------------ -------------- -------------
(unaudited)
<S> <C> <C> <C>
Leasehold improvements .................... $ 74,000 $ 397,000 $ 393,000
Furniture, fixtures and equipment ......... 1,575,000 2,761,000 3,162,000
--------- ----------- ----------
1,649,000 3,158,000 3,555,000
Less accumulated depreciation ............. 433,000 843,000 1,154,000
--------- ----------- ----------
1,216,000 $ 2,315,000 $2,401,000
========= =========== ==========
</TABLE>
5. Excess of Cost Over Net Assets Acquired
The excess of cost over net assets acquired consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
------------------------------- -------------
1996 1997 1997
------------- --------------- -------------
(unaudited)
<S> <C> <C> <C>
Weatherly Consumer Products Group, Inc. .......... $ $ 23,046,000 $22,948,000
Easy Gardener, Inc. .............................. 14,172,000 15,639,000 15,639,000
Plastic Molded Concepts, Inc. .................... 2,760,000 2,810,000
Golden West Chemical Distributions, Inc. ......... 2,098,000 2,098,000 2,098,000
Emerald Products, LLC ............................ 778,000 870,000 894,000
---------- ------------ -----------
17,048,000 44,413,000 44,389,000
Less accumulated amortization .................... 1,264,000 2,579,000 3,379,000
---------- ------------ -----------
15,784,000 $ 41,834,000 $41,010,000
========== ============ ===========
</TABLE>
F-12
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
6. Notes Payable and Line of Credit
Notes payable consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
----------------------------- -------------
1996 1997 1997
------------ -------------- -------------
(unaudited)
<S> <C> <C> <C>
$23,000,000 note payable, interest due monthly at prime (8.5% at
June 30, 1997) plus 1.25% or LIBOR (5.72% at June 30, 1997)
plus 3.50%, quarterly principal payments ranging from $570,000
to $1,350,000 beginning September 30, 1996 through June 30,
2002, collateralized by Easy Gardener's assets and guaranteed by
the Company. ...................................................... $ $20,510,000 $18,020,000
$2,250,000 note payable, interest due monthly at prime (8.5% at
June 30, 1997) plus 6.0%, quarterly principal payments of
$140,625 beginning September 30, 1998 through June 30, 2002,
collateralized by Easy Gardener's assets and guaranteed by the
Company. .......................................................... 2,250,000 2,250,000
$3,800,000 note payable, interest only due monthly at 12% with the
full principal due November 1997. ................................. 3,800,000
$8,000,000 note payable, interest at 12.25%, monthly principal pay-
ments of $133,333, plus interest, commencing January 31, 1995
until January 2000, collateralized by the assets of Easy Gardener
and a guaranty of the Company. This note was refinanced during
1997. ............................................................. 5,600,000
$3,000,000 note payable, interest at 12%, equal monthly principal
payments of $125,000, plus interest, commencing the earlier of
the repayment of the $8,000,000 note payable or January 31,
2000, collateralized by assets of Easy Gardener and a guaranty of
the Company. This note was refinanced during 1997. ................ 3,000,000
---------- ----------- -----------
8,600,000 26,560,000 20,270,000
Less current portion ............................................... 2,362,000 8,990,000 3,840,000
---------- ----------- -----------
$6,238,000 $17,570,000 $16,430,000
========== =========== ===========
</TABLE>
At June 30 and December 31, 1997, the Company's financing arrangements
include a $13,000,000 revolving credit facility expiring June 2002, bearing
interest at the lower of prime or LIBOR rates plus an additional marginal
amount; collateralized by Easy Gardener's assets and guaranteed by the Company.
The credit facility's availability increases to $16,000,000 for the months of
February through May.
As of June 30, 1997, no amounts were outstanding on the credit line, and
at December 31, 1997, $2,246,000 was outstanding on the credit line. The credit
agreement contains various restrictions which require, among other things,
maintenance of certain financial ratios and an annual zero balance for ten
consecutive days during August. At June 30, 1997 and December 31, 1997, the
Company was in compliance with all such covenants. If the revolving credit
facility is terminated prior to June 2002, the Company will be subject to
certain prepayment penalties.
F-13
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
6. Notes Payable and Line of Credit -- (Continued)
At June 30, 1996, the Company's had a $6,000,000 revolving credit facility
bearing interest at prime (8.25% at June 30, 1996) plus 2%, payable in monthly
installments commencing January 1, 1995 and collateralized by assets of Easy
Gardener and a guaranty of the Company. As of June 30, 1996, there was
$1,288,000 outstanding on the credit line which was refinanced during August
1996 utilizing the $13,000,000 revolving credit facility noted above.
The $3 million note payable also required the Company to pay additional
interest (defined as a success fee) when the loan was paid off. The success fee
ranges from $300,000 in the first year to $4,140,000 in the seventh year. As of
June 30, 1996, the accrued success fee was approximately $481,000 (Note 13).
The $8 million note payable was subject to certain mandatory prepay ments
of "excess cash flow" of Easy Gardener and certain net proceeds of asset sales,
condemnation awards and insurance recoveries. As of June 30, 1996, $762,000 is
the payment for "excess cash flow" which was made subsequent to year end. This
amount has been included in the current portion of notes payable. Also, certain
optional prepayments of advances under the revolving facility and the $8
million note payable require the payment of a premium (Note 13).
In connection with the acquisition of Weatherly Products Inc. on August 9,
1996, both of the above term notes payable were refinanced and a new line of
credit agreement was executed (Note 13).
Future minimum principal payments are as follows:
Year ending June 30, Amount
- ---------------------- --------------
1998 $ 8,990,000
1999 4,402,000
2000 4,403,000
2001 4,402,000
2002 4,363,000
------------
$ 26,560,000
============
7. Officer Receivables
Officer receivables represents notes which bear interest at 7% and require
interest only payments on an annual basis. The notes are due June 2002.
8. Commitments
Employment Agreements
During 1996 and 1997, the Company entered into new employment agreements
with three of its officers. The agreements are for one-year periods but are
automatically renewed unless specifically terminated by the Company or the
employee. If the employment agreements are terminated by the Company, the
officers will be entitled to an additional ten and five years of annual
compensation. Annual compensation under the employment agreements are $350,000,
$162,000 and $101,000. The employment agreements also provide for certain lump
sum payments in the event of a change in control equal to approximately $5
million. An agreement with an officer of Easy Gardener provides for a base
aggregate annual salary of approximately $200,000 in 1998. In addition, the
agreements provide for incentive and additional compensation under certain
circumstances.
Operating Leases
The Company leases office and warehouse space under operating leases which
expire in various years through 2001. The Company also leases certain office
equipment and automobiles under operating leases expiring in 1998 through 2002.
The future minimum lease payments under these non-cancelable operating leases
are as follows:
F-14
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
8. Commitments -- (Continued)
Year ending June 30, Amount
- ---------------------- --------------
1998 $ 729,000
1999 591,000
2000 410,000
2001 176,000
2002 1,000
-----------
$ 1,907,000
===========
Rent expense was approximately $303,000, $336,000 and $680,000 for the
years ended June 30, 1995, 1996 and 1997, respectively, and $322,000 and
$168,000 for the six months ended December 31, 1996 and 1997 respectively.
Pension Plan
Easy Gardener has established an employee defined contribution pension
plan (the Plan). Employees of the Company, Weatherly, Easy Gardener and Golden
West are eligible to participate. The Company is required to match the first 3%
of employee contributions up to 5% of the employees wage base. The plan also
allows discretionary contributions by the Company. The Company's contribution
vests over a seven-year period. Pension expense associated with the Plan for
1995, 1996 and 1997 was approximately $64,000, $180,000 and $199,000. Pension
expense associated with the Plan for the six months ended December 31, 1996 and
1997 was $161,000 and $159,000.
Royalty Agreements
The Company has entered into royalty agreements which provide for payments
based upon a percentage of net sales of certain products. These agreements
expire in various years from 1998 to 2005. Royalty expense during the years
ended June 30, 1995, 1996 and 1997 was $64,000, $104,000 and $304,000. Royalty
expense during the six months ended December 31, 1996 and 1997 was $51,000 and
$132,000.
9. Stockholders' Equity
(a) Convertible Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock
with such designations, rights and preferences as may be determined from time
to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of the Company's common
stock.
(b) Common Stock
The Company raised a portion of the Easy Gardener, Inc. purchase price
through the August 1994 private placement of $8,025,000 of Units (for which it
received net proceeds of approximately $6,900,000), each $100,000 Unit
consisting of 44,000 shares of common stock and a class B warrant to purchase
44,000 shares of common stock for $2.28 per share.
In June 1994, the Company sold approximately 200,000 shares to various
foreign investors. Proceeds to the Company, after deducting commissions and
expenses approximated $435,000. In a related transaction during July 1994, the
Company sold an additional 240,000 shares to foreign investors resulting in net
proceeds to the Company of approximately $518,000. Proceeds were used for the
Easy Gardener acquisition.
F-15
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
9. Stockholders' Equity -- (Continued)
(c) Stock Option Plans
The Company adopted the 1991 Stock Option Plan (the "1991 Plan") pursuant
to which 700,000 shares of common stock have been reserved for issuance upon
the exercise of options designated as either (i) options intended to constitute
incentive stock options ("ISOs") under the Internal Revenue Code of 1986, as
amended (the "Code") or (ii) non-qualified options. ISOs may be granted under
the Plan to employees and officers of the Company. Non-qualified options may be
granted to consultants, directors (whether or not they are employees),
employees or officers of the Company.
During fiscal 1995, the Board of Directors of the Company adopted, subject
to stockholder approval, two additional stock option plans. The 1995 Stock
Option Plan (the "1995 Plan") allows the granting of either ISOs or
non-qualified options. The maximum aggregate number of shares to be granted
under this plan is 1,500,000. The Non-Employee Director Stock Option Plan (the
"Non-Employee Director Plan") was established to attract, retain and compensate
for their services as directors, highly qualified individuals who are not
employees of the Company. The maximum aggregate number of shares issued under
this plan is 100,000. During 1996 and 1997, 10,000 options were granted each
year. The 1995 Plan is administered by a committee of the Board of Directors
and the Non-Employee Director Plan is a formula plan.
During May 1997, the Board of Directors approved the 1997 Stock Option
Plan. The plan reserves 1,500,000 shares of common stock.
The 1997 plan is subject to shareholder approval. No options have been
granted as of June 30, 1997.
The 1991 Plan is administered by the Board of Directors of the Company
(the "Board"). The Board, or committee, as the case may be, within the
limitations of the 1991 and 1995 Plans, as the case may be, determines the
persons to whom options will be granted, the number of shares to be covered by
each option, whether the options granted are intended to be ISOs, the duration
and rate of exercise of each option, the option purchase price per share and
the manner of exercise, the time, manner and form of payment upon exercise of
an option, and whether restrictions such as repurchase rights in the Company
are to be imposed on shares subject to options.
ISOs granted under the plans may not be granted at a price less than the
fair market value of the common stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more of the voting stock of
the Company). The aggregate fair market value of shares for which ISOs granted
to any employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and any related
corporation) may not exceed $100,000. Non-qualified options granted under the
1991 Plan may not be granted at a price less than the fair market value of the
common stock on the date of grant (not less than par value in the case of the
1995 Plan). Options granted under the plans will expire not more than ten years
from the date of grant (five years in the case of ISOs granted to persons
holding 10% or more of the voting stock of the Company).
All options granted under the 1991 Plan, Non-Employee Director Plan and
ISOs under the 1995 Plan are not transferable during an optionee's lifetime but
are transferable at death by will or by the laws of descent and distribution.
The Board of Directors also has authorization to issue stock options
("Non-Plan Options") to employees or consultants for services performed.
F-16
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
9. Stockholders' Equity -- (Continued)
The following is a summary of activity relating to stock options.
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Option Available Remaining
Price Per Out- Exer- for Contractual
Share standing cisable Grant Life
-------------- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
1991 Plan
June 30, 1995 ............... $ 1.71(1) 688,000 588,000 12,000 5 years
Became exercisable .......... 100,000
--------- ------- ------ ----------
June 30, 1996 ............... $ 1.71(1) 688,000 688,000 12,000 4 years
Expired in 1997 ............. $ 1.69 (26,000) (26,000) 26,000
--------- --------- ------- ------ ----------
June 30, 1997 ............... $ 1.71(1) 662,000 662,000 38,000 3 years
========= ========= ======= ====== ==========
1995 Plan
June 30, 1995 ............... $ 2.28 400,000 1,100,000 5 years
Granted during 1996 ......... 2.25 310,000(3) 10,000 (310,000)
Became exercisable .......... 400,000
--------- ------- --------- ----------
June 30, 1996 ............... $ 2.26 710,000 410,000 790,000 4.5 years
Granted during 1997 ......... 2.06 (4) 675,000 675,000 (675,000)
Became exercisable .......... 2.28 75,000
---------- --------- ------- --------- ----------
June 30, 1997 ............... $ 2.10(4) 1,385,000 1,160,000 115,000(5) 4 years
========== =========== ========= ========= ==========
Non-Plan Options
June 30, 1995 ............... $ 1.85 745,000(2) 645,000 4 years
Granted during 1996 ......... 2.25 315,000(3)
---------- ----------- --------- --------- ----------
June 30, 1996 ............... $ 1.83(1) 1,060,000 645,000 3.5 years
Became exercisable .......... 2.25 125,000
Granted during 1997 ......... 1.91 1,225,000 1,225,000
---------- ----------- --------- --------- ----------
June 30, 1997 ............... $ 1.84(4) 2,285,000 1,995,000 4 years
========== =========== ========= ========= ==========
</TABLE>
- ------------
(1) During fiscal 1995, the Board of Directors authorized a reduction in the
exercise price. The ending option price per share reflects the reduced
exercise price. During fiscal 1995, approximately 1.1 million options to
purchase common stock were repriced to $1.69.
(2) Options outstanding reflect the effect of certain antidilution provisions.
F-17
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
9. Stockholders' Equity -- (Continued)
(3) Options vest over four years with the exception of 10,000 immediately
vesting 1995 Plan options.
(4) In December 1996, 1,490,000 options granted subsequent to June 1995 were
repriced to $2.06 per share.
(5) During the period July 1, 1997 to September 30, 1997, the Company granted
options to acquire 98,000 shares of common stock under the 1995 Plan.
In addition to certain stock options and warrants granted to employees,
the Company also issued a total of 925,000 options and warrants to various
consultants and a financial institution relating to various consulting
services, the acquisitions of Weatherly and PlastiChain, and the new bank
agreement entered into during August 1996. The fair value of such options and
warrants was estimated at approximately $1,079,000. The fair value of such
options and warrants has been expensed except for the fair value related to
acquisitions and the bank financing for which these amounts are being amortized
over the life of the bank financing agreement and the excess of cost of net
assets acquired.
(d) Unit Purchase Options
In October 1994, the Company granted six unit purchase options (UPOs),
each consisting of 43,860 shares of the Company's common stock and Class B
Warrants to purchase 43,860 shares of common stock at an exercise price of
$2.28. These UPOs, which expire on August 31, 1999, have a nominal exercise
price. Three of the UPOs were granted to an officer of the Company for his
personal guarantees in connection with the Easy Gardener acquisition. Three
were granted to an outside consultant for its services in connection with
financing obtained for the Easy Gardener acquisition. The six UPOs issued with
the nominal exercise price were valued at $400,000 and included in deferred
financing costs. Concurrently, the Company also granted six UPOs, consisting of
the same components, each with a current exercise price of approximately
$75,000, three of which were granted to an officer of the Company. All these
transactions were done in lieu of cash compensation in consideration for
certain financial consulting and other services and for the personal guarantee
and other collateral provided in connection with the Company's acquisition of
Easy Gardener, Inc., without which the Company's transaction with Easy
Gardener, Inc. would not have occurred. During 1997, one UPO and the related
warrants were exercised by the outside consultant. Proceeds to the Company were
approximately $175,000.
In connection with the Company's August 1994 Private Placement, the
placement agent and its designees were granted approximately 28 UPOs
exercisable at $100,000 each. Each UPO consists of 43,860 shares of common
stock and warrants to purchase 43,860 shares of common stock at $2.28 per
share. These warrants expire in August 1999, if the underlying UPO is not
exercised. If exercised, the warrants expire in May 2000. During 1997, 5 UPOs
were terminated in a cashless exercise and approximately 60,000 shares of
common stock was issued.
The total shares of common stock issuable upon exercise of the UPOs,
including the underlying warrants, would be approximately 3,500,000 and
3,000,000 shares at June 30, 1996 and 1997.
In December 1997, the Company repurchased 1,661,871 shares of common stock
underlying 16.8 UPO's and warrants to acquire 85,000 of common stock for
approximately $3,221,000.
F-18
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
9. Stockholders' Equity -- (Continued)
(e) Warrants
In connection with certain business transactions and stock offerings, the
Company has granted various warrants to purchase common stock. The following
schedule will summarize the activity.
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Warrant Remaining
Price Per Out- Exer- Contractual
Share standing(1) cisable Life
----------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
July 1, 1994 ....................................... $ 1.89 1,729,000 1,729,000 3.5 years
Warrants issued in connection with private placement 2.28 3,520,000 3,520,000
Warrants issued with convertible debenture ......... 2.28 914,000 914,000
Warrants issued .................................... 2.75 100,000 100,000
Warrants exercised ................................. 1.85 (30,000) (30,000)
------- --------- ---------
June 30, 1995 ...................................... 2.12 6,233,000 6,233,000 4.5 years
------- --------- --------- ------------
Increase for antidilution .......................... 2.28 153,000 153,000
Warrants exercised ................................. 2.24 (770,000) (770,000)
------- --------- ---------
June 30, 1996 ...................................... 2.14 5,616,000 5,616,000 3.5 years
Warrants issued .................................... 2.45 525,000 525,000
Warrants exercised ................................. 2.15 (2,380,000) (2,380,000)
Expired ............................................ 6.00 (52,000) (52,000)
------- ---------- ----------
June 30, 1997 ...................................... $ 2.18 3,709,000(2) 3,709,000(2) 3 years
======= ============ ============ ============
</TABLE>
- ------------
(1) The warrants contain anti-dilution provisions which could effect the number
of shares of common issuable stock upon the exercise of the warrants as
well as the per share warrant prices. Additionally, these warrants contain
certain redemption provisions.
(2) During the period July 1, to December 31, 1997, 1,343,000 warrants were
exercised.
(f) Common Stock Reserved
At June 30, 1997, approximately 12,700,000 shares of common stock have
been reserved for issuance upon the exercise of warrants, options and UPOs.
(g) Stock Based Compensation
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for the plan. Under APB
Opinion No. 25, because the exercise price of the Company stock options equals
or exceeds the market price of the underlying stock on the date of grant, no
compensation cost is recognized.
FASB Statement No. 123, Accounting for Stock-Based Compensation, requires
the Company to provide pro forma information regarding net loss as if
compensation costs for the Company's stock options and warrants had been
determined in accordance with the fair value based method prescribed in FASB
Statement No. 123. The Company estimates the fair value of each stock option
and warrant at the grant date by using a modified Black-Scholes pricing model
with the following weighted-average assumptions used for grants in 1996 and
1997, respectively: no dividend yield for any year; expected volatility of
approximately 30% in both years; risk-free interest rates of 6.65% and 6.6%;
and expected lives of approximately three to five years.
F-19
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
9. Stockholders' Equity -- (Continued)
Under the accounting provisions of FASB Statement No. 123, the Company net
income and net income per common share would have been decreased to the pro
forma amounts indicated below:
Years ended June 30,
-----------------------------------
1996 1997
---------------- ----------------
Net Income
As reported ................... $ 2,524,000 $ 3,183,000
Pro forma ..................... 2,392,000 1,617,000
Per share as reported ......... 0.25 0.20
Pro forma ..................... 0.23 0.12
============= =============
The above pro forma information includes only the effects of 1996 and 1997
grants. Because options potentially vest over several years and additional
awards are made each year, the results shown above may not be representative of
the effects on net earnings in future years.
10. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A valuation allowance is
established for deferred income tax assets when realization is not deemed more
likely than not. Deferred tax assets (liabilities) consist principally of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
--------------------------------- -------------
1996 1997 1997
--------------- --------------- -------------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets
Net operating loss carryforwards ............................... $ 1,384,000 $ 555,000 $1,212,000
Accounts receivable allowance and other ........................ 97,000 58,000 169,000
----------- ----------- ----------
Total deferred tax asset ....................................... 1,481,000 613,000 1,381,000
Less valuation allowance ....................................... (148,000) (165,000) (302,000)
----------- ----------- ----------
Net deferred tax asset ......................................... $ 1,333,000 $ 448,000 $1,079,000
=========== =========== ==========
Deferred tax liability
Depreciation and amortization in excess of book amount ......... $ (328,000) $ (547,000) $ (650,000)
=========== =========== ==========
</TABLE>
At June 30, 1997, the Company had approximately $1,025,000 of net
operating loss (NOL) carryforwards available to reduce future Federal taxable
income. These losses are available through 2011. California allows an NOL
carryforward of 50% of a company's California taxable loss. The carryforward
for California purposes, after the 50% reduction, was approximately $2,217,000
at June 30, 1997 and expires through 2001. Use of the Company's NOLs could be
limited in the future as a result of issuance or exercise of stock options and
warrants or sale or issuance of stock. The Company files its tax returns on a
calendar year basis. Because of the seasonal nature of the Company's
operations, the different reporting periods for book and tax purposes may
affect the amount of taxes that will ultimately be payable or deferred.
At June 30, 1996, June 30, 1997 and December 31, 1997, the Company
established a $148,000, $165,000 and $302,000 valuation allowance for the
benefits pertaining to California NOLs which are not estimated to be realizable
prior to their expiration. The Company believes that it is more likely than not
that the remaining deferred tax assets will be realized through future taxable
earnings or alternative tax strategies.
F-20
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
10. Income Taxes -- (Continued)
The income tax (provision) benefit consists of:
June 30,
--------------------------------------------------
1995 1996 1997
-------------- ------------- -----------------
Current
Federal ......... $ -- $ -- $ (283,000)
State ........... (38,000) (290,000) (280,000)
---------- ---------- -------------
(38,000) (290,000) (563,000)
---------- ---------- -------------
Deferred
Federal ......... -- 1,013,000 (2,129,000)
State ........... -- (8,000) (56,000)
---------- ---------- -------------
-- 1,005,000 (2,185,000)
---------- ---------- -------------
$ (38,000) $ 715,000 $ (2,748,000)
========== ========== =============
The 1997 income tax expense consists of $3,200,000 expense from continuing
operations reduced by $452,000 benefit associated with the extraordinary
expense.
The following is a reconciliation between the Statutory Federal income tax
rate and the Company's effective tax rate for continuing operations:
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Income tax (provision) computed at Federal Statutory rate .......... (34.0)% (34.0)% (34.0)%
State taxes, net of Federal tax benefits ........................... ( 2.4) (16.5) ( 4.6)
Nondeductible amortization and other ............................... ( 3.6) ( 4.1) ( 4.5)
Changes in valuation allowance on deferred tax asset ............... (37.6) 94.1 ( 0.2)
----- ----- -----
(Provision) benefit for income taxes ............................... ( 2.4)% 39.5% (43.3)%
===== ===== =====
</TABLE>
The income tax benefit for the six months ended December 31, 1996 and 1997
is computed based upon the Company's estimated effective tax rate for the
respective fiscal year.
11. Concentration of Credit Risk and Significant Relationships
Trade accounts receivable are due primarily from numerous customers
located in many geographic regions throughout the United States. The Company
performs ongoing credit evaluations of its customers' financial conditions and
establishes an allowance for doubtful accounts based upon the credit risk of
specific customers, historical trends and other information. The Company does
not require collateral from its customers.
During the years ended June 30, 1996 and 1997, sales to two Easy Gardener
customers accounted for approximately 36% (27% and 9%) and 36% (26% and 10%) of
consolidated net sales. During the six months ended December 31, 1996 and 1997,
sales to two Easy Gardener customers accounted for approximately 34% (25% and
9%) and 35% (26% and 9%) of consolidated net sales. Included in accounts
receivable at June 30, 1996, June 30, 1997 and December 31, 1997 is $1,440,000,
$2,320,000 and $455,000 due from the largest customer.
During the year ended June 30, 1995, sales to two Easy Gardener customers
accounted for approximately 24% and 9% of consolidated net sales.
Substantially all of Easy Gardener's raw material purchases for
Weedblock(R) inventory, representing approximately 66%, 50% and 22% of the
Company's consolidated raw material purchases during the years ended June 30,
1995, 1996 and 1997, are from one vendor.
F-21
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
11. Concentration of Credit Risk and Significant Relationships -- (Continued)
Management believes that other suppliers could provide a similar product
on comparable terms. A change in suppliers, however, could cause delays and a
possible loss of sales, which would affect operating results adversely.
Included in accounts payable at June 30, 1996, June 30, 1997 and December 31,
1997 is $139,000, $349,000 and $520,000 due to this vendor.
12. Supplemental Cash Flow Information
Cash paid for:
<TABLE>
<CAPTION>
Years ended Six months ended
June 30, December 31,
------------------------------------------------ ----------------------------
1995 1996 1997 1996 1997
-------------- -------------- -------------- ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash paid during the period
for:
Interest, including deferred
financing costs and
extraordinary expense ......... $ 1,528,000 $ 1,296,000 $ 5,816,000 $3,251,000 $1,358,000
=========== =========== =========== ========== ==========
Taxes .......................... $ 10,000 $ 96,000 $ 131,000 $ 7,000 $ 30,000
=========== =========== =========== ========== ==========
</TABLE>
Supplemental Schedule of Non-cash Investing and Financing Activities:
The Company purchased all of the assets of Easy Gardener, Inc. for
$21,283,000 in September 1994.
Fair value of assets acquired ......... $ 28,526,000
Cash paid for assets acquired ......... (14,424,000)
Promissory notes ...................... (12,783,000)
------------
Liabilities assumed ................... $ 1,319,000
============
During 1995, the Company entered into agreements to issue approximately
417,000 shares of common stock, valued at approximately $683,000 as payment of
certain accounts payable.
During 1995, $2,000,000 of convertible debentures and related accrued
interest was converted into 914,396 shares of common stock and 914,396 Class B
warrants.
During 1995, deferred financing costs of approximately $400,000 was paid
for by the issuance of 6 UPOs with a nominal exercise price.
During 1996, the Company exchanged assets held for sale with a book value
of approximately $1.4 million for future trade credits.
During 1997, the Company issued warrants and options for various
consulting services which were valued at approximately $1,079,000.
13. Extraordinary Expense
As a result of the refinancing of all of the Company's outstanding debt in
August 1996 (See Note 6), the entire balance of deferred finance costs at June
30, 1996, net of accumulated amortization, plus certain prepayment penalties
totaling approximately $455,000, was written off as an extraordinary expense
during the year ended June 30, 1997.
F-22
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(Information for December 31, 1996 and 1997 is Unaudited)
14. Earnings per Share
The following is a reconciliation of the weighted average number of shares
used to compute basic and dilutive earnings per share before extraordinary
expense:
<TABLE>
<CAPTION>
Six months ended
Years ended June 30, December 31,
------------------------------------------ ----------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Basic earnings per common share............ 8,376,000 10,206,000 13,695,000 13,437,000 15,552,000
Options and warrants ...................... 1,749,000 3,155,000 2,373,000
--------- ---------- ---------- ---------- ----------
Diluted earning per common
share .................................... 10,125,000 13,361,000 16,068,000 13,437,000 15,552,000
---------- ---------- ---------- ---------- ----------
</TABLE>
Options and warrants to purchase 11,274,000 and 8,672,000 shares were
outstanding during the six months ended December 31, 1996 and 1997 but were not
included in the computation of diluted loss per common share because the effect
would be antidilutive.
15. Subsequent Events
Subsequent to June 30, 1997, a $350,000 liability was converted into
154,000 shares of common stock.
Subsequent to June 30, 1997, the Company granted stock options to acquire
565,000 and 98,000 shares of common stock under the 1997 and 1995 stock option
plans.
During July 1997, 453,000 warrants were exercised generating $1,033,000 in
cash proceeds to the Company.
The Company is involved in a lawsuit in which it has claimed a competitor
has infringed on a product trademark. The competitor has filed a counter-claim
in September 1997 seeking unspecified damages. The Company does not believe the
outcome of this matter will have a material impact on future operations.
F-23
<PAGE>
Report of Independent Certified Public Accountants
To the Shareholders of
Weatherly Consumer Products Group, Inc.,
and Subsidiaries
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Weatherly Consumer Products Group, Inc.
(a Delaware Corporation) and Subsidiaries for the year ended September 30, 1995
and the period October 1, 1995 through August 9, 1996, the date of the sale of
the Company (Note 1). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note 1 to the consolidated financial statements, all
outstanding capital stock of the Company was acquired by Easy Gardener
Acquisition Corp., a wholly-owned subsidiary of U.S. House & Garden Inc., on
August 9, 1996.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Weatherly Consumer Products Group, Inc. and Subsidiaries for the year
ended September 30, 1995 and the period October 1, 1995 through August 9, 1996
in conformity with generally accepted accounting principles.
BDO Seidman, LLP
San Francisco, California,
October 20, 1997
F-24
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Consolidated Statements of Operations
For the Year Ended September 30, 1995
and the Period October 1, 1995 through August 9, 1996 (Note 1)
<TABLE>
<CAPTION>
1995 1996
-------------- ----------------
<S> <C> <C>
NET SALES (Note 7) ...................................... $18,532,297 $ 18,184,995
COST OF GOODS SOLD ...................................... 8,872,354 7,677,707
----------- ------------
Gross profit ...................................... 9,659,943 10,507,288
----------- ------------
OPERATING EXPENSES (Note 1):
Selling and marketing ................................ 4,960,793 5,251,782
Administrative ....................................... 2,552,570 2,414,193
Redemption of employment contracts ................... 6,000,000
----------- ------------
7,513,363 13,665,975
----------- ------------
Operating income (loss) ........................... 2,146,580 (3,158,687)
----------- ------------
OTHER EXPENSES:
Interest ............................................. 1,361,987 1,546,311
Other, net ........................................... (67,636) 8,575
----------- ------------
1,294,351 1,554,886
----------- ------------
Income (loss) before (provision) benefit for
income taxes and extraordinary item .............. 852,229 (4,713,573)
(PROVISION) BENEFIT FOR INCOME TAXES (Notes 1
and 3) ................................................. (400,033) 475,535
----------- ------------
Income (loss) before extraordinary item ........... 452,196 (4,238,038)
EXTRAORDINARY ITEM -- Write-off of deferred
financing costs and debt prepayment charges, net of
related income tax benefit of $57,815 (Note 1).......... (520,334)
----------- ------------
Net income (loss) ................................. $ 452,196 $ (4,758,372)
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
F-25
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Year Ended September 30, 1995 and
the Period October 1, 1995 through August 9, 1996 (Note 1)
<TABLE>
<CAPTION>
Preferred Common
Stock Stock Warrants
--------------- -------------- -------------
<S> <C> <C> <C>
BALANCE,
September 30, 1994 ................... $ 9,983,662 $ (458,850) $ 350,000
Net income ...........................
Conversion or retirement of Common
and Preferred Stock and Warrants
(Note 8) ............................ (9,983,662) 458,950
------------- ---------- ----------
BALANCE,
September 30, 1995 .................... 100 350,000
Net loss .............................
Accretion of warrants (Note 2) ....... 810,442
------------- ---------- ----------
BALANCE,
August 9, 1996 ....................... $ $ 100 $1,160,442
============= ========== ==========
<CAPTION>
Additional Accumulated
Paid-In-Capital Deficit Total
----------------- ----------------- ----------------
<S> <C> <C> <C>
BALANCE,
September 30, 1994 ................... $ $ (11,809,219) $ (1,934,407)
Net income ........................... 452,196 452,196
Conversion or retirement of Common
and Preferred Stock and Warrants
(Note 8) ............................ 6,324,712 (3,200,000)
---------- ------------- ------------
BALANCE,
September 30, 1995 .................... 6,324,712 (11,357,023) (4,682,211)
Net loss ............................. (4,758,372) (4,758,372)
Accretion of warrants (Note 2) ....... (810,442)
---------- ------------- ------------
BALANCE,
August 9, 1996 ....................... $6,324,712 $ (16,925,837) $ (9,440,583)
========== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
Weatherly Consumer Products Group, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
For the Year Ended September 30, 1995
and the Period October 1, 1995 through August 9, 1996 (Note 1)
<TABLE>
<CAPTION>
1995 1996
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................... $ 452,196 $ (4,758,372)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities-
Depreciation and amortization ........................................ 1,018,594 977,986
Write-off of deferred financing costs and prepayment charges ......... 578,149
Reserves for certain property and other assets ....................... 247,661
(Gain) on disposition of assets ...................................... (63,512)
Future tax benefit ................................................... 10,828 209,902
Income tax receivable ................................................ (1,082,407)
Redemption of employment contracts ................................... 6,000,000
Changes in assets and liabilities-
Accounts receivable .................................................. 67,931 (529,880)
Inventory ............................................................ (714,412) 1,249,718
Prepaid expenses and other ........................................... 37,203 (103,273)
Accounts payable and accrued liabilities ............................. (161,761) (211,949)
------------ ------------
Net cash provided by operating activities ........................... 647,067 2,577,535
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on debt ..................................................... 3,308,801 4,131,547
Payments on debt ....................................................... (4,692,601) (4,978,047)
Proceeds from sale of land and building ................................ 74,492
------------ ------------
Net cash used in financing activities ............................... (1,309,308) (846,500)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in other assets ............................................... (53,746) (4,348)
Capital expenditures, net .............................................. (359,134) (327,751)
------------ ------------
Net cash used in investing activities ................................... (412,880) (332,099)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................................ (1,075,121) 1,398,936
CASH AND CASH EQUIVALENTS, beginning of period .......................... 2,128,789 1,053,668
------------ ------------
CASH AND CASH EQUIVALENTS, end of period ................................ $ 1,053,668 $ 2,452,604
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest ............................................... $ 1,295,209 $ 1,039,261
============ ============
Cash paid for income taxes ........................................... $ 192,532 $ 334,000
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of preferred stock to long-term stockholder debt
(Note 8) ............................................................ $ 3,200,000 $
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements
(1) Sale of the Company
Weatherly Consumer Products Group, Inc. (WCPG) and Subsidiaries (the
Company) is engaged in the manufacture and sale of fertilizer, watering,
insecticide and garden netting products.
On August 9, 1996, all outstanding capital stock of the Company was
acquired by Easy Gardener Acquisition Corp. (EGAC), a wholly-owned subsidiary
of U.S. Home & Garden Inc. for approximately $8 million dollars of net cash
consideration and approximately one million shares of U.S. Home & Garden Inc.
stock valued at $3 per share. Prior to and/or in conjunction with the sale;
o Certain of the officer and employee contracts were redeemed for
approximately $6 million. This expense and related obligation has been
included as a component of administrative expenses in the accompanying
1996 consolidated financial statements.
o The holders of the Company's warrants for Class B common shares agreed to
have their warrants redeemed for $1,160,442. Accordingly, the accretion of
the warrants was accelerated in the accompanying 1996 consolidated
financial statements to reflect the warrants at their respective
redemption price.
o Severance agreements were provided to certain Company employees.
Severance of approximately $450,000 was accrued or paid as of August 9,
1996 and is included in selling and marketing (approximately $395,000) and
administrative expenses ($55,000) in the accompanying 1996 consolidated
financial statements.
o Immediately subsequent to the sale of the Company's stock, the
preexisting debt obligations were paid off. Accordingly, the accretion of
the Company's bank loan with detachable warrants was accelerated,
unamortized deferred financing costs were written off and related
prepayment penalties were accrued. The expense associated with the
accretion of the bank loan with detachable warrants (approximately
$271,000) is included as a component of the 1996 interest expense, whereas
the costs associated with the prepayment of the debt obligations
(approximately $578,000) are reflected, net of the related tax benefit, in
the accompanying 1996 consolidated financial statements as an
extraordinary item.
o Immediately prior to the sale, specific assets were transferred to
certain employees and shareholders. The carrying amount of the net assets
transferred (approximately $248,000) is included in administrative
expenses in the accompanying 1996 consolidated financial statements.
o The selling shareholders of the Company entered into an agreement to
indemnify EGAC against any tax liabilities relating to periods prior to
the sale. If any such tax liabilities arise, EGAC would be required to
make the payments to the appropriate tax authority and, in turn, seek
reimbursement from the selling shareholders under their indemnification
agreement. The Internal Revenue Service (IRS) is currently examining
certain tax returns of the Company covering periods prior to the sale. The
Company believes that any payment it may be required to make will not have
a material adverse effect on the accompanying consolidated financial
statements.
(2) Summary of Accounting Policies
(a) Principles of Consolidation--The consolidated financial statements
include the accounts of WCPG and its subsidiaries, Weatherly Consumer
Products, Inc. and Ross Daniels, Inc. (WCP and RDI). All material
intercompany transactions have been eliminated.
(b) Translation of Foreign Currencies--Accounts of the United Kingdom
branch are stated in United States dollars. Currency gains and losses
have been reflected in the statements of operations. Translation
adjustments are not material to the consolidated financial statements
taken as a whole.
(c) Cash and Cash Equivalents--Cash and cash equivalents include operating
cash accounts and money market funds.
F-28
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(2) Summary of Accounting Policies -- (Continued)
(d) Inventories--Inventories are stated at the lower of cost or market.
Cost is determined using the first-in, first-out method.
(e) Equipment and Leasehold Improvements--Equipment and leasehold
improvements are depreciated over their estimated useful lives using the
straight-line method. Major expenditures for renewals and betterments
are charged to the property accounts while repairs and maintenance,
which do not improve or extend the life of the assets, are charged to
operations.
The estimated useful lives of the various classes of assets are as
follows:
Years
--------
Machinery and equipment .......... 3 to 10
Furniture and vehicles ........... 3 to 10
Leasehold improvements ........... 3 to 18
(f) Research and Development--Costs incurred in connection with the
development of new products and changes to existing products are charged
to operations as incurred. Research and development expense for the year
ended September 30, 1995 and the period October 1, 1995 through August
9, 1996 approximated $106,000 and $113,000, respectively.
(g) Other Assets--Patents, trademarks, product packaging costs and goodwill
are amortized over their estimated lives using the straight-line method.
The estimated lives of these assets are summarized as follows:
Years
-------
Patents .............................. 11
Trademarks ........................... 25
Goodwill ............................. 25
Product packaging and other .......... 3 to 8
The Company capitalizes significant expenditures for product packaging
development and design work.
(h) Warrants for Common Stock--Detachable warrants to purchase 15% of
WCPG's common stock were issued to Nations Credit Commerical Corporation
(Nations) as part of the financing agreement with Nations and were
redeemed in conjunction with the sale of Company stock (Note l). Prior
to 1996, the warrants were exercisable through July 30, 2003 and subject
to redemption at the option of Nations on or after July 30, 1997 at a
redemption price equal to the greater of the appraised value of the
Company, liquidation value, consolidated net worth, as defined, or a
multiple of earnings, as defined.
The original value assigned to the warrants was $350,000 and included in
stockholders' equity in the accompanying consolidated financial
statements. The redemption price was estimated annually and adjustments
to accrete the warrants to the estimated redemption price were recorded,
as applicable, with a corresponding charge to retained earnings. No
accretion was recorded in fiscal 1995. In connection with the sale of the
Company, there was a charge of $810,442 to accumulated deficit to accrete
the value of the warrants to the agreed-upon redemption price.
(i) Advertising--The Company expenses the costs of advertising as incurred.
Advertising expense for the year ended September 30, 1995 and the period
October 1, 1995 through August 9, 1996 approximated $782,000 and
$732,000, respectively.
(j) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts of assets and
liabilities, disclosure of contingent assets and liabilities and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-29
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(2) Summary of Accounting Policies -- (Continued)
(k) Reclassifications--Certain reclassifications have been made to the 1995
consolidated financial statements to conform with the 1996 presentation.
(l) New Accounting Pronouncements--In 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed of (SFAS 121), effective for fiscal
years beginning after December 15, 1995. The new standard requires that
long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. The Company does not expect that the adoption of SFAS 121
will have a material impact on the consolidated financial statements.
(m) Revenue Recognition--Sales are recorded as products are shipped to
customers.
(3) Income Taxes
Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109). Under SFAS 109, deferred tax assets or liabilities are
computed based on the difference between the financial statement basis and
income tax basis of assets and liabilities using the enacted marginal tax rate.
Deferred income tax expenses or credits are based on the changes in the asset
or liability from period to period.
The provision (credit) for income taxes includes the following:
<TABLE>
<CAPTION>
1995 1996
------------ ---------------
<S> <C> <C>
Current payable (receivable) ......................... $ 493,801 $ (685,437)
Benefit of net operating loss carryforwards .......... (104,596) (959,709)
Deferred ............................................. 10,828 (68,291)
Change in valuation allowance ........................ 1,237,902
---------- -----------
400,033 (475,535)
Tax benefit of extraordinary item .................... (57,815)
---------- -----------
$ 400,033 $ (533,350)
========== ===========
</TABLE>
The following is a reconciliation between the statutory federal income tax
rate and the provision (benefit) for income taxes:
<TABLE>
<CAPTION>
1995 1996
---------------------------- -------------------------------
Amount Rate Amount Rate
------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Computed provision (benefit) for federal income
taxes at the statutory rate ...................... $ 289,757 34.0% $ (1,602,614) (34.0%)
State and local income taxes, net of federal income
taxes ............................................ 47,432 5.6% (263,960) ( 5.6%)
Changes in valuation allowance .................... (104,596) (12.3%) 1,237,902 26.4%
Nondeductible amortization and other, net ......... 167,440 19.6% 153,137 3.2%
---------- ----- ------------ -----
$ 400,033 46.9% $ (475,535) (10.0%)
========== ===== ============ =====
</TABLE>
F-30
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(3) Income Taxes -- (Continued)
At September 30, 1995 and August 9, 1996, the net future tax benefit
consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- ---------------
<S> <C> <C>
Advertising and rebate accruals ................................. $ 81,137 $ 65,808
Warranty reserves ............................................... 24,543 16,486
Accounts receivable reserves .................................... 37,367 6,554
Inventory costs ................................................. 29,873 23,586
Other ........................................................... 36,982 63,798
Benefit of net operating loss and credit carryforwards .......... 1,061,670
-------- ------------
209,902 1,237,902
Valuation allowance ............................................. (1,237,902)
-------- ------------
$209,902 $
-------- ------------
</TABLE>
The valuation allowance is required due to the uncertainty of realizing
the net deferred tax assets through future operations.
As of August 9, 1996, the Company has accumulated approximately $2,800,000
of tax net operating losses and approximately $149,000 of tax credits,
substantially all of which expire in 2011, which can be carried forward and
used to reduce future taxable income.
(4) Debt Obligations
The Company's long-term debt obligations outstanding during 1995 and 1996
principally consisted of bank loans with interest at a commercial paper rate
plus 4.5% (10.005% at August 9, 1996) and a floating rate equal to the greater
of 11% or the commercial paper rate plus 6% (11.505% at August 9, 1996), and
subordinated notes due to a shareholder with interest at the prime rate (8.25%
at August 9, 1996). All of these long-term obligations were paid in full on
August 10, 1996 in connection with the sale of the Company (Note 1).
The Company had a $20 million credit arrangement with Nations, which was
secured by substantially all the assets of the Company. The working capital
commitment of $7.5 million included within the arrangement permitted borrowings
based on a percentage of eligible receivables and inventory, as defined. There
were no borrowings outstanding on the working capital loan at September 30,
1995 or August 9, 1996.
The terms of the Nations agreement stipulated, among others, that the
Company maintain certain financial ratios; limit capital expenditures and
retirements; limit lease and debt commitments; may not merge, consolidate,
acquire or sell operating assets; limit compensation to key employees.
The notes payable to shareholders were subordinated to all bank debt.
Accordingly, these notes stipulated that if payments of annual interest to the
shareholders would violate the terms of the Nations agreement, the interest
payments would be deferred until the next annual interest payment date.
(5) Royalty Commitments
WCP has exclusive licenses under patent applications to make, lease, or
sell certain of its products. Royalty expense under the agreements is based on
a percentage of net sales and amounted to approximately $121,000 and $150,000
for the year ended September 30, 1995 and the period October 1, 1995 through
August 9, 1996, respectively.
(6) Commitment
WCP conducts a portion of its operations in leased facilities and leases
equipment under noncancelable operating leases. The total amount charged to
rental expense was approximately $343,000 and $298,000 in 1995 and 1996,
respectively. The minimum scheduled lease payments for the noncancelable
operating leases as of August 9, 1996 are as follows:
F-31
<PAGE>
Weatherly Consumer Products Group, Inc.
And Subsidiaries
Notes to Consolidated Financial Statements -- (Continued)
(6) Commitment -- (Continued)
1997 ........... $325,000
1998 ........... 262,000
1999 ........... 158,000
--------
$745,000
========
(7) Significant Customers and Concentration of Credit Risk
Trade accounts receivable are due primarily from numerous customers
located in many geographic regions throughout the United States. The Company
performs ongoing credit evaluations of its customers' financial conditions and
establishes an allowance for doubtful accounts based upon the credit risk of
specific customers, historical trends and other information. The Company does
not require collateral from its customers.
Approximately 14% and 10% of consolidated gross sales in 1995 were with
two customers. These same two customers represented approximately 15% and 12%
of consolidated gross sales in 1996.
(8) Reorganization
In June, 1995, the Board of Directors approved an amendment of the
Certificate of Incorporation which converted all common and preferred shares
outstanding, except for the 12% Preferred "A" stock, into a new class of common
stock (Class A common stock). The 12% Preferred "A" stock, owned by one
shareholder, was converted into a $3,200,000 subordinated note. In addition,
previously accrued dividends owed by WCP to the shareholders were canceled,
preexisting stock option plans were terminated, certain stock was effectively
canceled for no consideration and consideration was provided to certain
shareholders for certain waivers and releases.
(9) Related Party Activities
During 1995 and 1996, the Company had outstanding subordinated notes and
accrued interest due to a stockholder. This related party debt was paid in full
on August 10, 1996 in connection with the sale of the Company (Notes 1 and 4).
In conjunction with the acquisition of the Company by WCPG, the prior sole
shareholder (and a current shareholder of WCPG) entered into a consulting
agreement with the Company which provided for annual consulting fees of
$125,000. This agreement was terminated January 1, 1995. Consulting fees
expensed in 1995 approximated $31,000.
In July 1993, the Company entered into a two year agreement, subject to
renewals, to sublease office space at fair market rental with its prior sole
stockholder. Rentals, as per the agreement, approximated $4,500 in 1995. The
lease agreement was amended and renewed during 1995 and provides for annual
rentals of $1 per year.
In 1993, the Company entered into a fully insured two year renewable
exclusive distributor agreement with its prior sole stockholder whereby WCP
markets and distributes lawn and garden products owned or controlled by its
prior sole stockholder. The Company distributed products under this agreement
in 1995. Commencing October 1, 1995 this agreement expired and the products
were owned and controlled by WCP.
(10) Employee Benefit Plans
(a) Health Plan--The Company has a fully insured health benefit plan which
provides for hospitalization, surgical, major medical and other benefits
for eligible employees.
(b) 401(k) Plan--The Company has a 401(k) plan for the benefit of all
employees meeting certain minimum eligibility requirements. The Company
contributed approximately $45,000 and $43,000 to this plan in matching
contributions in 1995 and 1996, respectively.
F-32
<PAGE>
U.S. HOME & GARDEN, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On August 9, 1996, Easy Gardener Acquisition Corporation, a wholly owned
subsidiary of U.S. Home & Garden, acquired all of the outstanding stock of
Weatherly Consumer Products (Weatherly), a lawn and garden care company, for
1,000,000 shares of the Company's common stock (valued at $3 per share) and
$22,937,321, less an amount required to discharge certain outstanding
indebtedness of the acquired company, and adjusted dollar for dollar based upon
the ultimate value of the acquired company's net current assets in excess of $2
million.
The acquisition was accounted for as a purchase, with the assets acquired
and liabilities assumed recorded at fair values. The results of Weatherly's
operations have been included in the Company's consolidated financial
statements from the date of acquisition.
The accompanying condensed pro forma consolidated statement of operations
illustrate the effect of the acquisition on the results of operations for the
year ended June 30, 1997 as if the acquisition had taken place on July 1, 1996.
The operating results for Weatherly as reflected on the pro forma statement of
operations represents the period ended July 1, 1996 to August 9, 1996.
The pro forma condensed consolidated results of operations may not be
indicative of the actual result which would have been obtained if the
acquisition had occurred on July 1, 1996.
F-33
<PAGE>
U.S. HOME & GARDEN, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Weatherly
Weatherly Adjustments Pro Forma
----------- ------------------- -----------
<S> <C> <C> <C>
Net sales ............................... $ 742 $ 742
Cost of sales ........................... 544 544
-------- -------
Gross profit ............................ 198 198
Operating Expenses:
Selling and shipping .................. 825 (395) (4) 430
(248) (4)
Administrative and general ............ 6,649 (6,055) (4) 346
-------- ------ -------
Income from operations .................. (7,276) 6,698 (578)
Interest expense, net ................... 463 (271) (4) 192
-------- ------ -------
Income (loss) before income taxes and
extraordinary item ..................... (7,739) 6,969 (770)
Income tax benefit (expense) ............ 886 (578)(5) 308
-------- ------ -------
Income before extraordinary items ....... (6,853) 6,391 (462)
Extraordinary item ...................... (520) (520)
-------- -------
Net income (loss) ....................... $ (7,373) $ 6,391 $ (982)
======== =========== =======
Diluted earnings per share:
(Income) loss per common share
Income before extraordinary item .......
Extraordinary item ......................
Net Income ..............................
Weighted average shares outstanding .....
<CAPTION>
U.S. Home & Consolidated
Garden Adjustments Pro Forma
--------------------- ------------- ----------------------
<S> <C> <C> <C>
Net sales ............................... 52,046 $ 52,788
Cost of sales ........................... 23,649 24,193
------ --------------
Gross profit ............................ 28,397 28,595
Operating Expenses:
Selling and shipping .................. 11,232 11,662
Administrative and general ............ 6,513 80 (1) 6,939
------ -- --------------
Income from operations .................. 10,652 (80) 9,994
Interest expense, net ................... 3,262 (2) 3,454
------ --- --------------
Income (loss) before income taxes and
extraordinary item ..................... 7,390 (80) 6,540
Income tax benefit (expense) ............ (3,200) (2,892)
------ --------------
Income before extraordinary items ....... 4,190 (80) 3,648
Extraordinary item ...................... (1,007) (1,527)
------ --------------
Net income (loss) ....................... $ 3,183 (80) $ 2,121
============= === ==============
Diluted earnings per share:
(Income) loss per common share
Income before extraordinary item ....... $ 0.26 (3) $ 0.22 (3)
Extraordinary item ...................... ( 0.06)(3) (0.09)(3)
------------- --------------
Net Income .............................. $ 0.20 (3) $ 0.13 (3)
============= ==============
Weighted average shares outstanding ..... 16,068,000(3) 16,436,000 (3)
=============== ==============
</TABLE>
F-34
<PAGE>
U.S. HOME & GARDEN, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTE A--BASIS OF PRESENTATION
Reference is made to the introduction at page PF-1
NOTE B--PRO FORMA ADJUSTMENTS
The pro forma adjustments to the condensed consolidated statement of operations
are as follows:
(1) Amortization of excess of cost over fair value of net assets acquired over
30 years.
(2) No adjustment to interest expense since the lower interest rate offsets the
increase in principal loan balances.
(3) Weighted average shares have been increased by 368,000 shares to reflect
the exercise of approximately 2,385,000 common stock warrants and the
issuance of 1,000,000 shares of common stock to the Weatherly shareholders
as if they had occurred at the beginning of the year. Approximately
2,373,000 additional shares deemed outstanding in connection with
potential dilution securities. See Note 14 of the June 30, 1997 audited
consolidated financial statements.
(4) To eliminate certain nonrecurring expenses including $6,000,000 buy-out of
employment agreements, severance payments of $450,000, $248,000 salary
expense relating to distribution of assets and nonrecurring interest
expense of $271,000 associated with prior stockholders sale of the
business.
(5) To adjust tax rate to U.S. Home and Garden's statutory tax rate.
F-35
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give
any information or to make representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, the Trust or any of
the underwriters. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy, any security other than the securities offered
by this Prospectus, or an offer to sell or a solicitation of an offer to buy to
any person in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making the offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information in this Prospectus is correct as of any time subsequent to the date
hereof.
--------------------------------------------
TABLE OF CONTENTS
Page
---------
Available Information ............................. 5
Prospectus Summary ................................ 6
Risk Factors ...................................... 17
Use of Proceeds ................................... 27
Accounting Treatment .............................. 27
Capitalization .................................... 29
Selected Consolidated Financial Data and
Other Information .............................. 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ..................................... 32
Business .......................................... 41
Management ........................................ 52
Principal Stockholders ............................ 58
Certain Transactions .............................. 59
Description of the Trust Preferred Securities...... 60
Description of Junior Subordinated
Debentures ..................................... 71
Book-Entry Issuance ............................... 80
Description of Guarantee .......................... 81
Expense Agreement ................................. 83
Relationship Among the Trust Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee ................... 83
Certain Federal Income Tax Consequences............ 85
ERISA Considerations .............................. 88
Underwriting ...................................... 89
Legal Matters ..................................... 90
Experts ........................................... 91
Index to Consolidated Financial Statements......... F-1
================================================================================
<PAGE>
================================================================================
2,200,000 Trust Preferred Securities
U.S. HOME
& GARDEN TRUST I
% Cumulative Trust
Preferred Securities
(Liquidation Amount $25 Per
Trust Preferred Security)
Fully and Unconditionally Guaranteed
By
U.S. HOME & GARDEN INC. [LOGO]
-----------------------------------
PROSPECTUS
-----------------------------------
EVEREN Securities, Inc.
Josephthal & Co. Inc.
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
SEC registration Fee .................... $ 18,658.75
NASD fee ................................
American Stock Exchange fees ............ 20,000.00
Trustees' fees and expenses .............
Legal fees and expenses ................. *
Accounting fees and expenses ............ 90,000.00
Printing and engraving expenses ......... 100,000.00
Miscellaneous expenses .................. $ *
-----------
Total ................................. $575,000.00
===========
- ------------
* To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may
affect a director's liability with respect to any of the following: (i)
breaches of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not made in good faith or which involve
intentional misconduct of knowing violations of law; (iii) liability for
dividends paid or stock repurchased or redeemed in violation of the Delaware
General Corporation law; or (iv) any transaction from which the director
derived an improper personal benefit. Section 102(b)(7) does not authorize any
limitation on the ability of the corporation or its stockholders to obtain
injunction relief, specific performance or other equitable relief against
directors.
The Company's Certificate of Incorporation and the Company's By-laws
provide that all persons who the Company is empowered to indemnify pursuant to
the provisions of Section 145 of the General Corporation law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect), shall be indemnified by the Company to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise.
The Company's Certificate of Incorporation also provides that no director
of the Company shall be personally liable to the Company or its stockholders
for any monetary damages for breaches of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing-violation of law, (iii) under
Section 174 of the General Corporation of Law of the State of Delaware, or (iv)
for any transaction from which the director derived an improper personal
benefit.
Insofar as indemnification for liabilities under the Act may be permitted
to directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
II-1
<PAGE>
Under the Trust Agreement, the Company will agree to indemnify each of the
Trustees of the Trust or any predecessor Trustee for the Trust, and to hold
each Trustee harmless against any loss, damage, claims, liability or incurred
without negligence or bad faith on its part, arising out of or connection with
the acceptance or administration of the Trust Agreement, the costs and expenses
of defending itself against any claim or in connection with the exercise or
performance of any of its powers or duties under the Trust Agreement.
The Company and the Trust have agreed to indemnify the Underwriters and
the Underwriters have agreed to indemnify the Trust and the Company for certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. Reference is made to the Underwriting Agreement filed as Exhibit 1.1
herewith.
Item 15. Recent Sales of Unregistered Securities.
Between October 8, 1994 and June 30, 1995 the Company issued to a total of
21 persons who were officers, directors and non-officer employees and to two
financial consultants stock options to purchase an aggregate of 694,500 shares
of its common stock. These options have an average exercise price of $ 2.06 per
share. During the fiscal year ended June 30, 1996 the Company issued to a total
of 7 of its directors and employees options to purchase an aggregate of 620,000
shares of its common stock. These options have an average exercise price of
$2.25 per share. During the fiscal year ended June 30, 1997 the Company issued
to a total of five of its officers, directors or employees, and seven
consultants and/or lending institutions options or warrants to purchase an
aggregate of 2,315,000 shares of its common stock. The options and warrants have
an average exercise price of $ 1.96 per share. Subsequent to June 30, 1997 the
Company has issued to a total of eight officers and directors, four consultants
and three employees options and warrants to purchase an aggregate of 988,000
shares of its common stock. These options have an average exercise price of
$3.13. The foregoing issuances were made in private transactions pursuant to the
exemptions from registration under the Securities Act of 1933 provided by
Section 4(2) of said act.
Item 16. Exhibits
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------- -------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended.**
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3(b) of the Company's Registration
Statement on Form S-1 (Registration No. 33-45428).
4.1 Form of Subordinated Indenture to be entered into between U.S. Home & Garden Inc. and
Wilmington Trust Company, as the Indenture Trustee.
4.2 Form of Officers' Certificate and Company Order.
4.3 Certificate of Trust of the Trust dated March 16, 1998.
4.4 Trust Agreement of the Trust dated as of March 16, 1998.
4.4.1 Form of Amended and Restated Trust Agreement of the Trust.
4.5 Form of Trust Preferred Securities Certificate of the Trust.
4.6 Form of Common Securities Certificate of the Trust.
4.7 Form of Guarantee Agreement.
4.8 Form of Agreement as to Expenses and Liabilities.
4.9 Form of Junior Subordinated Deferrable Interest Debenture of the Company.
4.10 Form of Unit Purchase Option granted to D.H. Blair & Co.***
4.11 Form of Public Warrant Agreement with respect to Class A Warrants.***
4.12 Warrant Agreement with respect to Class B Warrants, incorporated by reference to Exhibit 4(c) of
the Company's Registration Statement on Form S-3 (Registration No. 33-89800).
5.1 Opinion and Consent of Tenzer Greenblatt LLP*
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*
8.1 Opinion and Consent of Tenzer Greenblatt LLP, as counsel to U.S. Home & Garden Inc. as to
certain federal income tax matters.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.1 Voting Agreement among Joseph A. Owens, II, the Company, and Robert Kassel.+
9.2 Voting Agreement among Richard M. Grandy, the Company and Robert Kassel.+
10.1 Employment Agreement between the Company and Robert Kassel++
10.2 Employment Agreement between the Company and Richard Raleigh++
10.3 1991 Stock Option Plan, incorporated by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1 (Registration No. 33-45428).
10.4 1995 Stock Option Plan.**
10.5 Non-Employee Director Stock Option Plan.**
10.6 Asset Purchase Agreement dated as of June 18, 1994 among the Company, Easy Gardener Acqui-
sition Corp., Joseph A. Owens II, Richard M. Grandy and Easy Gardener, Inc.+
10.7 Employment Agreement of Richard Grandy.+++
10.8 Lease with respect to the Company's executive offices, incorporated by reference to Exhibit 10.14
of the Company's Form 10-KSB for the fiscal year ended June 30, 1992.
10.9 February 8, 1995 modification to lease with respect to the Company's executive offices.**
10.10 May 6, 1997 modification to lease with respect to the Company's executive offices.+++
10.11 Lease with respect to Weatherly's Warehouse Facilities in Paris, Kentucky+++
10.12 Form of Mergers and Acquisitions Agreement between the Company and D.H. Blair Investment
Banking Corp.***
10.13 Agreement dated as of April 16, 1996 between the Company and The Intrac Group.++
10.14 Credit Agreement among Easy Gardener Acquisition Corp., the Company, The Provident Bank,
as Administrative and Collateral Agent, and The Provident Bank and other certain lending insti-
tutions, dated as of August 9, 1996 (the "Credit Agreement").++
10.15 First Amendment to the Credit Agreement.+++
10.16 Second Amendment to the Credit Agreement.+++
10.17 Third Amendment to the Credit Agreement.+++
10.18 Lease and lease extension agreements between Crawford-Austin Mfg. Co. and Easy Gardener.**
10.19 Purchase Agreement, dated as of August 9, 1996, by and among the Company, Easy Gardener,
Weatherly and the Weatherly Stockholders (incorporated by reference to Exhibit 10.1 filed with
the Company's Form 8-K for the event dated August 9, 1996).
10.20 Lease and Lease Extension Agreement dated October 16, 1997 between Crawford-Austin Mfg.
Co. and Easy Gardener (incorporated by reference to Exhibit 10.22 to the Company's Registra-
tion Statement on Form S-1 No. 333-38483).
10.21 1997 Stock Option Plan (incorporated by reference to Exhibit A to the Company's proxy state-
ment dated May 27, 1997).
10.22 Purchase Agreement dated as of May 9, 1997 by and among the Company, Easy Gardener Plastic
Molded Concepts inc.+++
10.23 Assets Purchase Agreement dated as of February 25, 1998 by and among the Company, Weed
Wizard, Weed Wizard Inc. and the Weed Wizard stockholders (incorporated by reference to
exhibit 10.1 filed with the Company's Form 8-K for the event dated February 26, 1998).
10.24 Fourth Amendment to the Credit Agreement.
21 Subsidiaries of the Company.
23.1 Consent of Tenzer Greenblatt LLP (included in Exhibits 5.1 and 8.1)*
23.2 Consent of BDO Seidman, LLP
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).*
24.1 Power of Attorney (included in the Registration Statement)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the
Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Trust
Preferred Securities Guarantee Agreement.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the
Amended and Restated Trust Agreement.
</TABLE>
- ------------
* to be filed by amendment
II-3
<PAGE>
** Incorporated by reference to the comparable exhibit filed with the
Company's Form 10-KSB for the fiscal year ended June 30, 1995.
*** Incorporated by reference to the exhibit filed under the same number in the
Company's Registration Statement on Form SB-2 (file no. 33-61984).
+ Incorporated by reference to the exhibit contained in the Current Report on
Form 8-K filed by the Company for the event dated September 1, 1994.
++ Incorporated by reference to the exhibit contained on the Company's Form
10-KSB for the fiscal year ended June 30, 1996.
+++ Incorporated by reference to the exhibit contained the Company's Form 10-K
for the fiscal year ended
June 30, 1997.
(b) Report on 8-K. No reports on Form 8-K were filed by the Company during
its fiscal quarter ended
June 30, 1997.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed the initial bona fide offering
thereof.
(3) To remove by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrar
pursuant to any arrangement, 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 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 Securities Act and will be governed
by the final adjudication of such issue.
(4) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
47(h) under the Securities Act is part of this Registration Statement as of
the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement for the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, in the City of San Francisco, State of California, on the 20th day
of March 1998.
U.S. HOME & GARDEN INC.
By: /s/ Robert Kassel
---------------------------------
Robert Kassel, President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert Kassel and Richard Raleigh
severally, as his true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each said attorney-in-fact or agent or substitute lawfully does or
causes to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-1 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/ Robert Kassel
- ------------------------- Chairman of the Board President, Chief March 20, 1998
Robert Kassel Executive Officer and Treasurer
(Principal Executive and Financial
Officer)
/s/ Richard Raleigh Chief Operating Officer and Director March 20, 1998
- -------------------------
Richard Raleigh
/s/ Maureen Kassel Vice President, Secretary and Director March 20, 1998
- -------------------------
Maureen Kassel
/s/ Lynda Gustafson Vice President of Finance (Principal March 20, 1998
- ------------------------- Accounting Officer)
Lynda Gustafson
/s/ Fred Heiden Director March 20, 1998
- -------------------------
Fred Heiden
/s/ Jon Schulberg Director March 20, 1998
- -------------------------
Jon Schulberg
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, in the City of San Francisco, State of California, on March 20,
1998.
U.S. HOME & GARDEN TRUST I
By: U.S. Home & Garden Inc. as Depositor
Dated: March 20 , 1998 By: /s/ Robert Kassel
-----------------------------
Robert Kassel, President
II-6
<PAGE>
Report of Independent Certified Public Accountants on
Financial Statement Schedule
Board of Directors
U.S. Home & Garden Inc.
and Subsidiaries
San Francisco, California
The audits referred to in our report to U.S. Home & Garden Inc., dated August
1, 1997, except for Note 15 which is as of September 15, 1997, which is
contained in the Prospectus constituting part of this Registration Statement
included the audit of the schedule listed under Item 16(b) for each of the
three years in the period ended June 30, 1997. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based upon our
audits.
In our opinion, such schedule presents fairly, in all material respects, the
information set forth therein.
BDO Seidman, LLP
San Francisco, California
August 1, 1997
II-7
<PAGE>
U.S. Home & Garden Inc. and Subsidiaries
Schedule II -- Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Charged to
Beginning Costs and Writeoffs Ending
Balance Expenses of Accounts Balance
----------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year ended June 30, 1995 ......... $ 5,000 $ 3,000 $ (3,000) $ 5,000
Year ended June 30, 1996 ......... 5,000 167,000 (17,000) 155,000
Year ended June 30, 1997 ......... 155,000 323,000 (164,000) 314,000
======== ======== ========== ========
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------- --------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended.**
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3(b) of the Company's Registration
Statement on Form S-1 (Registration No. 33-45428).
4.1 Form of Subordinated Indenture to be entered into between U.S. Home & Garden Inc. and
Wilmington Trust Company, as the Indenture Trustee.
4.2 Form of Officers' Certificate and Company Order.
4.3 Certificate of Trust of the Trust dated March 16, 1998.
4.4 Trust Agreement of the Trust dated as of March 16, 1998.
4.4.1 Form of Amended and Restated Trust Agreement of the Trust.
4.5 Form of Trust Preferred Securities Certificate of the Trust.
4.6 Form of Common Securities Certificate of the Trust.
4.7 Form of Guarantee Agreement.
4.8 Form of Agreement as to Expenses and Liabilities.
4.9 Form of Junior Subordinated Deferrable Interest Debenture of the Company.
4.10 Form of Unit Purchase Option granted to D.H. Blair & Co.***
4.11 Form of Public Warrant Agreement with respect to Class A Warrants.***
4.12 Warrant Agreement with respect to Class B Warrants, incorporated by reference to Exhibit 4(c) of
the Company's Registration Statement on Form S-3 (Registration No. 33-89800).
5.1 Opinion and Consent of Tenzer Greenblatt LLP*
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*
8.1 Opinion and Consent of Tenzer Greenblatt LLP, as counsel to U.S. Home & Garden Inc. as to
certain federal income tax matters.*
9.1 Voting Agreement among Joseph A. Owens, II, the Company, and Robert Kassel.+
9.2 Voting Agreement among Richard M. Grandy, the Company and Robert Kassel.+
10.1 Employment Agreement between the Company and Robert Kassel++
10.2 Employment Agreement between the Company and Richard Raleigh++
10.3 1991 Stock Option Plan, incorporated by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1 (Registration No. 33-45428).
10.4 1995 Stock Option Plan.**
10.5 Non-Employee Director Stock Option Plan.**
10.6 Asset Purchase Agreement dated as of June 18, 1994 among the Company, Easy Gardener Acqui-
sition Corp., Joseph A. Owens II, Richard M. Grandy and Easy Gardener, Inc.+
10.7 Employment Agreement of Richard Grandy.+++
10.8 Lease with respect to the Company's executive offices, incorporated by reference to Exhibit 10.14
of the Company's Form 10-KSB for the fiscal year ended June 30, 1992.
10.9 February 8, 1995 modification to lease with respect to the Company's executive offices.**
10.10 May 6, 1997 modification to lease with respect to the Company's executive offices.+++
10.11 Lease with respect to Weatherly's Warehouse Facilities in Paris, Kentucky+++
10.12 Form of Mergers and Acquisitions Agreement between the Company and D.H. Blair Investment
Banking Corp.***
10.13 Agreement dated as of April 16, 1996 between the Company and The Intrac Group.++
10.14 Credit Agreement among Easy Gardener Acquisition Corp., the Company, The Provident Bank,
as Administrative and Collateral Agent, and The Provident Bank and other certain lending insti-
tutions, dated as of August 9, 1996 (the "Credit Agreement").++
10.15 First Amendment to the Credit Agreement.+++
10.16 Second Amendment to the Credit Agreement.+++
10.17 Third Amendment to the Credit Agreement.+++
10.18 Lease and lease extension agreements between Crawford-Austin Mfg. Co. and Easy Gardener.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.19 Purchase Agreement, dated as of August 9, 1996, by and among the Company, Easy Gardener,
Weatherly and the Weatherly Stockholders (incorporated by reference to Exhibit 10.1 filed with
the Company's Form 8-K for the event dated August 9, 1996).
10.20 Lease and Lease Extension Agreement dated October 16, 1997 between Crawford-Austin Mfg.
Co. and Easy Gardener (incorporated by reference to Exhibit 10.22 to the Company's Registra-
tion Statement on Form S-1 No. 333-38483).
10.21 1997 Stock Option Plan (incorporated by reference to Exhibit A to the Company's proxy state-
ment dated May 27, 1997).
10.22 Purchase Agreement dated as of May 9, 1997 by and among the Company, Easy Gardener Plastic
Molded Concepts inc.+++
10.23 Assets Purchase Agreement dated as of February 25, 1998 by and among the Company, Weed
Wizard, Weed Wizard Inc. and the Weed Wizard stockholders (incorporated by reference to
exhibit 10.1 filed with the Company's Form 8-K for the event dated February 26, 1998).
10.24 Fourth Amendment to the Credit Agreement.
21 Subsidiaries of the Company.
23.1 Consent of Tenzer Greenblatt LLP (included in Exhibits 5.1 and 8.1)*
23.2 Consent of BDO Seidman, LLP
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)*
24.1 Power of Attorney (included in the Registration Statement)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the
Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Trust
Preferred Securities Guarantee Agreement.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the
Amended and Restated Trust Agreement.
</TABLE>
- ------------
* to be filed by amendment
** Incorporated by reference to the comparable exhibit filed with the Company's
Form 10-KSB for the fiscal year ended June 30, 1995.
*** Incorporated by reference to the exhibit filed under the same number in the
Company's Registration Statement on Form SB-2 (file no. 33-61984).
+ Incorporated by reference to the exhibit contained in the Current Report on
Form 8-K filed by the Company for the event dated September 1, 1994.
++ Incorporated by reference to the exhibit contained on the Company's Form
10-KSB for the fiscal year ended June 30, 1996.
+++ Incorporated by reference to the exhibit contained the Company's Form 10-K
for the fiscal year ended
June 30, 1997.
<PAGE>
- --------------------------------------------------------------------------------
2,530,000 Shares
U.S. Home & Garden Trust I
(a Delaware Business Trust)
___% Cumulative Trust Preferred Securities
(Liquidation Amount of $25 per Trust Preferred Security)
UNDERWRITING AGREEMENT
________ __, 1998
EVEREN Securities, Inc.
&
Josephthal & Co. Inc.
- --------------------------------------------------------------------------------
<PAGE>
2,530,000 Shares
U.S. Home & Garden Trust I
(a Delaware Business Trust)
____% Cumulative Trust Preferred Securities
(Liquidation Amount of $25 per Trust Preferred Security)
UNDERWRITING AGREEMENT
_________ __, 1998
EVEREN Securities, Inc.
Josephthal & Co. Inc.
As Representatives of
the Several Underwriters
c/o EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1994
Ladies and Gentlemen:
U.S. Home & Garden Inc., a Delaware corporation (the "Company"), and
its financing subsidiary, U.S. Home & Garden Trust I, a Delaware business trust
(the "Trust," and together with the Company, the "Offerors"), confirm their
agreements with the several underwriters listed in Schedule I hereto (the
"Underwriters"), for whom EVEREN Securities, Inc. and Josephthal & Co. Inc.
(collectively, the "Representatives") have been duly authorized to act as
representatives, as follows:
1. The Shares. Subject to the terms and conditions set forth in this
agreement (the "Agreement"), the Trust proposes to issue and sell to the
Underwriters 2,200,000 shares of __% Cumulative Trust Preferred Securities
having a Liquidation Amount of $25 per share (the "Trust Preferred Securities"),
to be issued under the Trust Agreement (as defined below), the terms of which
are more fully described in the Prospectus (as defined below). Such 2,200,000
shares of Trust Preferred Securities proposed to be sold by the Trust are
hereinafter referred to as the "Firm Shares." The Trust also proposes to grant
to the Underwriters an option to purchase up to 330,000 additional shares of
Trust Preferred Securities (the "Additional Shares") solely for the purpose of
<PAGE>
covering overallotments, if any, if requested by the Underwriters as provided in
Section 3 hereof. The Firm Shares and the Additional Shares are herein
collectively called the "Shares."
The Offerors hereby confirm their agreements with the
Underwriters as follows:
2. Registration Statement and Prospectus. The Offerors have prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 (File No. 333-_____) including a
prospectus, relating to the Shares, the __% Junior Subordinated Deferrable
Interest Debentures due 2028 of the Company (the "Debentures"), and the
Guarantee pursuant to the Guarantee Agreement (as defined below) for the benefit
of the Trust Preferred Securities (the "Guarantee"). To the extent the
registration statement has been amended, each such amendment has been prepared
and filed with the Commission. The registration statement, as amended, at the
time when it became effective, and any registration statement filed with the
Commission pursuant to Rule 462(b) under the Act, at the time when it becomes
effective, including all financial schedules and exhibits thereto and all of the
information (if any) deemed to be part of the registration statements at the
time of effectiveness pursuant to Rule 430A under the Act ("Rule 430A"), is
hereinafter referred to as the "Registration Statement;" the prospectus in the
form first provided to the Underwriters by the Offerors for use in connection
with the offering and sale of the Shares (whether or not required to be filed
pursuant to Rule 424(b) under the Act ("Rule 424(b)")) are hereinafter referred
to as the "Prospectus," except that if any revised prospectus shall be provided
to the Underwriters by the Offerors for use in connection with the offering of
the Shares that differs from the Prospectus (whether or not any such revised
prospectus is required to be filed by the Offerors pursuant to Rule 424(b) under
the Act), the term "Prospectus" shall refer to the revised prospectus from and
after the time it is first provided to the Underwriters for such use. Each
preliminary prospectus included in the Registration Statement prior to the time
it became effective is herein referred to as a "Preliminary Prospectus."
3. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to the terms and
conditions hereof: (i) the Offerors agree that the Trust will issue and sell to
the Underwriters, at a price of $25 per Share (the "Purchase Price"), 2,200,000
newly issued Firm Shares; and (ii) each Underwriter agrees, severally and not
jointly, to purchase from the Trust, at the Purchase Price, the aggregate number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto.
On the basis of the representations and warranties contained
in this Agreement, and subject to the terms and conditions hereof: (i) the
Offerors agree that the Trust will issue and sell to the Underwriters, at the
Purchase Price, up to 530,000 newly issued Additional Shares; and (ii) the
Underwriters shall have the right from time to time (subject to the last
sentence of Section 4(b)) to purchase from the Trust, at the Purchase Price, up
to the aggregate number of Additional Shares. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase the number of Additional Shares (subject to such
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<PAGE>
adjustments to eliminate fractional shares as the Representatives may determine)
that bears the same proportion to the total number of Additional Shares to be
purchased as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I bears to the total number of Firm Shares.
As compensation to the Underwriters for their commitments
hereunder and in view of the fact that the proceeds of the sale of the Shares
(together with the entire proceeds from the sale by the Trust to the Company of
the Common Securities (as defined below)) will be used to purchase the
Debentures, the Company hereby agrees to pay by wire transfer of same day funds
on the Closing Date, directly to the Underwriters, a commission of $______ per
Share purchased by the Underwriters and delivered by the Trust pursuant to this
Agreement (the "Underwriting Commission").
Each of the Offerors covenants and agrees that it will not
(other than in connection with the transactions expressly contemplated by this
Agreement), directly or indirectly, for a period of 180 days after the date of
the Prospectus, (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise issue any shares of Trust Preferred
Securities, or any securities convertible into or exercisable or exchangeable
for Trust Preferred Securities or debentures, or any equity securities
substantially similar to the Trust Preferred Securities or any debt securities
substantially similar to the Debentures, or (2) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of any shares of Trust Preferred Securities or the Debentures,
whether any such transaction described in clauses (1) or (2) above is to be
settled by delivery of shares of Trust Preferred Securities or other securities,
in cash or otherwise, or (3) file any registration statement relating to any of
the foregoing on behalf of itself or any other person, in each case without the
prior written consent of EVEREN Securities, Inc. on behalf of the Underwriters.
4. Agreements of the Company as to Delivery and Payment. The Offerors
agree with each Underwriter that:
(a) Delivery to the Underwriters of and payment for the Firm
Shares shall be made at 10:00 A.M., New York City time, on the third
full business day (such time and date being referred to as the "Closing
Date") following the date of the public offering of the Firm Shares as
advised to the Representatives by the Offerors, at such place as the
Representatives shall designate.
(b) Delivery to the Underwriters of and payment for any
Additional Shares to be purchased by the Underwriters shall be made at
such place as the Representatives shall designate, at 10:00 A.M., New
York City time, on such date or dates (individually, an "Option Closing
Date" and collectively, the "Option Closing Dates"), which may be the
same as the Closing Date but shall in no event be earlier than the
Closing Date, as shall be specified in a written notice from the
Representatives to the Offerors of the Underwriters' determination to
purchase a number, specified in said notice, of Additional Shares. Any
such notice may be given at any time prior to the thirty-first (31st)
day after the date of this Agreement. Any Option Closing Date shall be
within five (5) business days of the date of the applicable notice.
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<PAGE>
(c) Unless otherwise agreed, the Shares to be purchased by
each Underwriter in book-entry form and in authorized denominations and
registered in the name of the nominee of The Depository Trust Company
("DTC") shall be delivered by or on behalf of the Offerors through the
facilities of DTC for the account of such Underwriter, against payment
of the Purchase Price therefor by wire transfer of same day funds to
the Trust, or upon its order, to an account designated by the Trust,
with any transfer taxes payable upon initial issuance or the transfer
thereof duly paid by the Offerors for the respective accounts of the
Underwriters.
5. Further Agreements of the Offerors. Each of the Offerors also agrees
with each Underwriter that:
(a) it will, if the Registration Statement has not heretofore
become effective under the Act, file an amendment to the Registration
Statement or, if necessary pursuant to Rule 430A under the Act, a
post-effective amendment to the Registration Statement, as soon as
practicable after the execution and delivery of this Agreement, and
will use its best efforts to cause the Registration Statement or such
post-effective amendment to become effective at the earliest possible
time; and the Offerors will comply fully and in a timely manner with
the applicable provisions of Rule 424(b), Rule 430A and the other rules
under the Act;
(b) it will advise the Underwriters promptly (i) when the
Registration Statement has become effective, if and when the Prospectus
is sent for filing pursuant to Rule 424 under the Act and when any
post-effective amendment to the Registration Statement becomes
effective, (ii) of the receipt of any comments or correspondence from
the Commission that relate to the Registration Statement or requests by
the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or, to the best knowledge of the Offerors, of the threat
or initiation of any proceedings for such purpose by the Commission or
any state securities commission or other regulatory authority, and (iv)
of the happening of any event or information becoming known during the
period referred to in paragraph (e) below that makes any statement of a
material fact made in the Registration Statement untrue or that
requires the making of any additions to or changes in the Registration
Statement (as amended or supplemented from time to time) in order to
make the statements therein not misleading or that makes any statement
of a material fact made in the Prospectus (as amended or supplemented
from time to time) untrue or that requires the making of any additions
to or changes in the Prospectus (as amended or supplemented from time
to time) in order to make the statements therein, not misleading; if at
any time the Commission shall issue or institute proceedings (or
threaten to institute any such proceedings) to issue any stop order
suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue
or institute proceedings (or threaten to institute proceedings) to
issue an order suspending the qualification or exemption of the Shares
under any state securities or Blue Sky laws, the Offerors shall use
their best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time;
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<PAGE>
(c) it will furnish to the Representatives without charge
signed copies of the Registration Statement as first filed with the
Commission and of each amendment to it, including all exhibits filed
therewith, and will furnish to the Representatives such number of
conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as the Representatives may
reasonably request;
(d) it will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, or make any amendment or supplement to the
Prospectus of which the Representatives shall not previously have been
advised and provided a copy a reasonable period of time prior to the
filing thereof and to which the Representatives or their counsel shall
reasonably object in writing; and it will prepare and file with the
Commission, promptly upon the Representatives' reasonable request, any
amendment to the Registration Statement or supplement to the Prospectus
that may be necessary or advisable in connection with the distribution
of the Shares by the Representatives in their or their counsel's
reasonable opinion, and will use its best efforts to cause the same to
become effective as promptly as possible;
(e) promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as a
prospectus is required by the Act to be delivered in connection with
the sales by an underwriter or a dealer (in the reasonable written
opinion of the Representatives' counsel, it being understood that no
opinion of the Representatives' counsel shall be necessary for
distribution of the Prospectus prior to or on the Closing Date), it
will furnish to each Underwriter and dealer without charge as many
copies of the Prospectus (and any amendment or supplement of the
Prospectus) as the Representatives may reasonably request for the
purposes contemplated by the Act; the Offerors consent to the use of
the Prospectus and any amendment or supplement thereto by any
Underwriter or any dealer, both in connection with the offering or sale
of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection therewith;
(f) if during the period specified in paragraph (e) any event
shall occur or information become known as a result of which in the
reasonable opinion of the Representatives' counsel it becomes necessary
to amend or supplement the Prospectus in order to make the statements
therein, in light of the circumstances existing as of the date the
Prospectus is delivered to a purchaser, not misleading, or it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and, subject to paragraph 5(d) above, it will file
with the Commission at the sole expense of the Offerors an appropriate
amendment or supplement to the Prospectus so that the statements of any
material facts in the Prospectus, as so amended and supplemented, will
not in light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with law and it will
furnish to the Representatives and to such Underwriters and dealers as
the Representatives shall specify, at the sole expense of the Offerors,
such number of copies thereof as the Representatives may reasonably
request;
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<PAGE>
(g) prior to any public offering of the Shares, it will
cooperate with the Representatives and counsel for the Representatives
in connection with the registration or qualification of the Shares for
offer and sale by the several Underwriters and by dealers under the
state securities or Blue Sky laws of such jurisdictions as the
Representatives may request (provided, that the Offerors shall not be
obligated to qualify as a foreign corporation or business trust in any
jurisdiction in which it is not so qualified or to take any action
which would subject it to general consent to service of process in any
jurisdiction in which it is not now so subject); the Offerors will
continue such qualification in effect so long as required by law for
the distribution of the Shares and will file such consents to service
of process or other documents as may be necessary in order to effect
such registration or qualification (provided, that the Offerors shall
not be obligated to take any action that would subject it to general
consent to service of process in any jurisdiction in which it is not
now so subject);
(h) it will promptly notify the Representatives if it incurs
any liability or obligation, direct or contingent, or enters into any
material transaction, other than in the ordinary course of business
prior to the exercise in full or termination or expiration of the
option to purchase the Additional Shares;
(i) it will not acquire any Trust Preferred Securities or any
capital stock of the Company prior to the exercise in full or
termination or expiration of the option to purchase the Additional
Shares nor will the Company declare or pay any dividend or make any
other distribution upon its common stock, $.001 par value per share
(the "Common Stock"), payable to stockholders of record on a date prior
to the exercise in full or termination or expiration of the option to
purchase the Additional Shares;
(j) the Offerors will mail and make generally available to the
Trust's stockholders and furnish to the Representatives as soon as
reasonably practicable a consolidated earnings statement covering a
period of at least 12 months beginning after the "effective date" (as
defined in Rule 158 under the Act) of the Registration Statement (but
in no event commencing later than 90 days after such date) that will
satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder;
(k) during the period of 12 months after the date of this
Agreement, it will furnish to the Representatives a copy (i) as soon as
practicable after the filing thereof, of each report filed by it with
the Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"); (ii) as soon as practicable after
the release thereof, of each press release relating to the Offerors;
(iii) as soon as available, of each report of the Company mailed to the
Company's stockholders and each report of the Trust mailed to the
Trust's stockholders; and (iv) as soon as available, such other
publicly available information concerning the Offerors as the
Representatives may reasonably request;
(1) whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective as to all of its
provisions or is terminated, to pay all costs, fees, expenses and taxes
incident to the performance by the Offerors of their obligations
6
<PAGE>
hereunder, including (i) the preparation, printing, filing and
distribution under the Act of the Registration Statement (including
financial statements and exhibits), each Preliminary Prospectus, the
Prospectus and all amendments and supplements to any of them prior to
or during the period specified in paragraph (e) above of this Section
5, (ii) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of the several states,
including, in each case, the applicable filing fees and the fees and
actual out-of-pocket disbursements of counsel for the Underwriters in
connection with such registration or qualification and with the
preparation of the memoranda relating thereto, (iii) the filing fee of
the NASD in connection with its review of the terms of the offering and
the sale of the Shares, (iv) the approval for quotation of the Shares
on the American Stock Exchange, Inc. or other securities exchange, (v)
furnishing such copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus and all amendments and supplements thereto
as may be requested by the Representatives for use in connection with
the offering or sale of the Shares by the Underwriters or by dealers to
whom the Shares may be sold, (vi) obtaining the opinions to be provided
pursuant to Section 8(g) of this Agreement, (vii) the fees and expenses
of the Property Trustee, the Delaware Trustee, the Guarantee Trustee
and the Indenture Trustee (each as defined below), including the fees
and disbursements of counsel for such trustees, (viii) the cost of
qualifying the Shares with DTC and (ix) the performance by the Offerors
of all of their other obligations under this Agreement; if the sale of
the Shares provided for herein is not consummated because the
Underwriters exercise their right to terminate this Agreement pursuant
to Section 9 hereof and any of the following have occurred during the
term of this Agreement: (a) there has been any material adverse change
in the condition (financial or otherwise), earnings, affairs, business
or prospects of the Company; or (b) the Offerors shall refuse or be
unable to comply with any provision hereof (except as the result of a
breach of this Agreement by the Underwriters), the Offerors will
promptly reimburse the Underwriters upon demand for all reasonable
out-of-pocket expenses (including the fees and actual out-of-pocket
disbursements of counsel for the Underwriters in connection with the
matters set forth solely in clause (ii) above) that shall have been
incurred by the Underwriters in connection with the proposed purchase
and sale of the Shares;
(m) it intends to use the net proceeds received by it from the
sale of the Shares being sold by the Trust in the manner specified in
the Prospectus;
(n) if, at the time of effectiveness of the Registration
Statement, any information shall have been omitted therefrom in
reliance upon Rule 430A, then immediately following the execution and
delivery of this Agreement, it will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A and Rule
424(b), copies of an amended prospectus, or, if required by such Rule
430A, a post-effective amendment to the Registration Statement
(including an amended prospectus), containing all information so
omitted;
(o) it will cause the Shares to be approved for quotation,
subject to notice of issuance or sale, on the American Stock Exchange,
Inc. or other securities exchange; it will comply with all
registration, filing and reporting requirements of the Securities
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<PAGE>
Exchange Act of 1934, as amended, (the "Exchange Act") American Stock
Exchange, Inc. or other securities exchange in connection with the sale
of the Shares; and
(p) it will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to
or after the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent required to be satisfied
under this Agreement prior to the delivery of the Shares.
6. Representations and Warranties.
(a) The Offerors, jointly and severally, represent and warrant
to each Underwriter that:
(i) the Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus
relating to the proposed offering of the Shares nor, to the
best of the Offerors' knowledge, instituted or threatened any
proceedings for that purpose. The Registration Statement, on
the date it became effective, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof
with the Commission (or if not filed, on the date provided by
the Offerors to the Underwriters in connection with the
offering and sale of the Shares) and at the Closing Date and
each Option Closing Date conformed or will conform with the
requirements of the Act and the rules and regulations
promulgated thereunder (the "Rules and Regulations") and the
Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") and the rules and regulations promulgated thereunder
(the "Trust Indenture Regulations"); the Registration
Statement, on the date it became effective, did not contain an
untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; the Prospectus and any
amendment or supplement thereto, on the date of filing thereof
with the Commission (or if not filed, on the date provided by
the Offerors to the Underwriters in connection with the
offering and sale of the Shares) and at the Closing Date and
each Option Closing Date did not and will not include an
untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; the foregoing shall not apply
to statements in or omissions from the Registration Statement
and the Prospectus made or omitted in reliance upon, and in
conformity with information relating to the Underwriters
furnished to the Offerors by or on behalf of the Underwriters
expressly for use therein (the Offerors hereby acknowledge for
all purposes under this Agreement that (A) the last paragraph
set forth on the outside front cover page of the Prospectus,
(B) the stabilization legend set forth on the inside of the
front cover page of the Prospectus, (C) the statements set
forth under the caption "Underwriting" in the Prospectus and
(D) the statement set forth in the second sentence under the
caption "Legal Matters" in the Prospectus constitute the only
information furnished to the Offerors by or on behalf of the
Underwriters for use in the preparation of the Registration
Statement or the Prospectus or any amendment or supplement
thereto);
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<PAGE>
(ii) the only subsidiaries of the Company (other than
the Trust) are as set forth on Exhibit A to this Agreement
(singularly, a "Subsidiary" and collectively, the
"Subsidiaries"); the Company has been duly incorporated and is
a validly existing corporation in good standing under the laws
of Delaware, with full corporate power and authority to own or
lease its properties and assets and to conduct its business as
described in the Registration Statement and the Prospectus and
is duly qualified to do business in each jurisdiction in which
it owns or leases real property or in which the conduct of its
business or the ownership or leasing of property requires such
qualification, except where the failure to be so qualified
would not have a material adverse effect on the condition
(financial or otherwise), business, assets, prospects, net
worth or results of operations of the Company and its
Subsidiaries, taken as a whole (a "Material Adverse Effect,"
and, when used with respect to the Trust, "Material Adverse
Effect" means any a material adverse effect on the condition
(financial or otherwise), business, assets, prospects, net
worth or results of operations of the Trust); each Subsidiary
has been duly incorporated and is a validly existing
corporation in good standing under the laws of the
jurisdiction set forth opposite its name on Exhibit A, with
full corporate power and authority to own or lease its
properties and assets and to conduct its business as described
in the Registration Statement and the Prospectus and is duly
qualified to do business in each jurisdiction in which it owns
or leases real property or in which the conduct of its
business or the ownership or leasing of property requires such
qualification, except where the failure to be so qualified
would not have a Material Adverse Effect;
(iii) the trust has been duly formed and is a validly
existing business trust in good standing under the laws of
Delaware, with full power and authority to own or lease its
properties and assets and to conduct its business as described
in the Registration Statement and the Prospectus, including,
without limitation, to enter into this Agreement and the other
agreements or instruments contemplated hereby, to issue and
sell the Shares, to issue and sell the Common Securities and
to otherwise consummate the transactions contemplated hereby,
and is duly qualified to do business in each jurisdiction in
which it owns or leases real property or in which the conduct
of its business or the ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; the Trust
is a consolidated subsidiary of the Company and has no
subsidiaries of its own, the Trust is not a party to or bound
by any agreement or instrument other than the Trust Agreement,
this Agreement and the agreements and instruments contemplated
by the Trust Agreement and this Agreement and described in the
Registration Statement and the Prospectus; the Trust has no
liabilities or obligations other than those arising out of the
transactions contemplated by the Trust Agreement and this
Agreement and described in the Registration Statement and the
Prospectus; the Trust is not, and on the Closing Date will not
be, to the knowledge of the Offerors, classified as an
association taxable as a corporation for United States federal
income tax purposes; the Trust is, and on the Closing Date
will be, treated as a consolidated subsidiary of the Company
pursuant to generally accepted accounting principles;
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<PAGE>
(iv) the capitalization of the Company is, and upon
consummation of the transactions contemplated hereby and by
the Prospectus will be, as set forth in the Registration
Statement and the Prospectus under the caption
"Capitalization;" all of the outstanding shares of capital
stock of the Company have been duly authorized and are validly
issued, are fully paid and non-assessable and conform to the
description thereof in the Registration Statement and the
Prospectus and were not issued in violation of any preemptive
rights or other rights to subscribe for or purchase
securities; and, except as set forth in the Registration
Statement and the Prospectus with respect to the Company's
stock option plans and options, warrants or other rights to
acquire shares of Common Stock granted outside of the
Company's stock option plans, no options, warrants or other
rights to purchase from the Company, agreements or other
obligations of the Company to issue or other rights to convert
any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company are
outstanding;
(v) subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, and except as described therein, (A) neither the
Trust, the Company nor any Subsidiary has incurred any
material liabilities or obligations, direct or contingent, or
entered into any material transactions not in the ordinary
course of business, (B) neither the Trust, the Company nor any
Subsidiary has purchased any of its outstanding capital stock
or declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock or otherwise and
(C) there has not been any material adverse change in the
condition (financial or otherwise), business, affairs,
prospects or results of operations of the Trust or the Company
and its Subsidiaries, taken as a whole, or any material change
in the Trust's, the Company's or any Subsidiary's capital
stock, short-term debt or long-term debt;
(vi) the Shares to be sold by the Trust pursuant to
this Agreement have been duly and validly authorized and, when
issued, delivered and paid for pursuant to this Agreement,
will be validly issued, fully paid and nonassessable undivided
beneficial assets of the Trust and will be entitled to the
benefits of the Trust Agreement; the shares of __% Cumulative
Trust Common Securities having a Liquidation Amount of $25 per
share (the "Common Securities") to be sold by the Trust to the
Company have been duly and validly authorized and, when
issued, delivered and paid for, will be validly issued, fully
paid and nonassessable undivided beneficial assets of the
Trust and will be entitled to the benefits of the Trust
Agreement; the Shares and the Common Securities conform to the
descriptions thereof contained in the Registration Statement
and the Prospectus;
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(vii) Subject to the terms of the Trust Agreement,
holders of the Shares will be entitled to the same limitation
of personal liability under Delaware law as extended to
stockholders of private corporations for profit;
(viii) this Agreement has been duly authorized,
executed and delivered by the Trust and the Company and is a
legal, valid and binding agreement of the Trust and the
Company enforceable in accordance with its terms, except (i)
as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) as rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws
or the public policy underlying such laws;
(ix) each of the Administrative Trustees (as defined
below) of the Trust is an employee of the Company and has been
authorized by the Company to execute and deliver the Trust
Agreement (as amended and restated, the "Trust Agreement") by
and among the Company, as Depositor, Wilmington Trust Company
("WTC") as Delaware Trustee (the "Delaware Trustee"), WTC as
Property Trustee (the "Property Trustee") and ___________,
______________ and ____________ as Administrative Trustees
(the "Administrative Trustees"); the Trust Agreement has been
duly authorized by the Company, will be duly executed and
delivered by the Company, as Depositor, and the Administrative
Trustees on the Closing Date, and will be legal, valid and
binding agreements of the Company and the Administrative
Trustees enforceable in accordance with its terms, except (i)
as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) as rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws
or the public policy underlying such laws; the Trust Agreement
conforms in all material respects with the description thereof
and all statements relating thereto in the Registration
Statement and the Prospectus and has been qualified under the
Trust Indenture Act;
(x) the Indenture ("Indenture") by and between the
Company and WTC as Indenture Trustee (the "Indenture Trustee")
has been duly authorized by the Company, will be duly executed
and delivered by the Company on the Closing Date, and will be
a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except (i) as
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) as rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws
or the public policy underlying such laws; the Indenture
conforms in all material respects with the description thereof
and all statements relating thereto in the Registration
Statement and the Prospectus and has been qualified under the
Trust Indenture Act;
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(xi) the Debentures have been duly authorized by the
Company, will be duly executed and delivered by the Company on
the Closing Date, and, when authenticated in the manner
provided for in the Indenture and delivered against payment
therefor as described in the Registration Statement and the
Prospectus, will be legal, valid and binding obligations of
the Company enforceable in accordance with its terms, except
(i) as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) as rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws
or the public policy underlying such laws, and will be
entitled to the benefits of the Indenture; the Debentures
conform in all material respects with the description thereof
and all statements relating thereto in the Registration
Statement and the Prospectus
(xii) the Guarantee Agreement (the "Guarantee
Agreement") by and between the Company and WTC, as Guarantee
Trustee (the "Guarantee Trustee") has been duly authorized by
the Company, will be duly executed and delivered by the
Company on the Closing Date, and will be legal, valid and
binding agreement of the Company enforceable in accordance
with its terms, except (i) as enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally
and by general equity principles and (ii) as rights to
indemnity or contribution hereunder may be limited by Federal
or state securities laws or the public policy underlying such
laws; the Guarantee pursuant to the Guarantee Agreement and
related documents conforms in all material respects with the
description thereof and all statements relating thereto in the
Registration Statement and the Prospectus and the Trust,
pursuant to the Guarantee, has been qualified under the Trust
Indenture Act;
(xiii) the Expense Agreement (the "Expense
Agreement") by and between the Trust and the Company has been
duly authorized by the Trust and the Company, will be duly
executed and delivered by the Trust and the Company on the
Closing Date, and will be legal, valid and binding agreements
of the Trust and the Company enforceable in accordance with
its terms, except (i) as enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by
general equity principles and (ii) as rights to indemnity or
contribution hereunder may be limited by Federal or state
securities laws or the public policy underlying such laws; the
Expense Agreement conforms in all material respects with the
description thereof and all statements relating thereto in the
Registration Statement and the Prospectus;
(xiv) neither the Trust, the Company nor any
Subsidiary is in violation of its Certificate of Trust and
Trust Agreement, or its Certificate or Articles of
Incorporation or by-laws, as the case may be; neither the
Trust, the Company nor any Subsidiary is in violation of or in
breach of or in default in (nor has any event occurred that
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with notice or lapse of time, or both, would be a breach of or
a default in) the performance of any obligation, agreement or
condition contained in any agreement, lease, contract, permit,
license, franchise agreement, mortgage, loan agreement,
debenture, note, deed of trust, bond, indenture or other
evidence of indebtedness or any other instrument or obligation
(collectively, "Obligations and Instruments") to which it is a
party or by which it or any of its properties or assets are
bound or affected, except for such violation, breach, default
as, either individually or in the aggregate, would not have a
Material Adverse Effect; neither the Trust, the Company nor
any Subsidiary is in violation of any statute, judgment,
decree, order, rule or regulation (collectively, "Laws")
applicable to it or any of its properties or assets that,
alone or together with other violations of Laws, would result
in a Material Adverse Effect;
(xv) the execution, delivery and performance of this
Agreement and delivery of the Shares by the Trust and
compliance by the Trust and the Company with all the
provisions hereof and the consummation of the transactions
contemplated hereby and as described in the Registration
Statement and the Prospectus will not, alone or upon notice or
the passage of time or both (A) require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body or third
party (except such as may be required under the Act and the
securities or Blue Sky laws of the various states or by the
NASD), (B) result in the creation or imposition of any
material lien, charge or encumbrance upon any of the
properties or assets of the Trust, the Company or any
Subsidiary pursuant to the terms and provisions of any
Obligation or Instrument, (C) conflict with or constitute a
breach or default under any Obligation or Instrument to which
the Trust, the Company or any Subsidiary is a party or by
which it or any of it properties or assets are bound, or (D)
assuming compliance with the Act and all applicable state
securities or Blue Sky laws violate or conflict with any Laws
applicable to the Trust, the Company or any Subsidiary or any
of its properties or assets, except, with respect to clauses
(B), (C) and (D) hereof, for such liens, charges,
encumbrances, conflicts, breaches, defaults or violations as
would not, either individually or in the aggregate, have a
Material Adverse Effect;
(xvi) except as set forth in the Registration
Statement and the Prospectus, there is no action, suit,
proceeding, inquiry or investigation, governmental or
otherwise before any court, arbitrator or governmental agency
or body (collectively, "Proceedings") pending to which the
Trust, the Company or any Subsidiary is a party or to which
any of its properties or assets are subject, that, if
determined adversely to the Trust, the Company or such
Subsidiary, could reasonably be expected to result in a
Material Adverse Effect, or that seeks to restrain, enjoin,
prevent the consummation of or otherwise challenge the
issuance or sale of any of the Shares to be sold hereunder or
the consummation of the transactions described in the
Registration Statement and the Prospectus and, to the best
knowledge of the Offerors, no such Proceedings are threatened
or contemplated; and there is no contract, document, agreement
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or transaction to which the Trust, the Company or any
Subsidiary is a party, or that involved or involves the Trust,
the Company or any Subsidiary or any of its properties or
assets that is required to be described in or filed as an
exhibit to the Registration Statement by the Act or the Rules
and Regulations that has not been so described or filed; to
the best knowledge of the Offerors, no action has been taken
by any governmental agency that suspends the effectiveness of
the Registration Statement, prevents or suspends the use of
any Preliminary Prospectus or the Prospectus or suspends the
sale of the Shares in any jurisdiction referred to in Section
5(g) hereof; no injunction, restraining order or order of any
nature by a federal or state court of competent jurisdiction
has been issued with respect to the Trust, the Company or any
Subsidiary that might prevent the issuance of the Shares,
suspend the effectiveness of the Registration Statement,
prevent or suspend the use of any Preliminary Prospectus or
the Prospectus or suspend the sale of the Shares in any
jurisdiction referred to in Section 5(g) hereof; and every
request of the Commission, or any securities authority or
agency of any jurisdiction, for additional information (to be
included in the Registration Statement or the Prospectus or
otherwise) has been complied with in all material respects;
(xvii) Except as set forth in the Registration
Statement and the Prospectus, (1) neither the Company nor any
Subsidiary has violated any Federal or state law, statute,
ordinance, rule, regulation or common law, as the same may be
interpreted or administered by any Federal, state, regional,
county or local agencies, relating to (A) the protection,
investigation, remediation, or restoration of the environment
or natural resources, (B) the handling, use, storage,
treatment, disposal, release or threatened release of any
Hazardous Material (as defined below), or (C) pollution or
contamination ("Environmental Laws"), except for such
violations as would not, either individually or in the
aggregate, have a Material Adverse Effect, nor, to the
knowledge of the Company, are there any circumstances, either
past, present or that are reasonably foreseeable, that may
lead to such violation in the future that, in each case or in
the aggregate, could reasonably be expected to result in a
Material Adverse Effect; (2) no property owned or leased by
the Company or any Subsidiary is included or, to the best of
the knowledge of the Company, proposed for inclusion on the
National Priorities List promulgated under the Comprehensive
Environmental Response Compensation and Liability Act of 1980,
U.S.C. ss.9601 et seq.; (3) except for any asbestos containing
materials or lead-based paint that may be, or may have been
contained, on property, to the knowledge of the Company no
property currently, or in the past, owned or leased by the
Company or any Subsidiary contains, or contained, as the case
may by, any Hazardous Material that requires or required, as
the case may be, investigation or remediation under any
Environmental Law, except for such investigation or
remediation as would not, either individually or in the
aggregate, have a Material Adverse Effect; (4) neither the
Company nor any Subsidiary has caused or allowed the release
of any Hazardous Material on, in, under or from any property
currently or in the past owned or leased by the Company or any
Subsidiary, except for such releases as would not, either
individually or in the aggregate, have a Material Adverse
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<PAGE>
Effect; (5) neither the Company nor any Subsidiary has
received any notice of a claim under or pursuant to any
Environmental Law relating to any Hazardous Material on or
originating from any property currently or in the past owned
or leased by the Company or any Subsidiary, except for such
claims as would not, either individually or in the aggregate,
have a Material Adverse Effect; (6) there are no underground
storage tanks located on or under any property currently owned
or leased by the Company or any Subsidiary at their current
facilities; "Hazardous Material" means any substance,
material, or waste that is (A) listed, classified or regulated
as a hazardous substance or waste in any concentration
pursuant to any Environmental Law, or (B) any other substance,
material, or waste which may be the subject of regulatory
action by any governmental entity pursuant to any
Environmental Law;
(xviii) Except as set forth in the Registration
Statement and the Prospectus, the Trust, the Company and each
Subsidiary has such permits, licenses, registrations,
franchises and authorizations of governmental or regulatory
authorities or third parties ("Permits"), including, without
limitation, under any applicable Environmental Laws, as are
necessary to own, lease and operate its properties and assets
and to conduct its businesses or operations, except where the
failure to have any such Permit would not have a Material
Adverse Effect; the Trust, the Company and each Subsidiary are
in compliance with such Permits, except where to failure to
comply with such Permits would not, either individually or in
the aggregate, have a Material Adverse Effect, and no event
has occurred that allows, or after notice or lapse of time, or
both would allow, revocation or termination thereof or result
in any other material impairment of the rights of the holder
of any such Permits;
(xix) Neither the Company nor any Subsidiary has
violated any foreign, Federal, state, or local law relating to
discrimination in the hiring, promotion or pay of employees,
or any applicable foreign, Federal or state wages and hours
laws, or any provisions of the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations
promulgated thereunder or similar foreign laws, that, in each
case or in the aggregate, might result in a Material Adverse
Effect;
(xx) Neither the Trust, the Company nor any
Subsidiary is, or intends to conduct its business in a manner
in which it would become, an "investment company" or a company
"controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(xxi) except as otherwise set forth in the
Registration Statement and the Prospectus, the Company and
each Subsidiary has good and marketable title, free and clear
of all liens, claims, encumbrances and restrictions (except
liens for taxes not yet due and payable) to all property and
assets described in the Registration Statement as being owned
by it, except for such liens, claims, encumbrances and
restrictions as would not have a Material Adverse Effect; all
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<PAGE>
leases to which the Company or any Subsidiary is a party are
subsisting, valid and binding obligation of the Company or
such Subsidiary and no default of the Company or the
Subsidiary or, to the best knowledge of the Company, any other
person has occurred or is continuing thereunder that might
result in a Material Adverse Effect; and the Company and each
Subsidiary enjoys peaceful and undisturbed possession under
all such leases to which the Company or the Subsidiary is a
party as lessee with such exceptions as do not materially
interfere with the use made thereof by the Company or the
Subsidiary;
(xxii) the Company and each Subsidiary is insured by
insurers of recognized financial responsibility against such
losses and risks and in such amounts as is reasonable and
prudent for the business in which it is engaged;
(xxiii) BDO Seidman, LLP, the accounting firm that
has audited the required annual financial statements and
supporting schedules filed or to be filed with the Commission
as part of the Registration Statement and the Prospectus, is
an independent public accounting firm with respect to the
Trust and the Company as required by the Act;
(xxiv) the consolidated financial statements of the
Company, together with related notes and schedules of the
Company included in the Registration Statement and the
Prospectus, are accurate and present fairly the financial
position, results of operations and cash flows of the Company
as consolidated with its Subsidiaries at the indicated dates
and for the indicated periods; such financial statements have
been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the
periods involved, and all adjustments necessary for a fair
presentation of results for such periods have been made and
any unaudited financial statements have been prepared on a
basis substantially consistent with that of the audited
operating financial statements included in the Registration
Statement and the Prospectus; and the summary and selected
financial and operating data included in the Registration
Statement and the Prospectus presents fairly the information
shown therein and have been prepared on a basis consistent
with the audited and any unaudited financial statements, as
the case may be, included therein; and the pro forma
information included in the Registration Statement and the
Prospectus present fairly the information shown therein, have
been prepared in accordance with GAAP and the Commission's
rules and guidelines with respect to pro forma financial
statements and other pro forma information, have been properly
prepared on the pro forma basis described therein;
(xxv) no holders of any security of the Company have
any rights to require inclusion of any such security in the
Registration Statement or, to the extent such rights exist,
(a) such rights have been waived or (b) the securities as to
which such rights exist are currently subject to an effective
registration statement under the Act; there are no preemptive
rights with respect to the offering being made by the
Prospectus or the Common Securities;
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<PAGE>
(xxvi) no labor dispute with the employees of the
Company or any Subsidiary exists, or to the best knowledge of
the Offerors after due inquiry, is imminent, that could result
in a Material Adverse Effect; and neither the Company nor any
Subsidiary has received notice of any existing or imminent
labor disturbance by the employees of any of its principle
suppliers, customers, manufacturers or contractors that would
result in any Material Adverse Effect;
(xxvii) the Trust, the Company and each Subsidiary
has filed or caused to be filed, or has properly filed
extensions for, all foreign, federal, state and local income,
value added and franchise tax returns and has paid all taxes
and assessments shown thereon as due, except for such taxes
and assessments as are disclosed or adequately reserved
against and that are being contested in good faith by
appropriate proceedings, promptly instituted and diligently
conducted; all material tax liabilities are adequately
provided for on the books of the Company and each Subsidiary,
and there is no material tax deficiency that has been or might
be asserted against the Trust, the Company or any Subsidiary
that is not so provided for;
(xxviii) the Company and each Subsidiary owns or
possesses, or can acquire on reasonable terms, the patents,
patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and or
unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
(collectively, "Patents and Proprietary Rights") currently
employed by it in connection with the business it now operates
except where the failure to so own, possess or acquire such
Patents and Proprietary Rights would not have a Material
Adverse Effect; and, except as disclosed in the Registration
Statement and Prospectus, neither the Company nor any
Subsidiary has received any notice and the Offerors are not
otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Patent or
Proprietary Rights that, if the subject of any unfavorable
decision, ruling or finding, singly or in the aggregate, could
result in a Material Adverse Effect;
(xxix) the Trust, the Company and each Subsidiary has
conducted, is conducting and intends to conduct its business
so as to comply in all material respects with applicable
federal, state, local and foreign government Laws, except
where the failure to comply would not have a Material Adverse
Effect; and except as set forth in the Registration Statement
and the Prospectus, neither the Trust, the Company nor any
Subsidiary is charged with or, to the Offerors' knowledge,
under investigation with respect to, any material violation of
any such Laws;
(xxx) neither the Trust, the Company nor any
Subsidiary has taken or will take, directly or indirectly, any
action designed to or which has constituted or that might
reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the
price of any security of the Trust or the Company to
facilitate the sale or resale of the Shares;
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(xxxi) neither the Trust, the Company, any Subsidiary
nor, to the best knowledge of the Offerors, any employee or
agent of the Trust, the Company or any Subsidiary has made any
payment of funds of the Trust, the Company or the Subsidiary
or received or retained any funds in violation of any law,
rule or regulation (including, without limitation, the Foreign
Corrupt Practices Act) or of a character required to be
disclosed in the Prospectus; neither the Trust, the Company
nor any Subsidiary has, at any time during the past five
years, (1) made any unlawful contributions to any candidate
for any political office, or failed fully to disclose any
contribution in violation of law, or (2) made any unlawful
payment to state, federal or foreign government officer or
officers, or other person charged with similar public or
quasi-public duty;
(xxxii) no transaction has occurred between or among
the Trust, the Company or any Subsidiary and any of the
Trust's, the Company's or such Subsidiary's officers,
directors or trustees or any affiliate or affiliates of any
such officer, director or trustee that is required to be
described in and is not described in the Registration
Statement and the Prospectus;
(xxxiii) other than as provided to the Underwriters
under this Agreement, neither the Trust, the Company nor any
Subsidiary has incurred any liability for finder's or broker's
fees or agent's commissions in connection with the execution
and delivery of this Agreement, the offer and sale of the
Shares or the transactions hereby contemplated;
(xxxiv) the Trust, the Company and each Subsidiary
maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded
accountability for inventory is compared with the existing
inventory at reasonable intervals and appropriate action is
taken with respect to any differences;
(xxxv) the Offerors confirm as of the date hereof
that the Trust, the Company and each Subsidiary is in
compliance with all provisions of Section 1 of Florida
Statutes, Section 517.075, An Act Relating to Disclosure of
Doing Business with Cuba; the Offerors further agree that if
they or any Subsidiary commences engaging in business with the
government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has
become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"),
whichever date is later, the Trust and the Company will
provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
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(xxxvi) except as set forth in the Registration
Statement and the Prospectus, no Subsidiary is currently
prohibited, directly or indirectly, from paying any dividends
to the Company, from making any other distribution on any such
Subsidiary's capital stock, from repaying to the Company any
loans or advances to such Subsidiary from the Company or from
transferring any of such Subsidiary's property or assets to
the Company or any other Subsidiary.
(b) Any certificate signed by any trustee of the Trust or
officer of the Company and delivered to the Underwriters or to counsel
for the Underwriters shall be deemed a representation and warranty made
by the Trust or Company, as the case may be, to each Underwriter as to
the matters covered thereby and shall be deemed incorporated herein in
its entirety and shall be effective as if such representation and
warranty were made herein.
7. Indemnification.
(a) The Offerors agree, jointly and severally, to indemnify
and hold harmless each of the Underwriters and each person, if any, who
controls each of the Underwriters within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act (collectively the
Underwriters and each such person are sometimes referred to in this
Section 7 as the "indemnified parties") from and against any and all
losses, claims, damages, liabilities and judgments caused by, arising
out of, related to or based upon: (i) any inaccuracy of any
representation or warranty by the Offerors contained in Section 6
hereof; (ii) any failure of the Offerors to perform their respective
obligations hereunder or under law; or (iii) any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (as amended or supplemented if the Offerors
shall have furnished any amendments or supplements thereto), including
the information deemed to be part of the Registration Statement at the
time of effectiveness pursuant to Rule 430A, if applicable, or the
Prospectus or any Preliminary Prospectus or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the indemnification contained in this paragraph
with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling
such Underwriter or any employee of such Underwriter) on account of any
such loss, liability, claim, damage or expense arising from the sale of
the Shares by such Underwriter to any person if a copy of the
Prospectus shall not have been sent to such person within the time
required by the Act and the Regulations, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material
fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended or supplemented, provided that the Offerors had
delivered the Prospectus, as amended or supplemented, to the several
Underwriters on a timely basis to permit such delivery or sending; and
provided further, that the Offerors shall not be liable in any such
case to the extent that such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission made or omitted
in reliance upon, and in conformity with, information relating to the
Underwriters furnished to the Offerors by or on behalf of the
Underwriters expressly for use therein (the Offerors hereby acknowledge
for all purposes under this Agreement that (A) the last paragraph set
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forth on the outside front cover page of the Prospectus, (B) the
stabilization legend set forth on the inside of the front cover page of
the Prospectus, (C) the statements set forth under the caption
"Underwriting" in the Prospectus and (D) the statement set forth in the
second sentence under the caption "Legal Matters" in the Prospectus
constitute the only information furnished to the Offerors by or on
behalf of the Underwriters for use in the preparation of the
Registration Statement or the Prospectus or any amendment or supplement
thereto).
(b) In case any action shall be brought against any of the
indemnified parties, based upon any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement
thereto, or otherwise, and with respect to which indemnity may be
sought against the Offerors, such indemnified parties shall promptly
notify the Offerors in writing (but the failure so to notify shall not
relieve the Offerors of any liability that it may otherwise have to
such indemnified parties under this Section 7, although the Offerors'
liability to an indemnified party may be reduced on a monetary basis to
the extent, but only to the extent, it has been prejudiced by such
failure on the part of such indemnified party), and the Offerors shall
promptly assume the defense thereof, including the employment of
counsel reasonably satisfactory to such indemnified party and payment
of all fees and expenses. The indemnified parties shall each have the
right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such indemnified parties unless (i) the employment of
such counsel shall have been specifically authorized by the Offerors,
(ii) the Offerors shall have failed to assume promptly the defense or
(iii) the named parties to any such action (including any impleaded
parties) include both the indemnified parties and the Offerors, and an
indemnified party shall have been advised by counsel that there may be
a conflict of interest between the indemnified parties, on the one
hand, and the Offerors, on the other hand, (in which case the Offerors
shall not have the right to assume the defense of such action on behalf
of such indemnified party, it being understood, however, that the
Offerors shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for the indemnified parties, which
firm shall be designated in writing by EVEREN Securities, Inc., and
that all such fees and expenses shall be reimbursed promptly as they
are incurred). The Offerors shall not be liable for any settlement of
any such action effected without their written consent, which consent
shall not be unreasonably withheld, but if settled with the written
consent of the Offerors, the Offerors agree to indemnify and hold
harmless the indemnified parties from and against any and all loss or
liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested the
Offerors to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, the
Offerors agree that they shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement
is entered into more than 15 business days after delivery by registered
or certified mail to the proper address for notice to the Offerors of
the aforesaid request (whether or not such delivery is accepted) and
(ii) the Offerors shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. The
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Offerors shall not, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional and
complete release in writing of such indemnified party from any and all
liability on claims that are the subject matter of such proceeding,
which settlement shall be in form and substance reasonably satisfactory
to the indemnified party. The indemnification provided in this Section
7 will be in addition to any liability which the Offerors may otherwise
have.
(c) The Underwriters agree, severally and not jointly, to
indemnify and hold harmless each of the Offerors, its directors,
officers or trustees who sign the Registration Statement and any person
controlling the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, to the same extent as the indemnity
provided in Section 7(a) above from the Offerors to the Underwriters,
but only with reference to information stated in or omitted from the
Registration Statement, the Prospectus or any Preliminary Prospectus in
reliance upon, and in conformity with, information relating to the
Underwriters furnished in writing to the Offerors by or on behalf of
the Underwriters expressly for use therein; the Offerors hereby
acknowledge for all purposes under this Agreement that (A) the last
paragraph set forth on the outside front cover page of the Prospectus,
(B) the stabilization legend set forth on the inside of the front cover
page of the Prospectus, (C) the statements set forth under the caption
"Underwriting" in the Prospectus and (D) the statement set forth in the
second sentence under the caption "Legal Matters" in the Prospectus
constitute the only information furnished to the Offerors by or on
behalf of the Underwriters for use in the preparation of the
Registration Statement or the Prospectus or any amendment or supplement
thereto. In case any action shall be brought against the Offerors, any
of the Offerors' directors, any such officers or any person controlling
the Offerors based on the Registration Statement, the Prospectus or any
Preliminary Prospectus and in respect of which indemnity may be sought
against the Underwriters, the Underwriters shall have the rights and
duties given to the Offerors by Section 7(b) hereof (except that if the
Offerors shall have assumed the defense thereof, such Underwriter shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such Underwriter), and the Offerors,
their directors, any such officers and any person controlling the
Officers shall have the rights and duties given to the "indemnified
parties" by Section 7(b) hereof.
(d) The Company agrees to indemnify and hold harmless the
Trust, its directors, officers or trustees who sign the Registration
Statement and any person controlling the Trust within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the indemnity provided in Section 7(a) above from the
Offerors to the Underwriters.
(e) If the indemnification provided for in this Section 7 is
for any reason unavailable to an indemnified party or insufficient to
hold such indemnified party harmless in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
21
<PAGE>
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Offerors on the one hand and the
Underwriters on the other from the offering of the Securities or (ii)
if the allocation provided in clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Offerors on the one hand and the Underwriters on
the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Offerors on the
one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering and sale of
the Shares (before deducting expenses) received by the Offerors on the
one hand, and the total underwriting discounts and commissions received
by the Underwriters on the other, bears to the total price to the
public of the Shares, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Offerors and
the Underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission or the alleged omission to state a material fact
relates to information supplied by the Offerors or the Underwriters and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Offerors and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7(e) were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount of underwriting commissions received by
such Underwriter in connection with the Shares underwritten by it and
distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligation in this
Section 7(e) to contribute are several in proportion to the respective
amount of Shares purchased hereunder by each Underwriter and not joint.
8. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Shares on the
Closing Date and the Additional Shares on any Option Closing Date are subject to
the fulfillment of each of the following conditions on or prior to the Closing
Date and each Option Closing Date:
(a) All the representations and warranties of the Offerors
contained in this Agreement and in any certificate delivered hereunder
shall be true and correct on the Closing Date and each Option Closing
22
<PAGE>
Date with the same force and effect as if made on and as of the Closing
Date or Option Closing Date, as applicable. The Offerors shall not have
failed at or prior to the Closing Date or Option Closing Date, as
applicable, to perform or comply in all material respects with any of
the agreements herein contained and required to be performed or
complied with by the Offerors at or prior to the Closing Date or the
Option Closing Date, as applicable.
(b) If the Registration Statement is not effective at the time
of the execution and delivery of this Agreement, the Registration
Statement shall have become effective (or, if a post-effective
amendment is required to be filed pursuant to Rule 430A under the Act,
such post-effective amendment shall have become effective) not later
than 9:30 A.M., New York City time, on the date of this Agreement or
such later time as the Representatives may approve in writing or, if
the Registration Statement has been declared effective prior to the
execution and delivery hereof in reliance on Rule 430A, the Prospectus
shall have been filed as required by the Act, if necessary; and at the
Closing Date and each applicable Option Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
commenced or shall be pending before or, to the best knowledge of the
Underwriters or the Offerors, threatened by the Commission; every
request for additional information on the part of the Commission shall
have been complied with to the Underwriters' satisfaction; no stop
order suspending the sale of the Shares in any jurisdiction referred to
in Section 5(g) shall have been issued and no proceeding for that
purpose shall have been commenced or shall be pending or, to the best
knowledge of the Underwriters or the Offerors, threatened.
(c) The Shares shall have been qualified for sale under the
Blue Sky laws of such states as shall have been specified by the
Representatives.
(d) The legality and sufficiency of the authorization,
issuance and sale or transfer and sale of the Shares hereunder, the
validity and form of the certificates representing the Shares, the
execution and delivery of this Agreement and all corporate proceedings
and other legal matters incident thereto, and the form of the
Registration Statement and the Prospectus (except financial statements)
shall have been approved by counsel for the Underwriters exercising
reasonable judgment, and no Underwriter shall have advised the Offerors
that the Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of material fact, or
omits to state a fact that in the Underwriters' opinion is material and
is required to be stated therein or is necessary to make the statements
therein not misleading.
(e) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any material adverse change,
or any development involving a prospective material adverse change, in
or affecting particularly the business or properties of the Trust, the
Company or any Subsidiary, whether or not arising in the ordinary
course of business, that, in the reasonable judgment of the
Representatives, makes it impractical or inadvisable to proceed with
the public offering or purchase of the Shares as contemplated hereby.
23
<PAGE>
(g) The Underwriters shall have received an opinion
(satisfactory to them and their counsel) dated the Closing Date or the
Option Closing Date, as the case may be, of Tenzer Greenblatt LLP,
counsel for the Company, in form and substance satisfactory to the
Representatives and attached hereto as Exhibit B-1; the Underwriters
shall have received an opinion (satisfactory to them and their counsel)
dated the Closing Date or the Option Closing Date, as the case may be,
of Richards, Layton & Finger, P.A., special counsel for the Offorers,
in form and substance satisfactory to the Representatives and attached
hereto as Exhibit B-2; the Underwriters shall have received an opinion
(satisfactory to the Underwriters and their counsel) dated the Closing
Date or the Option Closing Date, as the case may be, of Riker, Danzig,
Scherer, Hyland & Perretti LLP, special counsel for the Company, in
form and substance satisfactory to the Representatives and attached
hereto as Exhibit B-3; the Underwriters shall have received an opinion
(satisfactory to them and their counsel) dated the Closing Date or the
Option Closing Date, as the case may be, of Richards, Layton & Finger,
P.A., special counsel for the Property Trustee, the Indenture Trustee
and the Guarantee Trustee, in form and substance satisfactory to the
Representatives and attached hereto as Exhibit B-4.
(h) The Underwriters shall have received an opinion of Gibson,
Dunn & Crutcher LLP, counsel for the Underwriters, dated the Closing
Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to the Representatives and attached hereto as
Exhibit C.
(i) The Underwriters shall have received, in connection with
the execution of this Agreement and on the Closing Date and each Option
Closing Date, a "cold comfort" letter from BDO Seidman, LLP, dated as
of each such date in form and substance satisfactory to the
Representatives with respect to the financial statements and certain
financial information and data contained in the Registration Statement
and the Prospectus.
(j) The Underwriters shall have received from the Company a
certificate, signed by Robert Kassel and Richard Raleigh in their
capacities as the Chief Executive Officer, President and Treasurer and
the Chief Operating Officer of the Company, respectively, addressed to
the Underwriters and dated the Closing Date or Option Closing Date, as
applicable, to the effect that:
(i) such officer does not know of any Proceedings
instituted, threatened or contemplated against the Company or
any Subsidiary of a character required to be disclosed in the
Prospectus that are not so disclosed; such officer does not
know of any material contract required to be filed as an
exhibit to the Registration Statement which is not so filed;
(ii) such officer has carefully examined the
Registration Statement and the Prospectus and all amendments
or supplements thereto and, in such officer's opinion, such
Registration Statement or such amendment as of its effective
date and as of the Closing Date, and the Prospectus or such
supplement as of its date and as of the Closing Date, did not
contain an untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary in
24
<PAGE>
order to make the statements therein not misleading and, in
such officer's opinion, since the effective date of the
Registration Statement, no event has occurred or information
become known that should have been set forth in an amendment
to the Registration Statement or a supplement to the
Prospectus which has not been so set forth in such amendment
or supplement;
(iii) the representations and warranties of the
Company set forth in Section 6 of this Agreement are true and
correct as of the date of this Agreement and as of the Closing
Date or the Option Closing Date, as the case may be, and the
Company has complied in all material respects with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date or the
Option Closing Date, as the case may be; and
(iv) the Commission has not issued an order
preventing or suspending the use of the Prospectus or any
preliminary prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending
the effectiveness of the Registration Statement has been
issued; and, to the best knowledge of the respective officers,
no proceedings for that purpose have been instituted or are
pending or contemplated under the Act.
The delivery of the certificate provided for in this
subparagraph shall be and constitute a representation and warranty of
the Company as to the facts set forth in said certificate.
(k) The Underwriters shall have received from the Trust a
certificate, signed by each of the Administrative Trustees, addressed
to the Underwriters and dated the Closing Date or Option Closing Date,
as applicable, to the effect that:
(i) such trustee does not know of any Proceedings
instituted, threatened or contemplated against the Trust of a
character required to be disclosed in the Prospectus that are
not so disclosed; such trustee does not know of any material
contract required to be filed as an exhibit to the
Registration Statement which is not so filed;
(ii) such trustee has carefully examined the
Registration Statement and the Prospectus and all amendments
or supplements thereto and, in such trustee's opinion, such
Registration Statement or such amendment as of its effective
date and as of the Closing Date, and the Prospectus or such
supplement as of its date and as of the Closing Date, did not
contain an untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in
such trustee's opinion, since the effective date of the
Registration Statement, no event has occurred or information
become known that should have been set forth in an amendment
to the Registration Statement or a supplement to the
Prospectus which has not been so set forth in such amendment
or supplement;
25
<PAGE>
(iii) the representations and warranties of the Trust
set forth in Section 6 of this Agreement are true and correct
as of the date of this Agreement and as of the Closing Date or
the Option Closing Date, as the case may be, and the Trust has
complied in all material respects with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date or the Option
Closing Date, as the case may be; and
(iv) the Commission has not issued an order
preventing or suspending the use of the Prospectus or any
preliminary prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending
the effectiveness of the Registration Statement has been
issued; and, to the best knowledge of the respective trustees,
no proceedings for that purpose have been instituted or are
pending or contemplated under the Act.
The delivery of the certificate provided for in this
subparagraph shall be and constitute a representation and warranty of
the Offerors as to the facts set forth in said certificate.
(l) The Underwriters and Gibson, Dunn & Crutcher LLP, counsel
for the Underwriters, shall have received on or before the Closing Date
or the Option Closing Date, as the case may be, such further documents,
opinions, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Offerors as the
Underwriters and they shall have reasonably requested from the
Offerors.
9. Effective Date of Agreement, Termination and Defaults. This
Agreement shall become effective upon, and shall not be deemed delivered until,
the later of (i) execution of this Agreement and (ii) when notification of the
effectiveness of the Registration Statement has been released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
and any exercise of the option to purchase Additional Shares may be canceled at
any time prior to any Option Closing Date by the Underwriters by written notice
to the Offerors if any of the following has occurred: (i) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change or development involving a prospective
material adverse change in the condition, financial or otherwise, of the Trust
or the Company or the earnings, assets, liabilities, affairs, prospects,
management or business of the Trust or the Company, whether or not arising in
the ordinary course of business, that would, in the Representatives' sole
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States that, in
the Representatives' judgment, is material and adverse and would, in the
Representatives' judgment, make it impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus, (iii) the suspension or
material limitation of trading in securities on the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., the Nasdaq SmallCap Market or the
Nasdaq Stock Market or limitation on prices for securities on either such
exchange, the Nasdaq SmallCap Market or the Nasdaq Stock Market, (iv) the
26
<PAGE>
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
that in the Representatives' opinion materially and adversely affects, or will
materially and adversely affect, the business or operations of the Trust or the
Company, (v) the declaration of a banking moratorium by either federal or
Illinois or New York state authorities, (vi) the taking of any action by any
Federal, state or local government or agency in respect of its monetary or
fiscal affairs that in the Representatives' opinion has a material adverse
effect on the financial markets in the United States, (vii) there shall be any
change in financial markets or in political, economic or financial conditions
which, in the opinion of the Representatives, either renders it impracticable or
inadvisable to proceed with the offering and sale of the Shares on the terms set
forth in the Prospectus or materially adversely affects the market for the
Shares, or (vii) any conditions to the Underwriters' obligations shall not have
been fulfilled when and as required by this Agreement.
If on the Closing Date or on any Option Closing Date, as the
case may be, any of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has agreed to purchase
hereunder on such date, and the aggregate number of Firm Shares or Additional
Shares, as the case may be, that such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase does not exceed, in the aggregate, 10%
of the total number of Shares that all Underwriters are obligated to purchase on
such date, each non-defaulting Underwriter shall be obligated, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I hereto
bears to the total number of Firm Shares or Additional Shares, as the case may
be, that all the non-defaulting Underwriters have agreed to purchase, or in such
other proportion as the non-defaulting Underwriters may specify, to purchase the
Firm Shares or Additional Shares, as the case may be, that such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the Closing Date or on the Option Closing Date, as the case may be,
any of the Underwriters shall fail or refuse to purchase the Firm Shares or
Additional Shares, as the case may be, in an amount that exceeds, in the
aggregate, 10% of the total number of the Shares, and arrangements satisfactory
to the non-defaulting Underwriters and the Offerors for the purchase of such
Shares are not made within 48 hours after such default, this Agreement shall
terminate without liability on the part of the non-defaulting Underwriters and
the Offerors, except as otherwise provided in this Section 9. In any such case
that does not result in termination of this Agreement, either the
Representatives or the Company may postpone the Closing Date or the Option
Closing Date, as the case may be, for not longer than seven (7) days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve a defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
The indemnity and contribution provisions and other
agreements, representations and warranties of the Offerors and the Offerors'
officers, directors and trustees set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive delivery
of and payment for the Shares, regardless of (i) any investigation, or statement
as to the results thereof, made by or on behalf of any of the Underwriters or by
or on behalf of the Offerors or the officers or directors of the Offerors or any
controlling person of the Offerors, (ii) acceptance of the Shares and payment
therefor hereunder or (iii) termination of this Agreement. Notwithstanding any
termination of this Agreement, the Offerors shall be liable for and shall pay
all expenses they have agreed to pay pursuant to Section 5(l).
27
<PAGE>
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of, and shall be binding upon, the Offers, the
Underwriters, any indemnified person referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The terms "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
10. Effectiveness of Registration Statement. The Underwriters and the
Offerors will use their best efforts to cause the Registration Statement to
become effective, if it has not yet become effective, and to prevent the
issuance of any stop order suspending the effectiveness of the Registration
Statement and, if such stop order be issued, to obtain as soon as possible the
lifting thereof.
11. Miscellaneous. All communications hereunder will be in writing and,
if sent to the Underwriters will be mailed, delivered or telegraphed and
confirmed to the Representatives c/o EVEREN Securities, Inc., 77 West Wacker
Drive, Chicago, Illinois 60601-1994, Attention: Syndicate Department, with a
copy to Gibson, Dunn & Crutcher LLP, One Montgomery Street, San Francisco,
California 94104, Attention: Kenneth R. Lamb, Esq.; and if sent to the Offerors
will be mailed, delivered or telegraphed and confirmed to the Offerors at the
Company's corporate headquarters with a copy to Tenzer Greenblatt LLP, 405
Lexington Avenue, New York, New York 10174, Attention: Robert J. Mittman, Esq.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAW THEREOF.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
28
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Offerors and the several Underwriters, including the Representatives.
Very truly yours,
U.S. HOME & GARDEN INC.
By:__________________________________
Robert Kassel
Chief Executive Officer, President
and Treasurer
Very truly yours,
U.S. HOME & GARDEN TRUST I
By:__________________________________
Robert Kassel
Administrative Trustee
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
EVEREN SECURITIES, INC.
JOSEPHTHAL & CO. INC.
Acting as Representatives of the several Underwriters named in Schedule I.
By: EVEREN Securities, Inc.
By:__________________________________
Todd Jadwin
Senior Managing Director
29
<PAGE>
Exhibit A
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
Easy Gardener, Inc. Delaware
(100% owned by the Company)
Golden West Agri-Products, Inc. California
(100% owned by the Company)
Weatherly Consumer Products Group, Inc. Delaware
(100% owned by Easy Gardener, Inc.)
Weatherly Consumer Products, Inc. Delaware
(100% owned by Weatherly Consumer Products Group, Inc.)
Weed Wizard Acquisition Corp. Delaware
(100% owned by Easy Gardener, Inc.)
<PAGE>
Exhibit B-1 through B-4
Attached
<PAGE>
Exhibit C
Attached
<PAGE>
Exhibit D
Attached
<PAGE>
Schedule I
Number of Firm Shares
Underwriter to be Purchased
- ----------- ---------------------
EVEREN Securities, Inc. ................................
Josephthal & Co. Inc....................................
Total..........................................
<PAGE>
EXHIBIT 4.1
U.S. HOME & GARDEN INC.
to
WILMINGTON TRUST COMPANY
Trustee
JUNIOR SUBORDINATED INDENTURE
Dated as of ____________ ___, 1998
<PAGE>
U.S. HOME & GARDEN, INC.
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by
the Trust Reform Act of 1990, are a part of and govern the Indenture whether or
not physically contained therein) and the Junior Subordinated Indenture, dated
as of ________________, 1998.
Trust Indenture Indenture
Act Section Section
----------- ---------
ss 310(a)(1), (2) and (5) Not Applicable
(a) (3) Not Applicable
(a) (4) Not Applicable
(b) 6.8
6.10
(c) Not Applicable
ss 311(a) 6.13
(b) 6.13
7.3(a)
ss 312(a) 7.1
7.2(a)
(b) 7.2(b)
(c) 7.2(c)
ss 313(a) 7.3(a)
(b) 7.3(b)
(c) 7.3(a), 7.3(b)
(d) 7.3(c)
ss 314(a) (1), (2) and (3) 7.4
(a) (4) 10.5
(b) Not Applicable
(c) (1) 1.2
(c) (2) 1.2
(c) (3) Not Applicable
(d) Not Applicable
(e) 1.2
(f) Not Applicable
ss 315(a) 6.1(a)
(b) 6.2
7.3(a)
(c) 6.1(b)
(d) 6.1(c)
(d)(1) 6.1(a)(1)
(d)(2) 6.1(c)(2)
(d)(3) 6.1(c)(3)
(e) 5.14
ss 316(a) 1.1
(a)(1)(A) 5.12
(a)(1)(B) 5.13
(a)(2) Not Applicable
(b) 5.8
(c) 1.4(f)
ss 317(a)(1) 5.3
(a)(2) 5.4
(b) 10.3
ss 318(a) 1.7
- ------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I: DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION............................................................................................ 1
Section 1.1 Definitions......................................................... 1
Section 1.2 Compliance Certificate and Opinions................................. 10
Section 1.3 Forms of Documents Delivered to
Trustee............................................................. 11
Section 1.4 Acts of Holders..................................................... 12
Section 1.5 Notices, Etc. to Trustee and Company................................ 14
Section 1.6 Notice to Holders; Waiver........................................... 15
Section 1.7 Conflict with Trust Indenture Act................................... 15
Section 1.8 Effect of Headings and Table of
Contents............................................................ 15
Section 1.9 Successors and Assigns.............................................. 15
Section 1.10 Separability Clause................................................. 15
Section 1.11 Benefits of Indenture............................................... 16
Section 1.12 Governing Law....................................................... 16
Section 1.13 Non-Business Days................................................... 16
ARTICLE II: SECURITY FORMS............................................................................. 16
Section 2.1 Forms Generally..................................................... 16
Section 2.2 Form of Face of Security............................................ 17
Section 2.3 Form of Reverse of Security......................................... 21
Section 2.4 Additional Provisions Required in Global
Security............................................................ 25
Section 2.5 Form of Trustee's Certificate of
Authentication...................................................... 25
ARTICLE III: THE SECURITIES............................................................................ 25
Section 3.1 Title and Terms..................................................... 25
Section 3.2 Denominations....................................................... 28
Section 3.3 Execution, Authentication, Delivery and
Dating.............................................................. 28
Section 3.4 Temporary Securities................................................ 30
Section 3.5 Registration, Transfer and Exchange................................. 30
Section 3.6 Mutilated, Destroyed, Lost and Stolen
Securities.......................................................... 32
Section 3.7 Payment of Interest; Interest Rights
Preserved........................................................... 33
Section 3.8 Persons Deemed Owners............................................... 35
Section 3.9 Cancellation........................................................ 35
Section 3.10 Computation of Interest............................................. 35
Section 3.11 Deferrals of Interest Payment Dates................................. 36
Section 3.12 Right of Set-Off.................................................... 37
Section 3.13 Agreed Tax Treatment................................................ 37
Section 3.14 Shortening of Stated Maturity....................................... 37
Section 3.15 CUSIP Numbers....................................................... 38
</TABLE>
-i-
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<TABLE>
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<S> <C>
ARTICLE IV: SATISFACTION AND DISCHARGE................................................................. 38
Section 4.1 Satisfaction and Discharge of
Indenture........................................................... 38
Section 4.2 Application of Trust Money.......................................... 39
ARTICLE V: REMEDIES.................................................................................... 40
Section 5.1 Events of Default................................................... 40
Section 5.2 Acceleration of Maturity; Rescission and
Annulment........................................................... 41
Section 5.3 Collection of Indebtedness and Suits for
Enforcement by Trustee.............................................. 42
Section 5.4 Trustee May File Proofs of Claim.................................... 43
Section 5.5 Trustee May Enforce Claim Without
Possession of Securities............................................ 44
Section 5.6 Application of Money Collected...................................... 44
Section 5.7 Limitation on Suits................................................. 45
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest;
Direct Action by Holders of Preferred Securities.................... 46
Section 5.9 Restoration of Rights and Remedies.................................. 46
Section 5.10 Rights and Remedies Cumulative...................................... 46
Section 5.11 Delay or Omission Not Waiver........................................ 47
Section 5.12 Control by Holders.................................................. 47
Section 5.13 Waiver of Past Defaults............................................. 47
Section 5.14 Undertaking for Costs............................................... 48
Section 5.15 Waiver of Usury, Stay or Extension
Laws................................................................ 48
ARTICLE VI: THE TRUSTEE................................................................................ 49
Section 6.1 Certain Duties and Responsibilities................................. 49
Section 6.2 Notice of Defaults.................................................. 50
Section 6.3 Certain Rights of Trustee........................................... 50
Section 6.4 Not Responsible for Recitals or Issuance
of Securities....................................................... 51
Section 6.5 May Hold Securities................................................. 52
Section 6.6 Money Held in Trust................................................. 52
Section 6.7 Compensation and Reimbursement...................................... 52
Section 6.8 Disqualification; Conflicting
Interests........................................................... 53
Section 6.9 Corporate Trustee Required;
Eligibility......................................................... 53
Section 6.10 Resignation and Removal; Appointment of
Successor........................................................... 54
Section 6.11 Acceptance of Appointment by Successor.............................. 55
Section 6.12 Merger, Conversion, Consolidation or
Succession to Business.............................................. 56
Section 6.13 Preferential Collection of Claims
Against Company..................................................... 57
Section 6.14 Appointment of Authenticating Agent................................. 57
</TABLE>
-ii-
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<TABLE>
<CAPTION>
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<S> <C>
ARTICLE VII: HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
COMPANY....................................................................................... 59
Section 7.1 Company to Furnish Trustee Names and
Addresses of Holders................................................ 59
Section 7.2 Preservation of Information,
Communications to Holders........................................... 59
Section 7.3 Reports by Trustee.................................................. 60
Section 7.4 Reports by Company.................................................. 60
ARTICLE VIII: CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE......................................................................................... 61
Section 8.1 Company May Consolidate, Etc., Only on
Certain Terms....................................................... 61
Section 8.2 Successor Corporation Substituted................................... 61
ARTICLE IX: SUPPLEMENTAL INDENTURES.................................................................... 62
Section 9.1 Supplemental Indentures without Consent
of Holders.......................................................... 62
Section 9.2 Supplemental Indentures with Consent of
Holders............................................................. 63
Section 9.3 Execution of Supplemental Indentures................................ 65
Section 9.4 Effect of Supplemental Indentures................................... 65
Section 9.5 Conformity with Trust Indenture Act................................. 66
Section 9.6 Reference in Securities to Supplemental
Indentures.......................................................... 66
ARTICLE X: COVENANTS................................................................................... 66
Section 10.1 Payment of Principal, Premium and
Interest............................................................ 66
Section 10.2 Maintenance of Office or Agency..................................... 66
Section 10.3 Money for Security Payments to be Held
in Trust............................................................ 67
Section 10.4 Statement as to Compliance.......................................... 68
Section 10.5 Waiver of Certain Covenants......................................... 69
Section 10.6 Additional Sums..................................................... 69
Section 10.7 Additional Covenants................................................ 70
ARTICLE XI: REDEMPTION OF SECURITIES................................................................... 71
Section 11.1 Applicability of This Article....................................... 71
Section 11.2 Election to Redeem; Notice to Trustee............................... 71
Section 11.3 Selection of Securities to be Redeemed.............................. 72
Section 11.4 Notice of Redemption................................................ 72
Section 11.5 Deposit of Redemption Price......................................... 73
Section 11.6 Payment of Securities Called for
Redemption.......................................................... 73
Section 11.7 Right of Redemption of Securities
Initially Issued to a U.S. Home & Garden Trust...................... 74
ARTICLE XII: SINKING FUNDS............................................................................. 74
Section 12.1 Applicability of Article............................................ 74
</TABLE>
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<TABLE>
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Page
<S> <C>
Section 12.2 Satisfaction of Sinking Fund Payments
with Securities..................................................... 75
Section 12.3 Redemption of Securities for Sinking
Fund................................................................ 75
ARTICLE XIII: SUBORDINATION OF SECURITIES.............................................................. 77
Section 13.1 Securities Subordinate to Senior Debt
and Subordinated Debt............................................... 77
Section 13.2 Payment Over of Proceeds Upon
Dissolution, Etc.................................................... 77
Section 13.3 Prior Payment to Senior Debt and
Subordinated Debt Upon Acceleration of
Securities.......................................................... 79
Section 13.4 No Payment When Senior Debt and
Subordinated Debt in Default........................................ 79
Section 13.5 Payment Permitted If No Default..................................... 80
Section 13.6 Subrogation to Rights of holders of
Senior Debt and Subordinated Debt................................... 81
Section 13.7 Provisions Solely to Define Relative
Rights.............................................................. 81
Section 13.8 Trustee to Effectuate Subordination................................. 82
Section 13.9 No Waiver of Subordination Provisions............................... 82
Section 13.10 Notice to Trustee................................................... 82
Section 13.11 Reliance on Judicial Order or
Certificate of Liquidating Agent.................................... 83
Section 13.12 Trustee Not Fiduciary for holders of
Senior Debt and Subordinated Debt................................... 84
Section 13.13 Rights of Trustee as Holder of Senior
Debt and Subordinated Debt; Preservation of
Trustee's Rights.................................................... 84
Section 13.14 Article Applicable to Paying Agents................................. 84
Section 13.15 Certain Conversions or Exchanges Deemed
Payment............................................................. 84
</TABLE>
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<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of _________ __, 1998,
between U.S. HOME & GARDEN INC., a Delaware corporation (hereinafter called
the "company") having its principal office at 655 Montgomery Street, San
Francisco, California 94111, and WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
junior subordinated debt securities in series (hereinafter called the
"Securities") of substantially the tenor hereinafter provided, including,
without limitation, Securities issued to evidence loans made to the Company of
the proceeds from the issuance from time to time by one or more business
trusts (each a "U.S. Home & Garden Trust," and, collectively, the "U.S. Home &
Garden Trusts") of preferred trust interests in such Trusts (the "Preferred
Securities") and common interests in such Trusts (the "Common Securities" and,
collectively with the Preferred Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration
of the premises and the purchase of the Securities by the Holders thereof, it
is mutually covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the contest otherwise requires:
(a) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE>
(c) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean such
accounting principles which are generally accepted at the date or time of such
computation; provided, that when two or more principles are so generally
accepted, it shall mean that set of principles consistent with those in use by
the Company; and
(d) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"1940 Act" means the Investment Company Act of 1940, as
amended.
"Act" when used with respect to any Holder has the meaning specified
in Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue
on any interest on the Securities of any series the payment of which has not
been made on the applicable Interest Payment Date and which shall accrue at
the rate per annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means the sum of any additional taxes, duties and
other governmental charges to which a U.S. Home & Garden Trust has become
subject from time to time as a result of a Tax Event.
"Administrative Trustee" means, in respect of any U.S. Home & Garden
Trust, each Person identified as an "Administrative Trustee" or an
"Administrative Agent" in the related Amended and Restated Trust Agreement,
solely in such Person's capacity as Administrative Trustee or an
Administrative Agent, as the case may be, of such U.S. Home & Garden Trust
under such Amended and Restated Trust Agreement and not in such Person's
individual capacity, or any successor administrative trustee or successor
administrative agent, as the case may be, appointed as therein provided.
"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; provided, however, no U.S. Home & Garden
Trust to which Securities have been issued shall be deemed to be an Affiliate
of the Company. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities,
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by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors, or such committee of the Board of Directors or
officers of the Company to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday,
(ii) a day on which banking institutions in the State of California are
authorized or required by law or executive order to remain closed or (iii) a
day on which the Corporate Trust Office of the Trustee, or, with respect to
the Securities of a series initially issued to a U.S. Home & Garden Trust, the
principal office of the Property Trustee under the related Trust Agreement, is
closed for business.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned
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to it under the Trust Indenture Act, then the body performing such duties on
such date.
"Common Securities" has the meaning specified in the first
recital of this Indenture.
"Common Stock" means the common stock, $.01 par value per
share, of the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chief Executive
Officer, President or a Vice President, and by its Vice President, Controller,
its Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered.
"Corporation" includes a corporation, association, company,
joint-stock company or business trust.
"Debt" means, with respect to any Person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent: (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of
such Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of
such Person issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business); (v) every capital lease obligation of
such Person; (vi) all indebtedness of such Person whether incurred on or prior
to the date of this Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor or otherwise.
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<PAGE>
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.1 with respect to such series (or any successor thereto).
"Discount Security" means any security which provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 5.2.
"Distributions" with respect to the Trust Securities issued by a U.S.
Home & Garden Trust, means amounts payable in respect of such Trust Securities
as provided in the related Trust Agreement and referred to therein as
"Distributions."
"Dollar" or "U.S. $" means the currency of the United States
of America that, as at the time of payment, is legal tender for
the payment of public and private debts.
"Event of Default" has the meaning specified in Article V unless
otherwise specified in the supplemental indenture or the Officers' Certificate
delivered pursuant to Section 3.1 hereof creating a series of Securities.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Extension Period" has the meaning specified in Section 3.11.
"Global Security" means a Security in the form prescribed in Section
2.4 evidencing all or part of a series of Securities, issued to the Depositary
or its nominee for such series, and registered in the name of such Depositary
or its nominee.
"Guarantee Agreement" means the Guarantee Agreement substantially in
the form attached hereto as Annex C, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.
"Holder" means a Person in whose name a Security is
registered in the Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
or one or more Officers'
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<PAGE>
Certificates delivered pursuant to Section 3.1 and shall include the terms of
each particular series of Securities established as contemplated by Section
3.1.
"Interest Payment Date" means as to each series of Securities, the
Stated Maturity of an installment of interest on such Securities.
"Investment Company Event" means, in respect of a U.S. Home & Garden
Trust, the receipt by the Company and a U.S. Home & Garden Trust of an Opinion
of Counsel experienced in such matters to the effect that, as a result of
change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, such U.S. Home & Garden Trust is or will be considered
an "investment company" that is required to be registered under the 1940 Act,
which change becomes effective on or after the date of original issuance of
the Preferred Securities of such U.S. Home & Garden Trust.
"Junior Subordinated Payment" has the meaning specified in
Section 13.2.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind
specified in Section 5.2.
"Officers' Certificate" means a certificate signed by the Chief
Executive Officer, the President or a Vice President, and by the Vice
President, Controller, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
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<PAGE>
(ii) Securities for whose payment money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent in
trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which
other Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented
that any such Securities are held by Holders in whose hands such Securities
are valid, binding and legal obligations of the Company; provided, however,
that in determining whether the Holders of the requisite principal amount of
Outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the
Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Securities which the Trustee knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon
the Securities or any Affiliate of the Company or such other obligor. Upon the
written request of the Trustee, the Company shall furnish to the Trustee
promptly an Officers' Certificate listing and identifying all Securities, if
any, known by the Company to be owned or held by or for the account of the
Company, or any other obligor on the Securities or any Affiliate of the
Company or such obligor, and, subject to the provisions of Section 6.1, the
Trustee shall be entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Securities
not listed therein are Outstanding for the purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment" means, with respect to the Securities of any
series, the place or places where the principal of (and premium, if any) and
interest on the Securities of such series are payable pursuant to Sections 3.1
and 3.11.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same
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<PAGE>
debt as that evidenced by such particular Security; and, for the purposes of
this definition, any security authenticated and delivered under Section 3.6 in
lieu of a lost, destroyed or stolen Security shall be deemed to evidence the
same debt as the lost, destroyed or stolen Security.
"Preferred Securities" has the meaning specified in the
first recital of this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, in respect of any U.S. Home & Garden Trust,
the commercial bank or trust company identified as the "Property Trustee" in
the related Trust Agreement, solely in its capacity as Property Trustee of
such U.S. Home & Garden Trust under such Trust Agreement and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as therein provided.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date with respect to the Securities of a series means, unless
otherwise provided pursuant to Section 3.1 with respect to Securities of a
series, (i) in the case of Securities of a series represented by one or more
Global Securities, the Business Day next preceding such Interest Payment Date
and (ii) in the case of Securities of a series not represented by one or more
Global Securities, the date which is fifteen days next preceding such Interest
Payment Date (whether or not a Business Day).
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Securities" or "Security" means any debt securities or debt security,
as the case may be, authenticated and delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
"Senior Debt and Subordinated Debt" means the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such
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<PAGE>
claim for post-petition interest is allowed in such proceeding), on Debt of
the Company, whether incurred on or prior to the date of this Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Securities or to other
Debt which is pari passu with, or subordinated to, the Securities; provided,
however, that Senior Debt and Subordinated Debt shall not be deemed to include
(a) any Debt of the Company which, when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Reform Act of
1978, as amended, was without recourse to the Company, (b) any Debt of the
Company to any of its Subsidiaries, (c) Debt to any employee of the Company,
and (d) any Securities.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case
of such principal, as such date may be shortened or extended as provided
pursuant to the terms of such Security and this Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at
all times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Tax Event" means the receipt by the Company and the U.S. Home &
Garden Trust of an Opinion of Counsel (as defined in the relevant U.S. Home &
Garden Trust Agreement) experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or Judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or such prospective change, pronouncement or decision is
announced on or after the date of issuance of the Preferred Securities of such
U.S. Home & Garden Trust, there is more than an insubstantial risk that (i)
such U.S. Home & Garden Trust is, or will be within 90 days of the date of
such Opinion of Counsel, subject to United States Federal income tax with
respect to income received or accrued on the corresponding series of
Securities, (ii) interest
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<PAGE>
payable by the Company on such corresponding series of Securities is not, or
within 90 days of the date of such Opinion of Counsel, will not be, deductible
by the Company, in whole or in part, for United States Federal income tax
purposes or (iii) such U.S. Home & Garden Trust is, or will be within 90 days
of the date of such Opinion of Counsel, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Trust" has the meaning specified in the first recital of
this Indenture.
"Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by the form of Amended and Restated
Trust Agreement substantially in the form attached hereto as Annex B, or
substantially in such form as may be specified as contemplated by Section 3.1
with respect to the Securities of any series, in each case as amended from
time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder
and, if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. (S)(S) 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
"U.S. Home & Garden Guarantee" means the guarantee by the Company of
distributions on the Preferred Securities of a U.S. Home & Garden Trust to the
extent provided in the related Guarantee Agreement.
"U.S. Home & Garden Trust" has the meaning specified in the first
recital of this Indenture.
"Vice President" when used with respect to the Company, means any
duly appointed vice president, whether or not designated by a word or words
added before or after the title "vice president" of the Company.
Section 1.2 Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate
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<PAGE>
stating that all conditions precedent (including covenants, compliance with
which constitutes a condition precedent), if any, provided for in this
Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent (including covenants compliance with which constitute a
condition precedent), if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 10.5) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(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 each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3 Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based
-11-
<PAGE>
are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect
to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders.
(i) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given to or
taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an agent
or proxy duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments is or are delivered to the Trustee, and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred
to as the Acts of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.1) conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(ii) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a Person acting in other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(iii) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(iv) The ownership of Securities shall be proved by the Securities
Register.
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<PAGE>
(v) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued
upon the transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or suffered to be done by the Trustee or the Company
in reliance thereon, whether or not notation of such action is made upon such
Security.
(vi) The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that
the Company may not set a record date for, and the provisions of this
paragraph shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any
Person be canceled and of no effect), and nothing in this paragraph shall be
construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities of the relevant series on the date
such action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities of the
relevant series in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
join in the giving or making of (i) any Notice of Default, (ii) any
declaration of acceleration referred to in Section 5.2, (iii) any request to
institute proceedings referred to in Section 5.7(b) or (iv) any direction
referred to in Section 5.12, in each case with respect to Securities of such
series. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities of such series on such record date, and no other
Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date,
provided that no
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such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action for which a record date has previously been set pursuant
to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Trustee, at the
Company's expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Company in
writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day, provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto
in writing, and to each Holder of Securities of the relevant series in the
manner set forth in Section 1.6, on or prior to the existing Expiration Date.
If an Expiration Date is not designated with respect to any record date set
pursuant to this Section, the party hereto which set such record date shall be
deemed to have initially designated the 180th day after such record date as
the Expiration Date with respect thereto, subject to its right to change the
Expiration Date as provided in this paragraph. Notwithstanding the foregoing,
no Expiration Date shall be later than the 180th day after the applicable
record date.
(vii) Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so
with regard to all or any part of the principal amount of such Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal amount.
Section 1.5 Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder, any holder of Preferred
Securities or the Company shall be sufficient for every purpose
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hereunder if made, given, furnished or filed in writing to or with the Trustee
at its Corporate Trust office, or
(b) the Company by the Trustee, any Holder or any holder of Preferred
Securities shall be sufficient for every purpose (except as otherwise provided
in Section 5.1) hereunder if in writing and mailed, first class, postage
prepaid, to the Company, addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Company.
Section 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first class postage prepaid, to each
Holder affected by such event, at the address of such Holder as it appears in
the Securities Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice,
nor any defect in any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
Section 1.7 Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
Section 1.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
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In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
and assigns, the Holders of Senior Debt and Subordinated Debt, the Holders of
the Securities and, to the extent expressly provided in Sections 5.2, 5.8,
5.9, 5.11, 5.13, 9.1 and 9.2, the holders of Preferred Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
Section 1.12 Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York without regard to
conflicts of laws principles thereof, except that the immunities and standard
of care of the Trustee shall be governed by Delaware law.
Section 1.13 Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or the Securities)
payment of interest or principal (and premium, if any) need not be made on
such date, but may be made on the next succeeding Business Day (and no
interest shall accrue for the period from and after such Interest Payment
Date, Redemption Date or Stated Maturity, as the case may be, until such next
succeeding Business Day, with the same force and effect as if made on the
Interest Payment Date or Redemption Date or at the Stated Maturity).
ARTICLE II
SECURITY FORMS
Section 2.1 Forms Generally.
The Securities of each series shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established
by or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with applicable tax laws or the rules of any securities
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exchange or as may, consistently herewith, be determined by the officers
executing such securities, as evidenced by their execution of the Securities.
If the form of Securities of any series is established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Vice President, Controller, the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.3 with respect to
the authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be substantially
in the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
Section 2.2 Form of Face of Security.
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U.S. HOME & GARDEN INC.
___% JUNIOR SUBORDINATED DEBENTURE DUE _______
Registered Principal Amount:
No. CUSIP No.
U.S. Home & Garden Inc., a corporation organized and existing under
the laws of Delaware (hereinafter called the "Company," which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _____________________, or registered
assigns, the principal sum of $___________ ( Dollars) on
______________________; provided that the Company may shorten the Stated
Maturity of the principal of this Security to a date not earlier than
___________. The Company further promises to pay interest on said principal
sum from ____________ or from the most recent interest payment date (each such
date, an "Interest Payment Date") on which interest has been paid or duly
provided for, monthly (subject to deferral as set forth herein) in arrears on
the 15th day of each calendar month of each year commencing __________ at the
rate of ___% per annum, until the principal hereof shall have become due and
payable, plus Additional Interest, if any, until the principal hereof is paid
or duly provided for or made available for payment and on any overdue
principal and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the rate of ___% per annum. The amount of interest payable for any
period shall be computed on the basis of twelve 30-day months and a 360-day
year. The amount of interest payable for any partial period shall be computed
on the basis of the number of days elapsed in a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this
Security is not a Business Day, then a payment of the interest payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if made on the date the payment was originally
payable. A "Business Day" shall mean any day other than a Saturday or Sunday a
day on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed or on a day on which the
Corporate Trust Office of the Trustee, or the principal office of the Property
Trustee under the Amended and Restated Trust Agreement (hereinafter referred
to) for [name of Trust] is closed for business. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name
this security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest installment,
which shall be [insert Record Date] next preceding such Interest Payment Date.
Any such interest installment not so punctually paid or duly provided for
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shall forthwith cesse to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to holders of Securities of this
series not less than ______ days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities of this series may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
[If applicable insert--So long as no Event of Default has occurred
and is continuing, the Company shall have the right at any time during the
term of this Security to defer payment of interest on this Security, at any
time or from time to time, for up to 60 consecutive monthly interest payment
periods with respect to each deferral period (each an "Extension Period"),
(during which Extension Periods the Company shall have the right to make
partial payments of interest on any Interest Payment Date, and at the end of
which the Company shall pay all interest then accrued and unpaid (together
with Additional Interest thereon to the extent permitted by applicable law));
provided, however, that no Extension Period shall extend beyond the Stated
Maturity of the principal of this Security; provided, further, that during any
such Extension Period, the Company shall not, and shall not permit any
Subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt security of the
Company (including Securities issued by the Company pursuant to the Indenture
other than the Securities represented by this certificate) that ranks pari
passu with or junior in interest to this Security, (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities
of any Subsidiaries of the Company (if such guarantee ranks pari passu in all
respects with or junior in interest to this Security (other than (a) dividends
or distributions in the Company's capital stock (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the U.S. Home & Garden Guarantee related
to the Preferred Securities issued by [name of Trust], and (d) purchases of
Common Stock related to the issuance of Common Stock or rights under any of
the Company's benefit plans for its directors, officers or employees, or (iv)
redeem, purchase or acquire less than all of the Securities of this series or
any of the Preferred Securities. Prior to the termination of any such
Extension Period, the
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Company may further extend such Extension Period, provided that such extension
does not cause such Extension Period to exceed [60] consecutive interest
payment periods or to extend beyond the Stated Maturity. Upon the termination
of any such Extension Period and upon the payment of all amounts then due on
any Interest Payment Date, and subject to the foregoing limitation, the
Company may elect to begin a new Extension Period. No interest shall be due
and payable during an Extension Period except at the end thereof. The Company
shall give the Trustee, the Property Trustee and the Administrative Trustees
of [name of Trust] notice of its election to begin any Extension Period at
least [one] Business Day prior to the earlier of (i) the date on which
Distributions on the Preferred Securities would be payable except for the
election to begin such Extension Period, or (ii) the date the Administrative
Trustees are required to give notice to the American Stock Exchange, the New
York Stock Exchange, the Nasdaq Stock Market or other applicable stock
exchange or automated quotation system on which the Preferred Securities are
then listed or quoted or to holders of such Preferred Securities on the record
date or (iii) the date such Distributions are payable, but in any event not
less than [one] Business Day prior to such record date. The Trustee shall give
notice of the Company's election to begin a new Extension Period to the
holders of the Preferred Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period.]
Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Trustee or at the
office of such paying agent or paying agents as the Company may designate from
time to time, maintained for that purpose in the United States, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Securities Register or (ii) by transfer to an account maintained by the person
entitled thereto, in immediately available funds, at such place and to such
account as may be designated by the Person entitled thereto as specified in
the Securities Register.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, unsecured and will rank junior and subordinate and
subject in right of payments to the prior payment in full of all Senior Debt
and Subordinated Debt, and this Security is issued subject to the provisions
of the Indenture with respect thereto. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may
be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his attorney-in-fact for any and all such purposes.
Each
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Holder hereof, by his acceptance hereof, waives all notice of the acceptance
of the subordination provisions contained herein and in the Indenture by each
holder of Senior Debt and Subordinated Debt, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
U.S. Home & Garden, Inc.
By:_________________________
[Chief Executive Officer,
President or Vice President]
Attest:
__________________________________
[Secretary or Assistant Secretary]
Section 2.3 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under a Junior Subordinated Indenture, dated as of ____________,
1998 (herein called the "Indenture"), between the Company and ______________
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Trustee, the Company and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $ ______________.
All terms used in this Security that are defined in the Indenture and
in the Amended and Restated Trust Agreement, dated as of ____________, 1998,
as amended (the "Amended and Restated Trust Agreement"), for [insert name of
trust] among U.S. Home &
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Garden, Inc., as depositor, and the Trustees named therein, shall have the
meanings assigned to them in the Indenture or the Amended and Restated Trust
Agreement, as the case may be.
[If applicable, insert--The Company may at any time, at its option,
on or after _______________, and subject to the terms and conditions of
Article XI of the Indenture, redeem this Security [in whole at any time] [or
in part from time to time], without premium or penalty, at a redemption price
equal to [insert redemption price] to the Redemption Date.]
[If applicable, insert--Upon the occurrence and during the
continuation of a Tax Event or Investment Company Event in respect of a U.S.
Home & Garden Trust, the Company may, at its option, at any time within 90
days of the occurrence of such Tax Event or Investment Company Event redeem
this Security, [if applicable, insert--in whole but not in part], subject to
the provisions of Section 11.7 and the other provisions of Article XI of the
Indenture, at a redemption price equal to [insert redemption price] to the
Redemption Date.]
[If applicable, insert--In the event of redemption of this Security
in part only, a new Security or Securities of this series for the portion
hereof not redeemed will be issued in the name of the Holder hereof upon the
cancellation hereof.]
The Indenture contains provisions for satisfaction and discharge of
the entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such
series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof
or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
[If the Security is not a Discount Security,--As provided in
and subject to the provisions of the Indenture, if an Event of
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Default with respect to the Securities of this series at the time Outstanding
occurs and is continuing, then and in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of this series may declare the principal amount of all the Securities of this
series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, in the case
of the Securities of this series issued to a U.S. Home & Garden Trust, if upon
an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of this series fails to declare
the principal of all the Securities of this series to be immediately due and
payable, the holders of at least 25% in aggregate Liquidation Amount of the
Preferred Securities then outstanding shall have such right by a notice in
writing to the Company and the Trustee; and upon any such declaration the
principal amount of and the accrued interest (including any Additional
Interest) on all the Securities of this series shall become immediately due
and payable, provided that the payment of principal and interest (including
any Additional Interest) on such Securities shall remain subordinated to the
extent provided in Article XIII of the Indenture.]
[If the Security is a Discount Security,--As provided in and subject
to the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than such
portion of the principal amount as may be specified in the terms of this
series may declare an amount of principal of the Securities of this series to
be due and payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), provided that, in the case of the Securities
of this series issued to a U.S. Home & Garden Trust, if upon an Event of
Default, the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Securities of this series fails to declare the principal of
all the Securities of this series to be immediately due and payable, the
holders of at least 25% in aggregate Liquidation Amount of the Preferred
Securities then outstanding shall have such right by a notice in writing to
the Company and the Trustee. Such amount shall be equal to [insert formula for
determining the amount]. Upon any such declaration, such amount of the
principal of and the accrued interest (including any Additional Interest) on
all the Securities of this series shall become immediately due and payable,
provided that the payment of principal and interest (including any Additional
Interest) on such Securities shall remain subordinated to the extent provided
in Article XIII of the Indenture. Upon payment (i) of the amount of principal
so declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the
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payment of the principal of and interest, if any, on this Security shall
terminate.]
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate,
and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2
of the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees. No service charge shall be made for
any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Securities of this series are issuable only in registered form
without coupons in minimum denominations of $25 and any integral multiples of
$25 in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for
a like aggregate principal amount of Securities of such series of a different
authorized denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and
local tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
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Section 2.4 Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 2.2 and 2.3, bear a legend in substantially
the following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND 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."
Section 2.5 Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
as Trustee
By:______________________________
Authorized Officer
ARTICLE III
THE SECURITIES
Section 3.1 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate (such Officers' Certificate shall have the effect of a
supplemental indenture for all purposes hereunder), or established in one or
more indentures supplemental hereto, prior to the issuance of Securities of a
series:
(i) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
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(ii) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder); provided, however, that the authorized
aggregate principal amount of such series may be increased above such amount
by a Board Resolution to such effect;
(iii) the Stated Maturity or Maturities on which the principal of
the Securities of such series is payable or the method of determination
thereof;
(iv) the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates and extent to which
Additional Interest, if any, shall be payable in respect of any Securities of
such series, the Interest Payment Dates on which such interest shall be
payable, the right, pursuant to Section 3.11 or as otherwise set forth
therein, of the Company to defer or extend an Interest Payment Date, and the
Regular Record Date for the interest payable on any Interest Payment Date or
the method by which any of the foregoing shall be determined;
(v) the place or places where the principal of (and premium, if
any) and interest on the Securities of such series shall be payable, the place
or places where the Securities of such series may be presented for
registration of transfer or exchange, and the place or places where notices
and demands to or upon the Company in respect of the Securities of such series
may be made;
(vi) the period or periods within or the date or dates on which,
if any, the price or prices at which and the terms and conditions upon which
the Securities of such series may be redeemed, in whole or in part, at the
option of the Company;
(vii) the obligation or the right, if any, of the Company to
prepay, repay or purchase the Securities of such series pursuant to any
sinking fund, amortization or analogous provisions, or at the option of a
holder thereof, and the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in which
and the other terms and conditions upon which Securities of the series shall
be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(viii) the denominations in which any Securities of such series
shall be issuable, if other than denominations of $25 and any integral
multiples of $25 in excess thereof;
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(ix) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any) and
interest, if any, on the Securities of the series shall be payable, or in
which the Securities of the series shall be denominated;
(x) the additions, modifications or deletions, if any, in the
Events of Default or covenants of the Company set forth herein with respect to
the Securities of such series;
(xi) if other than the principal amount thereof, the portion of
the principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(xii) the additions or changes, if any, to this Indenture with
respect to the Securities of such series as shall be necessary to permit or
facilitate the issuance of the Securities of such series in bearer form,
registrable or not registrable as to principal, and with or without interest
coupons;
(xiii) any index or indices used to determine the amount of
payments of principal of and premium, if any, on the Securities of such series
or the manner in which such amounts will be determined;
(xiv) whether the Securities of the series, or any portion
thereof, shall initially be issuable in the form of a temporary Global
Security representing all or such portion of the Securities of such series and
provisions for the exchange of such temporary Global Security for definitive
Securities of such series;
(xv) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities and,
in such case, the respective Depositaries for such Global Securities, the form
of any legend or legends which shall be borne by any such Global Security in
addition to or in lieu of that set forth in Section 2.4 and any circumstances
in addition to or in lieu of those set forth in Section 3.5 in which any such
Global Security may be exchanged in whole or in part for Securities
registered, and any transfer of such Global Security in whole or in part may
be registered, in the name or names of Persons other than the Depositary for
such Global Security or a nominee thereof;
(xvi) the appointment of any Paying Agent or Agents for the
Securities of such series;
(xvii) the terms of any right to convert or exchange Securities of
such series into any other securities or property of the Company, and the
additions or changes, if any, to this
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Indenture with respect to the Securities of such series to permit or
facilitate such conversion or exchange;
(xviii) the form or forms of the Trust Agreement, Amended and
Restated Trust Agreement and Guarantee Agreement, if different from the forms
attached hereto as Annexes A, B and C, respectively;
(xix) the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of Securities in
right of payment, whether such other series of Securities are Outstanding or
not; and
(xx) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior
Debt and Subordinated Debt as provided in Article XIII.
Section 3.2 Denominations.
The Securities of each series shall be in registered form without
coupons and shall be issuable in minimum denominations of $25 and integral
multiples of $25 in excess thereof, unless otherwise specified as contemplated
by Section 3.1.
Section 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
President or one of its Vice Presidents under its corporate seal reproduced or
impressed thereon and attested by its Vice President, Controller, Secretary or
one of its Assistant Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior
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to the authentication and delivery of such Securities or did not hold such
offices at the date of such Securities. At any time and from time to time
after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or
more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating
such Securities, and accepting the additional responsibilities under this
Indenture in relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 6.1) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such form has
been established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such terms have
been established in conformity with the provisions of this Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally
binding obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at
one time, it shall not be necessary to deliver the Officers' Certificate
otherwise required pursuant to Section 3.1 or the Company Order and Opinion of
Counsel otherwise required pursuant to such preceding paragraph at or prior to
the authentication of each Security of such series if such documents are
delivered at or prior to the authentication upon original issuance of the
first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
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No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any denomination, substantially of the
tenor of the definitive Securities of such series in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of
the temporary Securities at the office or agency of the Company designated for
that purpose without charge to the holder. Upon surrender for cancellation of
any one or more temporary Securities, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series of authorized denominations having
the same Original Issue Date and Stated Maturity and having the same terms as
such temporary Securities. Until so exchanged, the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series.
Section 3.5 Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities
and of transfers of Securities. Such register is herein sometimes referred to
as the
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"Securities Register." The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering Securities and transfers of Securities as
herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of a like aggregate principal amount,
of the same Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated
Maturity and having the same terms, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate
and deliver, the Securities which the Holder making the exchange is entitled
to receive.
All Securities issued upon any transfer or exchange of Securities
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
Every Security presented or surrendered for transfer or exchange
shall (if so required by the Company or the Securities Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Securities.
The provisions of Clauses (a), (b), (c) and (d) below shall
apply only to Global Securities
(a) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security
or a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
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(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and
no transfer of a Global Security in whole or in part may be registered, in the
name of any Person other than the depositary for such Global Security or a
nominee thereof unless (A) such Depositary (i) has notified the Company that
it is unwilling or unable to continue as Depositary for such Global Security
or (ii) has ceased to be a clearing agency registered under the Exchange Act
at a time when the Depositary is required to be so registered to act as
depositary, in each case unless the Company has approved a successor
Depositary within 90 days, (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security, (C) the Company in its
sole discretion determines that such Global Security will be so exchangeable
or transferable or (D) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this
purpose as contemplated by Section 3.1.
(c) Subject to Clause (6) above, any exchange of a Global Security
for other Securities may be made in whole or in part, and all Securities
issued in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 3.4, 3.6, 9.6 or
11.6 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name of
a Person other than the Depositary for such Global Security or a nominee
thereof.
Neither the Company nor the Trustee shall be required, pursuant to
the provisions of this Section, (a) to issue, transfer or exchange any
Security of any series during a period beginning at the opening of business 15
days before the day of selection for redemption of Securities pursuant to
Article XI and ending at the close of business on the day of mailing of notice
of redemption or (b) to transfer or exchange any Security so selected for
redemption in whole or in part, except, in the case of any Security to be
redeemed in part, any portion thereof not to be redeemed.
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same issue
and series of like tenor and principal amount, having the same
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Original Issue Date and Stated Maturity, and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or
the Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of the same issue and series of like tenor and principal amount,
having the same Original Issue Date and Stated Maturity as such destroyed,
lost or stolen Security, and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date, shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest in respect of Securities of such series, except that, unless
otherwise provided in the Securities of such series, interest payable on the
Stated Maturity of the principal of a Security shall be paid to the Person to
whom principal is paid. The initial payment of interest on any Security of any
series which is issued between a
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Regular Record Date and the related Interest Payment Date shall be payable as
provided in such Security or in the Board Resolution pursuant to Section 3.1
with respect to the related series of Securities.
Any interest on any Security which is payable, but is not timely paid
or duly provided for, on any Interest Payment Date for Securities of such
series (herein called "Defaulted Interest"), shall forthwith cease to be
payable to the registered Holder on the relevant Regular Record Date by virtue
of having been such holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clauses (a) or (b)
below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series in respect of
which interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect
of such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held ln trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon, the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed, first
class, postage prepaid, to each Holder of a Security of such series at the
address of such Holder as it appears in the Securities Register not less than
10 days prior to such Special Record Date. The Trustee may, in its discretion,
in the name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper, customarily published in the English
language on each Business Day and of general circulation in the State of
California, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in
whose names the Securities of such series (or their respective Predecessor
Securities) are registered on such Special Record
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Date and shall no longer be payable pursuant to the following Clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after
notice given by the Company to the Trustee of the proposed payment pursuant to
this Clause, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.7, each
Security delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
Section 3.8 Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and
(subject to Section 3.7) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 3.9 Cancellation.
All Securities surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities shall be destroyed by the Trustee and the Trustee shall
deliver to the Company a certificate of such destruction.
Section 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series for any
period shall be computed on the basis of a 360-day year of twelve 30-day
months and interest on the Securities of
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each series for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months.
Section 3.11 Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with
respect to the Securities of a particular series, so long as no Event of
Default has occurred and is continuing, the Company shall have the right, at
any time during the term of such series, from time to time to defer the
payment of interest on such Securities for such period or periods as may be
specified as contemplated by Section 3.1 (each, an "Extension Period") during
which Extension Periods the Company shall have the right to make partial
payments of interest on any Interest Payment Date. No Extension Period shall
end on a date other than an Interest Payment Date. At the end of any such
Extension Period the Company shall pay all interest then accrued and unpaid on
the Securities (together with Additional Interest thereon, if any, at the rate
specified for the Securities of such series to the extent permitted by
applicable law); provided, however, that no Extension Period shall extend
beyond the Stated Maturity of the principal of the Securities of such series;
provided, further, that during any such Extension Period, the Company shall
not, and shall not permit any Subsidiary to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of the Company's capital stock (which includes
common and preferred atock), (ii) make any payment of principal of or interest
or premium, if any, on or repay, repurchase or redeem any debt securities of
the Company (including securities other than the Securities of such series)
that ranks pari passu in all respects with or in interest to the Securities of
such series or make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any Subsidiary of the Company if such
guarantee rank pari passu in all respects with or Junior in interest to the
securities of such series (other than (a) dividends or distributions in
capital stock (which includes common and preferred stock), (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the U.S. Home & Garden Guarantee related to the Preferred
Securities issued by the U.S. Home & Garden Trust holding Securities of such
series, and (d) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Company's benefit plans for its directors,
officers or employees) or (iii) redeem, purchase or acquire less than all of
the Securities of such series or any of the Preferred Securities. Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period, provided that such extension does not cause such Extension
Period to extend beyond the Stated Maturity of the principal of such
Securities. Upon termination of any Extension Period and upon the payment of
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all accrued and unpaid interest and any Additional Interest then due on any
Interest Payment Date, the Company may elect to begin a new Extension Period,
subject to the above requirements. No interest shall be due and payable during
an Extension Period, except at the end thereof. The Company shall give the
Trustee, the Property Trustee and the Administrative Trustees of the U.S. Home
& Garden Trust holding securities of such series notice of its election of any
Extension Period (or an extension thereof) at least one business Day prior to
the earlier of (i) the next occurring date on which Distributions on the
Preferred Securities of such U.S. Home & Garden Trust would be payable except
for the election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to the American Stock
Exchange, the New York Stock Exchange, the Nasdaq Stock Market or other
applicable stock exchange or automated quotation system on which the Preferred
Securities are then listed or quoted or to holders of such Preferred
Securities as of the record date or (iii) the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date. The Trustee shall give notice of the Company's election to begin a new
Extension Period to the holders of the Securities. There is no limitation on
the number of times that the Company may elect to begin an Extension Period.
The Trustee shall promptly give notice of the Company's election to
begin any such Extension Period to the holders of the outstanding Securities
of such series.
Section 3.12 Right of Set-Off.
With respect to the Securities of a series issued to a U.S. Home &
Garden Trust, notwithstanding anything to the contrary in the Indenture, the
Company shall have the right to set off any payment it is otherwise required
to make thereunder in respect of any such Security to the extent the Company
has theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee Agreement relating to such Security or under
Section 5.8 of the Indenture.
Section 3.13 Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree
that for United States Federal, state and local tax purposes it is intended
that such Security constitute indebtedness.
Section 3.14 Shortening of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with
respect to the Securities of a particular series, the Company shall have the
right to shorten the Stated Maturity of
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the principal of the Securities of such series at any time to any date not
earlier than the first date on which the Company has the right to redeem the
Securities of such series. In the event that the Company elects to shorten the
Stated Maturity of the Junior Subordinated Debentures, it shall give notice to
the Indenture Trustee, and the Indenture Trustee shall give notice of such
shortening to the Holders of the Junior Subordinated Debentures no less than
60 days prior to the effectiveness thereof.
Section 3.15 CUSIP Numbers.
The Company in issuing the Securities 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 Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in
trust and applied by the Trustee, [if]
(i) either
(a) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.3), have been delivered to the
Trustee for cancellation; or
(b) all such Securities not theretofore delivered to the Trustee for
cancellation
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1) have become due and payable, or
2) will become due and payable at their Stated
Maturity within one year of the date of deposit, or
3) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of Clause (b) (1), (2) or (3) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust
for such purpose an amount in the currency or currencies in which the
Securities of such series are payable sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and interest
(including any Additional Interest) to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(ii) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (b) of clause
(i) of this Section, the obligations of the Trustee under Section 4.2 and the
last paragraph of Section 10.3 shall survive.
Section 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in
trust and applied by the Trustee, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for the payment of which such money or
obligations have been deposited with or received by the Trustee.
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ARTICLE V
REMEDIES
Section 5.1 Events of Default.
"Event of Default," wherever used herein with respect to the
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period);
or
(b) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity, upon redemption by
declaration or otherwise; or
(c) default in the performance, or breach, in any material respect,
of any covenant of the Company in this Indenture (other than a covenant, a
default in the performance of which is elsewhere in this Section 5.1
specifically dealt with), and continuance of such default or breach for a
period of 90 days after there has been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in principal amount of the Outstanding Securities of that
series a written notice specifying such default or breach and requiring it to
be remedied; or
(d) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90 consecutive
days; or
(e) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable
Federal or State
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bankruptcy, insolvency, reorganization or other similar law, or the consent by
it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it of an
assignment for the benefit for creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate action by
the Company in furtherance of any such action; or
(f) any other Event of Default provided with respect to Securities of
that series.
Section 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(d) or 5.1(e)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee
or the holders of not less than 25% in principal amount of the outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided
that, in the case of the Securities of a series issued to a U.S. Home & Garden
Trust, if, upon an Event of Default, the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Securities of that series fail
to declare the principal of all the Securities of that series to be
immediately due and payable, the holders of at least 25% in aggregate
liquidation amount of the corresponding series of Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and
the Trustee; and upon any such declaration such principal amount (or specified
portion thereof) of and the accrued interest (including any Additional
Interest) on all the Securities of such series shall become immediately due
and payable. Payment of principal and interest (including any Additional
Interest) on such Securities shall remain subordinated to the extent provided
in Article XIII notwithstanding that such amount shall become immediately due
and payable as herein provided. If an Event of Default specified in Section
5.1(d) or 5.1(e) with respect to Securities of any series at the time
Outstanding occurs, the principal amount of all the Securities of that series
(or, if the Securities of that series are Discount Securities, such portion of
the principal amount of such Securities as may be specified by the terms of
that series) shall automatically, and without any declaration or other action
on the part of the Trustee or any holder, become immediately due and payable.
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At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all overdue installments of interest (including any Additional
Interest) on all Securities of that series,
(ii) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities, and
(iii) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(b) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series which
has become due solely by such acceleration, have been cured or waived as
provided in Section 5.13.
In the case of Securities of a series issued to a U.S. Home & Garden
Trust, the holders of a majority in aggregate Liquidation Amount (as defined
in the Trust Agreement under which such U.S. Home & Garden Trust is formed) of
the related series of Preferred Securities issued by such U.S. Home & Garden
Trust shall also have the right to rescind and annul such declaration and its
consequences by written notice to the Company and the Trustee subject to the
satisfaction of the conditions set forth in Clauses (a) and (b) above of this
Section 5.2.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(a) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest becomes
due and payable and such default continues for a period of 30 days, or
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(b) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Maturity thereof, the Company will, upon
demand of the Trustee, pay to the Trustee, for the benefit of the holders of
such Securities, the whole amount then due and payable on such Securities for
principal, including any sinking fund payment or analogous obligations (and
premium, if any) and interest (including any Additional Interest); and, in
addition thereto, all amounts owing the Trustee under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, and
may prosecute such proceeding to judgment or final decree, and may enforce the
same against the Company or any other obligor upon the Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Company or any other obligor upon the Securities,
wherever situated.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal (and
premium, if any) or interest (including any Additional Interest)) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
1) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest (including any Additional Interest) owing and
unpaid in respect to the Securities and to file such other papers or documents
as may be necessary or advisable and to take any and all actions as are
authorized under the Trust Indenture Act in order to have the
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claims of the Holders and any predecessor to the Trustee under Section 6.7
allowed in any such judicial proceedings; and
2) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, 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 and any predecessor Trustee under Section
6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any holder any plan of
reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any holder thereof, or to authorize the Trustee to
vote in respect of the claim of any holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
Section 5.5 Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of all the amounts
owing the Trustee and any predecessor Trustee under Section 6.7, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
Section 5.6 Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
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FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then
due and unpaid upon such series of Securities for principal (and premium, if
any) and interest (including any Additional Interest), in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on such series of Securities for principal (and premium, if any) and interest
(including any Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
Section 5.7 Limitation on Suits.
No Holder of any Securities of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that series;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request:
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing itself of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such holders or to enforce any right
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under this Indenture, except in the manner herein provided and for the equal
and ratable benefit of all such Holders.
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest; Direct Action by Holders of Preferred Securities.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right which is absolute and unconditional to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest (including any Additional Interest) on such Security on
the respective Stated Maturities expressed in such Security (or, in the case
of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder. In the case of Securities of a series issued to a
U.S. Home & Garden Trust, any holder of the corresponding series of Preferred
Securities issued by such U.S. Home & Garden Trust shall have the right, upon
the occurrence of an Event of Default described in Section 5.1(a) or 5.1(b),
to institute a suit directly against the Company for enforcement of payment to
such holder of principal of (and premium, if any) and (subject to Section 3.7)
interest (including any Additional Interest) on the Securities having a
principal amount equal to the aggregate Liquidation Amount (as defined in the
Trust Agreement under which such U.S. Home & Garden Trust is formed) of such
Preferred Securities of the corresponding series held by such holder.
Section 5.9 Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee,
the Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Trustee, the Holders and the holders of Preferred Securities shall
continue as though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
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employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee, any holder of any Security or
any holder of any Preferred Security to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute
a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee
or to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the holders or the holders of
Preferred Securities, as the case may be.
Section 5.12 Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the proceeding so
directed would be unjustly prejudicial to the Holders not joining in any such
direction or would involve the Trustee in personal liability.
Section 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series and, in the case of any Securities of a
series issued to a U.S. Home & Garden Trust, the holders of Preferred
Securities issued by such U.S. Home & Garden Trust may waive any past default
hereunder and its consequences with respect to such series except a default:
(a) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such series, or
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(b) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all
the Securities of such series or, in the case of a waiver by holders of
Preferred Securities issued by such U.S. Home & Garden Trust, by all holders
of Preferred Securities issued by such U.S. Home & Garden Trust.
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 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities
of any series, or to any suit instituted by any Holder for the enforcement of
the payment of the principal of (or premium, if any) or interest (including
any Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
Section 5.15 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
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ARTICLE VI
THE TRUSTEE
Section 6.1 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, 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; but in the case
of any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.
(b) In case 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 their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(i) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of Holders pursuant to Section 5.12 relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture
with respect to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any
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financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, if there shall be reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
Section 6.2 Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the
Securities Register, notice of such default, unless such default shall have
been cured or waived; provided, however, that, except in the case of a default
in the payment of the principal of (or premium, if any) or interest (including
any Additional Interest) on any Security of such series, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of Securities of such series; and
provided, further, that, in the case of any default of the character specified
in Section 5.1(c), no such notice to Holders of Securities of such series
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
Section 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, Security or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or
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established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may
make such inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 6.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of the Securities or the proceeds thereof.
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Section 6.5 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Securities Registrar or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Securities and, subject
to Sections 6.8 and 6.13, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Securities Registrar or such other agent.
Section 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Company.
Section 6.7 Compensation and Reimbursement.
The Company agrees
(a) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder in such amounts as the Company and the
Trustee shall agree from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the acceptance
or administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. This indemnification shall survive the termination of
this Agreement.
To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such
lien shall survive the satisfaction and discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.1(d) or (e) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor
statute.
Section 6.8 Disqualification; Conflicting Interests.
The Trustee for the Securities of any series issued hereunder shall
be subject to the provisions of Section 310(b) of the Trust Indenture Act.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of said Section
3.10(b).
Section 6.9 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee pursuant
to a rule, regulation or order of the Commission, authorized under such laws
to exercise corporate trust powers, and subject to supervision or examination
by authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees, in either case having a combined capital and
surplus of at least $50,000,000, subject to supervision or examination by
Federal or State authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purposes of this Section
6.9, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section 6.9, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article VI. Neither the Company nor any Person directly or indirectly
controlling, controlled by or under common control with the Company shall
serve as Trustee for the Securities of any series issued hereunder.
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Section 6.10 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered
to the Trustee within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the Trustee
and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by any
such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or
(ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause
with respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of
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that or those series. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee with respect to the Securities of such series and
supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, subject to Section 5.14, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the Securities of
such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any
series by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Securities of such series as their names and
addresses appear in the Securities Register. Each notice shall include the
name of the successor Trustee with respect to the Securities of such series
and the address of its Corporate Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an indenture supplemental
hereto wherein each successor Trustee shall accept such appointment and
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which (1) shall contain such provisions as shall be necessary or desirable to
transfer and confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates, (2) if the retiring Trustee is not retiring with respect to
all Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee and
upon the execution and delivery of such supplemental indenture the resignation
or removal of the retiring Trustee shall become effective to the extent
provided therein and each such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts,
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but,
on request of the Company or any successor Trustee, such retiring Trustee
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article VI.
Section 6.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be
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otherwise qualified and eligible under this Article VI, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Securities so authenticated, and in case any Securities shall
not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor Trustee or in the name
of such successor Trustee, and in all cases the certificate of authentication
shall have the full force which it is provided anywhere in the Securities or
in this Indenture that the certificate of the Trustee shall have.
Section 6.13 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
Section 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with
respect to one or more series of Securities which shall be authorized to act
on behalf of the Trustee to authenticate Securities of such series issued upon
original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.6, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, or of any State or Territory or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section 6.14 the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, such Authenticating
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Agent shall resign immediately in the manner and with the effect specified in
this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of an Authenticating Agent shall be the
successor Authenticating Agent hereunder, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant
to this Section 6.14, the Securities of such series may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
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This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
As Trustee
By:________________________
As Authenticating Agent
By:________________________
Authorized Officer
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after January 15 and July 15
in each year, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of January 1 and July 1 of such
year, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished, excluding from any such list names and addresses
received by the Trustee in its capacity as Securities Registrar.
Section 7.2 Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in
the Trust Indenture Act.
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(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of information as to the names and addresses of the Holders
made pursuant to the Trust Indenture Act.
Section 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act, at the times and in the manner provided pursuant
thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each
calendar year, commencing with the first July 15 after the first issuance of
Securities under this Indenture.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed and also with the Commission. The Company will
notify the Trustee when any Securities are listed on any stock exchange.
Section 7.4 Reports by Company.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided in the Trust Indenture Act; provided that
any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall
be filed with the Trustee within 15 days after the same is required to be
filed with the Commission. Notwithstanding that the Company may not be
required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the
information, documents and other reports which are specified in Sections 13
and 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of Trust Indenture Act Section 314(a).
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1 Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially
as an entirety to the Company, unless:
(a) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the corporation formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of
(and premium, if any) and interest (including any Additional Interest) on all
the Securities and the performance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and any such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with; and the Trustee, subject to Section
6.1, may rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.
Section 8.2 Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any
other Person, or any conveyance, transfer or lease by the Company of its
properties and assets substantially as an entirety to any Person in accordance
with Section 8.1, the successor corporation formed by such consolidation or
into which the
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Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; and in the event of any such
conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Company to the Trustee for authentication
pursuant to such provisions and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued
shall in all respects have the same legal rank and benefit under this
Indenture as the Securities theretofore or thereafter issued in accordance
with the terms of this Indenture as though all of such Securities had been
issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter
to be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, provided, however, that the form and terms of Securities of any
series may be established by a Board Resolution, as set forth in the Officers'
Certificate delivered to the Trustee pursuant to Section 3.1, without entering
into a supplemental indenture for all purposes hereunder, for any of the
following purposes:
(a) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company herein
and in the Securities contained; or
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(b) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee or to surrender any right or power herein conferred upon
the Company; or
(c) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 or 3.1; or
(d) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such series)
or to surrender any right or power herein conferred upon the Company; or
(e) to add any additional Events of Default for the benefit of the
holders of all or any series of Securities (and if such additional Events of
Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of such series); or
(f) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution
of such supplemental indenture which is entitled to the benefit of such
provision; or
(g) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause (g)
shall not adversely affect the interest of the Holders of Securities of any
series in any material respect or, in the case of the Securities of a series
issued to a U.S. Home & Garden Trust and for so long as any of the
corresponding series of Preferred Securities issued by such U.S. Home & Garden
Trust shall remain outstanding, the holders of such Preferred Securities; or
(h) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or more
series and to add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee, pursuant to the requirements of
Section 6.11(b); or
(i) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
Section 9.2 Supplemental Indentures with Consent of Holders.
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With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and
the Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the
rights of the Holders of Securities of such series under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(a) except to the extent permitted by Sections 3.11 or 3.14 or as
otherwise specified as contemplated by Section 2.1 or Section 3.1 with respect
to the deferral of the payment of interest on the Securities of any series or
the shortening of the Stated Maturity of the Securities of any series, change
the Stated Maturity of the principal of, or any installment of interest
(including any Additional Interest) on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or reduce any premium payable
upon the redemption thereof, or reduce the amount of principal of a Discount
Security that would be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to Section 5.2, or change the place of payment
where, or the coin or currency in which, any Security or interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(c) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby; or
(d) modify the provisions in Article XIII of this Indenture with
respect to the subordination of Outstanding Securities of any series in a
manner adverse to the Holders thereof; provided, further, that, in the case of
the Securities of a series issued to a U.S. Home & Garden Trust, so long as
any of the corresponding series of Preferred Securities issued by such U.S.
Home & Garden Trust remains outstanding, (i) no such amendment shall be made
that adversely affects the holders of such
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Preferred Securities in any material respect, and no termination of this
Indenture shall occur, and no waiver of any Event of Default or compliance
with any covenant under this Indenture shall be effective, without the prior
consent of the holders of at least a majority of the aggregate liquidation
preference of such Preferred Securities then outstanding unless and until the
principal (and premium, if any) of the Securities of such series and all
accrued and, subject to Section 3.7, unpaid interest (including any Additional
Interest) thereon have been paid in full and (ii) no amendment shall be made
to Section 5.8 of this Indenture that would impair the rights of the holders
of Preferred Securities provided therein without the prior consent of the
holders of each Preferred Security then outstanding unless and until the
principal (and premium, if any) of the Securities of such series and all
accrued and (subject to Section 3.7) unpaid interest (including any Additional
Interest) thereon have been paid in full.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities or Preferred
Securities, or which modifies the rights of the Holders of Securities or
holders of Preferred Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities or holders of Preferred Securities of
any other series.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
In executing or accepting the additional series of Securities created
by any supplemental indenture permitted by this Article or the modifications
thereby of any series of Securities previously created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture, and that all conditions precedent
have been complied with. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article
IX or delivery to the Trustee of the Officers' Certificate pursuant to Section
3.1 hereof (which Officers'
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Certificate shall have the effect of a supplemental indenture for all purposes
hereunder), this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX and
every Officers' Certificate delivered to the trustee pursuant to Section 3.1
hereof shall conform to the requirements of the Trust Indenture Act as then in
effect.
Section 9.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX or delivery to the Trustee
of the Officers' Certificate pursuant to Section 3.1 hereof (which Officers'
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder) may, and shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for in such supplemental
indenture or such Officers' Certificate. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture or such Officers's Certificate may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
Section 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities, an office or agency where Securities of that series may be
presented or surrendered for payment and an office or agency where Securities
of that series may be surrendered for transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities of
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that series and this Indenture may be served. The Company initially appoints
the Trustee, acting through its Corporate Trust Office, as its agent for said
purposes. The Company will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the
Company shall fail to maintain such office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive
all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all of 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 each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation and any change in the location of any such office or agency.
Section 10.3 Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of
the principal of (and premium, if any) or interest on any of the Securities of
such series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. California time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to
pay the principal (and premium, if any) or interest so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to such principal
and premium (if any) or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its failure so to
act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such
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sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal
(and premium, if any) or interest;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held
in trust by such Paying Agent; and
(d) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due
and payable shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be paid on Company
Request to the Company, or (if then held by the Company) shall (unless
otherwise required by mandatory provision of applicable escheat or abandoned
or unclaimed property law) be discharged from such trust; and the Holder of
such Security shall thereafter, as an unsecured general 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 a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the state of California, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 10.4 Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the
end of each calendar year of the Company ending after
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the date hereof, an Officers' Certificate covering the preceding calendar
year, stating whether or not to the best knowledge of the signers thereof the
Company is in default in the performance, observance or fulfillment of or
compliance with any of the terms, provisions, covenants and conditions of this
Indenture, and if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
For the purpose of this Section 10.4, compliance shall be determined without
regard to any grace period or requirement of notice provided pursuant to the
terms of this Indenture.
Section 10.5 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4)
with respect to the Securities of any series, if before or after the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company in respect
of any such covenant or condition shall remain in full force and effect.
Section 10.6 Additional Sums.
In the case of the Securities of a series issued to a U.S. Home &
Garden Trust, so long as no Event of Default has occurred and is continuing
and except as otherwise specified as contemplated by Section 2.1 or Section
3.1, in the event that (i) such U.S. Home & Garden Trust is the Holder of all
of the Outstanding Securities of such series, (ii) a Tax Event in respect of
such U.S. Home & Garden Trust shall have occurred and be continuing and (iii)
the Company shall not have (A) redeemed the Securities of such series pursuant
to Section 11.7 or (B) terminated such U.S. Home & Garden Trust pursuant to
Section 9.2(b) of the related Trust Agreement, the Company shall pay to such
U.S. Home & Garden Trust (and its permitted successors or assigns under the
related Trust Agreement) for so long as such U.S. Home & Garden Trust (or its
permitted successor or assignee) is the registered holder of any Securities of
such series, such additional amounts as may be necessary in order that the
amount of Distributions (including any Additional Amounts (as defined in such
Trust Agreement)) then due and payable by such U.S. Home & Garden Trust on the
related Preferred Securities and Common Securities that at any time remain
outstanding in accordance with the terms thereof shall not be reduced as a
result of any Additional Taxes (the "Additional Sums"). Whenever in this
Indenture or the Securities there is a reference in any context to the payment
of principal of or interest on the Securities,
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such mention shall be deemed to include mention of the payments of the
Additional Sums provided for in this paragraph to the extent that, in such
context, Additional Sums are, were or would be payable in respect thereof
pursuant to the provisions of this paragraph and express mention of the
payment of Additional Sums (if applicable) in any provisions hereof shall not
be construed as excluding Additional Sums in those provisions hereof where
such express mention is not made; provided, however, that the deferral of the
payment of interest pursuant to Section 3.11 or the Securities shall not defer
the payment of any Additional Sums that may be due and payable.
Section 10.7 Additional Covenants.
If at any time (i) there shall have occurred an Event of Default,
(ii) the Company shall have given notice of its election of an Extension
Period as provided herein and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing, or (iii)
while Securities are held by a U.S. Home & Garden Trust, the Company shall be
in default with respect to its payment of any obligation under the Guarantee,
then the Company covenants and agrees with each Holder of Securities of any
series that it shall not, and it shall not permit any Subsidiary of the
Company to, (a) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any shares of
the Company's capital stock (which includes common and preferred stock), (b)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including Securities
other than the Securities of such series) that rank pari passu in all respects
with or junior in interest to the Securities of such series or make any
guarantee payments with respect to any guarantee by the Company of debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
in all respects with or junior in interest to the Securities (other than (i)
dividends or distributions in capital stock (which includes common and
preferred stock), (ii) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan or the redemption or repurchase of any such rights pursuant
thereto, (iii) payments under the U.S. Home & Garden Guarantee related to the
Preferred Securities issued by the U.S. Home & Garden Trust holding Securities
of such series, and (iv) purchases of Common Stock related to the issuance of
Common Stock or rights under any of the Company's benefit plans for its
directors, officers, consultants or employees), or (c) redeem, purchase or
acquire less than all of the Securities of such series or any of the Preferred
Securities if at such time (i) there shall have occurred an Event of Default
with respect to the Securities of such series, (ii) if the Securities of such
series are held by a U.S. Home & Garden Trust, the Company shall be in default
with respect to its payment of any obligations under the U.S. Home &
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Garden Guarantee relating to the Preferred Securities issued by such U.S. Home
& Garden Trust, or (iii) the Company shall have given notice of its election
to begin an Extension Period with respect to the Securities of such series as
provided herein and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a series
issued to a U.S. Home & Garden Trust (i) to maintain directly or indirectly
100% ownership of the Common Securities of such U.S. Home & Garden Trust;
provided, however, that any permitted successor of the Company hereunder may
succeed to the Company's ownership of such Common Securities, (ii) not to
voluntarily terminate, wind-up or liquidate such U.S. Home & Garden Trust,
except (a) in connection with a distribution of the Securities of such series
to the holders of Trust Securities in liquidation of such U.S. Home & Garden
Trust or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the related Trust Agreement and (iii) to use its
reasonable efforts, consistent with the terms and provisions of such Trust
Agreement, to cause such U.S. Home & Garden Trust to remain classified as a
grantor trust and not an association taxable as a corporation for United
States federal income tax purposes.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Applicability of This Article.
Redemption of Securities of any series (whether by operation of a
sinking fund or otherwise) as permitted or required by any form of Security
issued pursuant to this Indenture shall be made in accordance with such form
of Security and this Article; provided, however, that if any provision of any
such form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of such series shall be
subject to partial redemption only in the amount of $25 or, in the case of the
Securities of a series issued to a U.S. Home & Garden Trust, $25, or integral
multiples of $25 in excess thereof.
Section 11.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at
the election of the Company of less than all of the Securities of any
particular series and having the same terms, the Company shall, not less than
30 nor more than 60 days prior to the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such date and
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of the principal amount of Securities of that series to be redeemed. In the
case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities, the
Company shall furnish the Trustee with an Officers' Certificate and an Opinion
of Counsel evidencing compliance with such restriction.
Section 11.3 Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
of such series not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of a portion of the principal amount of any Security
of such series, provided that the portion of the principal amount of any
Security not redeemed shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such Security. If less
than all the Securities of such series and of a specified tenor are to be
redeemed (unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
of such series and specified tenor not previously called for redemption in
accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part,
to the portion of the principal amount of such Security which has been or is
to be redeemed. If the Company shall so direct, Securities registered in the
name of the Company, any Affiliate or any Subsidiary thereof shall not be
included in the Securities selected for redemption.
Section 11.4 Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
sixtieth day, prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice
of redemption shall state:
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(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of such particular series
and having the same terms are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the
particular Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price; and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or
any defect in the notice to the Holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
Section 11.5 Deposit of Redemption Price.
Prior to 12:00 noon, Eastern time on the Redemption Date specified in
the notice of redemption given as provided in Section 11.4, the Company will
deposit with the Trustee or with one or more Paying Agents (or if the Company
is acting as its own Paying Agent, the Company will segregate and hold in
trust as provided in Section 10.3) an amount of money sufficient to pay the
Redemption Price of, and any accrued interest (including Additional Interest)
on, all the Securities which are to be redeemed on that date.
Section 11.6 Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section
11.4, the Securities or portion of Securities with respect to which such
notice has been given shall become due and payable on the date and at the
place or places stated in such notice at the applicable Redemption Price. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said securities or the specified portions thereof
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shall be paid and redeemed by the Company at the applicable Redemption Price,
together with accrued interest (including any Additional Interest) to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and
the provisions of Section 3.7.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of the
same series, of authorized denominations, in aggregate principal amount equal
to the portion of the Security not redeemed so presented and having the same
Original Issue Date, Stated Maturity and terms. If a Global Security is so
surrendered, such new Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on
such Security shall, until paid, bear interest from the Redemption Date at the
rate prescribed therefor in the Security.
Section 11.7 Right of Redemption of Securities Initially Issued
to a U.S. Home & Garden Trust.
In the case of the Securities of a series initially issued to a U.S.
Home & Garden Trust, except as otherwise specified as contemplated by Section
3.1, the Company, at its option, may redeem such Securities (i) on or after
the date five years after the Original Issue Date of such Securities, in whole
at any time or in part from time to time, or (ii) upon the occurrence and
during the continuation of a Tax Event or Investment Company Event, at any
time within 90 days following the occurrence of such Tax Event or Investment
Company Event in respect of such U.S. Home & Garden Trust, in whole (but not
in part), in each case at a Redemption Price equal to 100% of the principal
amount thereof.
ARTICLE XII
SINKING FUNDS
Section 12.1 Applicability of Article.
The provisions of this Article shall be applicable to any sinking
fund for the retirement of Securities of any series except as otherwise
specified as contemplated by Section 3.1 for such Securities.
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The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount which is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment." If
provided for by the terms of any Securities of any series, the cash amount of
any sinking fund payment may be subject to reduction as provided in Section
12.2. Each sinking fund payment shall be applied to the redemption of
Securities of any series as provided for by the terms of such Securities.
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment
with respect to any Securities of a series in cash, the Company may at its
option, at any time no more than 16 months and no less than 30 days prior to
the date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Company, except Securities of such series that have been redeemed through the
application of mandatory or optional sinking fund payments pursuant to the
terms of the Securities of such series, accompanied by a Company Order
instructing the Trustee to credit such obligations and stating that the
Securities of such series were originally issued by the Company by way of bona
fide sale or other negotiation for value; provided that the Securities to be
so credited have not been previously so credited. The Securities to be so
credited shall be received and credited for such purpose by the Trustee at the
redemption price for such Securities, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount
of such sinking fund payment shall be reduced accordingly.
Section 12.3 Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which
the Securities of such series are payable (except as provided pursuant to
Section 3.1) and the portion thereof, if any, which is to be satisfied by
delivering and crediting Securities pursuant to Section 12.2 and will also
deliver to the Trustee any Securities to be so delivered. Such Officers'
Certificate shall be irrevocable and upon its delivery the Company shall be
obligated to make the cash payment or payments therein referred to, if any, on
or before the succeeding sinking fund payment date. In the case of the failure
of the Company to deliver such
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Officers' Certificate (or, as required by this Indenture, the Securities and
coupons, if any, specified in such Officers' Certificate), the sinking fund
payment due on the succeeding sinking fund payment date for such series shall
be paid entirely in cash and shall be sufficient to redeem the principal
amount of the Securities of such series subject to a mandatory sinking fund
payment without the right to deliver or credit securities as provided in
Section 12.2 and without the right to make the optional sinking fund payment
with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent)
on the sinking fund payment date on which such payment is made (or, if such
payment is made before a sinking fund payment date, on the sinking fund
payment date immediately following the date of such payment) to the redemption
of Securities of such series at the Redemption Price specified in such
Securities with respect to the sinking fund. Any sinking fund moneys not so
applied or allocated by the Trustee (or, if the Company is acting as its own
Paying Agent, segregated and held in trust by the Company as provided in
Section 10.3) for such series and together with such payment (or such amount
so segregated) shall be applied in accordance with the provisions of this
Section 12.3. Any and all sinking fund moneys with respect to the Securities
of any particular series held by the Trustee (or if the Company is acting as
its own Paying Agent, segregated and held in trust as provided in Section
10.3) on the last sinking fund payment date with respect to Securities of such
series and not held for the payment or redemption of particular Securities of
such series shall be applied by the Trustee (or by the Company if the Company
is acting as its own Paying Agent), together with other moneys, if necessary,
to be deposited (or segregated) sufficient for the purpose, to the payment of
the principal of the Securities of such series at Maturity. The Trustee shall
select the Securities to be redeemed upon such sinking fund payment date in
the manner specified in Section 11.3 and cause notice of the redemption
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 11.4. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Section 11.6. On or before each sinking fund payment date, the
Company shall pay to the Trustee (or, if the Company is acting as its own
Paying Agent, the Company shall segregate and hold in trust as provided in
Section 10.3) in cash a sum in the currency in which Securities of such series
are payable (except as provided pursuant to Section 3.1) equal to the
principal and any interest accrued to the Redemption Date for Securities or
portions thereof to be redeemed on such sinking fund payment date pursuant to
this Section 12.3.
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Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default
occurring as a consequence of this paragraph) with respect to the Securities
of such series, except that if the notice of redemption shall have been
provided in accordance with the provisions hereof, the Trustee (or the
Company, if the Company is then acting as its own Paying Agent) shall redeem
such Securities if cash sufficient for that purpose shall be deposited with
the Trustee (or segregated by the Company) for that purpose in accordance with
the terms of this Article XII. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default
shall occur and any moneys thereafter paid into such sinking fund shall,
during the continuance of such default or Event of Default, be held as
security for the payment of the Securities and coupons, if any, of such
series; provided, however, that in case such default or Event of Default shall
have been cured or waived herein, such moneys shall thereafter be applied on
the next sinking fund payment date for the Securities of such series on which
such moneys may be applied pursuant to the provisions of this Section 12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
Section 13.1 Securities Subordinate to Senior Debt and Subordinated Debt.
The Company covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of
all amounts then due and payable in respect of all Senior Debt and
Subordinated Debt.
Section 13.2 Payment Over of Proceeds Upon Dissolution, Etc.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior Debt and
Subordinated Debt shall be entitled to receive payment in full of such Senior
Debt and Subordinated Debt, or provision shall be made for such payment in cash
or cash equivalents or
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otherwise in a manner satisfactory to the holders of Senior Debt and
Subordinated Debt, before the Holders of the Securities are entitled to
receive or retain any payment or distribution of any kind or character,
whether in cash, property or securities (including any payment or distribution
which may be payable or deliverable by reason of the payment of any other Debt
of the Company subordinated to the payment of the Securities, such payment or
distribution being hereinafter referred to as a "Junior Subordinated
Payment"), on account of principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary
and to that end the holders of Senior Debt and Subordinated Debt shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or
securities, including any Junior Subordinated Payment, which may be payable or
deliverable in respect of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 13.2, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt and Subordinated Debt are paid in full or
payment thereof is provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt and Subordinated Debt, and if
such fact shall, at or prior to the time of such payment or distribution, have
been made known to the Trustee or, as the case may be, such Holder, then and in
such event such payment or distribution shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Debt and
Subordinated Debt remaining unpaid, to the extent necessary to pay all Senior
Debt and Subordinated Debt in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt and Subordinated
Debt.
For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character, whether in cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which
securities are subordinated in right of payment to all then outstanding Senior
Debt and Subordinated Debt to substantially the same extent as the Securities
are so subordinated as provided in this Article XIII. The consolidation of the
Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the sale of all or
substantially all of its
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properties and assets as an entirety to another Person upon the terms and
conditions set forth in Article VIII shall not be deemed a Proceeding for the
purposes of this Section 13.2 if the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by sale such
properties and assets as an entirety, as the case may be, shall, as a part of
such consolidation, merger, or sale comply with the conditions set forth in
Article VIII.
Section 13.3 Prior Payment to Senior Debt and Subordinated Debt
Upon Acceleration of Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior Debt and
Subordinated Debt outstanding at the time such Securities become due and payable
shall be entitled to receive payment in full of all amounts due on or in respect
of such Senior Debt and Subordinated Debt (including any amounts due upon
acceleration), or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior Debt
and Subordinated Debt, before the Holders of the Securities are entitled to
receive any payment or distribution of any kind or character, whether in cash,
property or securities (including any Junior Subordinated Payment) by the
Company on account of the principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
provided, however, that nothing in this Section 13.3 shall prevent the
satisfaction of any sinking fund payment in accordance with this Indenture or as
otherwise specified as contemplated by Section 3.1 for the Securities of any
series by delivering and crediting pursuant to Section 12.2 or as otherwise
specified as contemplated by Section 3.1 for the Securities of any series
Securities which have been acquired (upon redemption or otherwise) prior to such
declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by
the foregoing provisions of this Section 13.3, and if such fact shall, at or
prior to the time of such payment, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such payment shall be
paid over and delivered forthwith to the Company.
The provisions of this Section 13.3 shall not apply to any payment
with respect to which Section 13.2 would be applicable.
Section 13.4 No Payment When Senior Debt and Subordinated Debt in Default.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest
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on any Senior Debt and Subordinated Debt, or in the event that any event of
default with respect to any Senior Debt and Subordinated Debt shall have
occurred and be continuing and shall have resulted in such Senior Debt and
Subordinated Debt becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, unless and until such
event of default shall have been cured or waived or shall have ceased to exist
and such acceleration shall have been rescinded or annulled, or (b) in the event
any Judicial Proceeding shall be pending with respect to any such default in
payment or such event or default, then no payment or distribution of any kind or
character, whether in cash, properties or securities (including any Junior
Subordinated Payment) shall be made by the Company on account of principal of
(or premium, if any) or interest (including any Additional Interest), if any, on
the Securities or on account of the purchase or other acquisition of Securities
by the Company or any Subsidiary, in each case unless and until all such Senior
Debt and Subordinated Debt are paid in full; provided, however, that nothing in
this Section 13.4 shall prevent the satisfaction of any sinking fund payment in
accordance with this Indenture or as otherwise specified as contemplated by
Section 3.1 for the Securities of any series by delivering and crediting
pursuant to Section 12.2 or as otherwise specified as contemplated by Section
3.1 for the Securities of any series Securities which have been acquired (upon
redemption or otherwise) prior to such default in payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by
the foregoing provisions of this Section 13.4, and if such fact shall, at or
prior to the time of such payment, have been made known to the Trustee or, as
the case may be, such holder, then and in such event such payment shall be
paid over and delivered forthwith to the Company.
The provisions of this Section 13.4 shall not apply to any payment
with respect to which Section 13.2 would be applicable.
Section 13.5 Payment Permitted If No Default.
Nothing contained in this Article XIII or elsewhere in this Indenture
or in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 13.2 or under the
conditions described in Sections 13.3 and 13.4, from making payments at any
time of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any
money deposited with it hereunder to the payment of or on account of the
principal of (and premium, if any) or interest (including any Additional
Interest) on the Securities or the retention of such payment by the holders,
if, at the time of such application by the Trustee, it did not have
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knowledge that such payment would have been prohibited by the provisions of
this Article XIII.
Section 13.6 Subrogation to Rights of holders of Senior Debt
and Subordinated Debt.
Subject to the payment in full of all amounts due or to become due on
all Senior Debt and Subordinated Debt, or the provision for such payment in
cash or cash equivalents or otherwise in a manner satisfactory to the holders
of Senior Debt and Subordinated Debt, the Holders of the Securities shall be
subrogated to the extent of the payments or distributions made to the holders
of such Senior Debt and Subordinated Debt pursuant to the provisions of this
Article XIII (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to Senior Debt and
Subordinated Debt of the Company to substantially the same extent as the
Securities are subordinated to the Senior Debt and Subordinated Debt and is
entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Debt and Subordinated Debt) to
the rights of the holders of such Senior Debt and Subordinated Debt to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt and Subordinated Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior Debt
and Subordinated Debt of any cash, property or securities to which the Holders
of the Securities or the Trustee would be entitled except for the provisions
of this Article, and no payments over pursuant to the provisions of this
Article XIII to the holders of Senior Debt and Subordinated Debt by Holders of
the Securities or the Trustee, shall, as among the Company, its creditors
other than holders of Senior Debt and Subordinated Debt, and the Holders of
the Securities, be deemed to be a payment or distribution by the Company to or
on account of the Senior Debt and Subordinated Debt.
Section 13.7 Provisions Solely to Define Relative Rights.
The provisions of this Article XIII are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities
on the one hand and the holders of Senior Debt and Subordinated Debt on the
other hand. Nothing contained in this Article XIII or elsewhere in this
Indenture or in the Securities is intended to or shall (a) impair, as between
the Company and the Holders of the Securities, the obligations of the Company,
which are absolute and unconditional, to pay to the holders of the Securities
the principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other
than their rights in relation to
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the holders of Senior Debt and Subordinated Debt; or (c) prevent the Trustee
or the Holder of any Security from exercising all remedies otherwise permitted
by applicable law upon default under this Indenture including, without
limitation, filing and voting claims in any Proceeding, subject to the rights,
if any, under this Article XIII of the holders of Senior Debt and Subordinated
Debt to receive cash, property and securities otherwise payable or deliverable
to the Trustee or such Holder.
Section 13.8 Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination
provided in this Article XIII and appoints the Trustee his or her
attorney-in-fact for any and all such purposes.
Section 13.9 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt and
Subordinated Debt to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof that any
such holder may have or be otherwise charged with.
Without in any way limiting the generality of the immediately
preceding paragraph, the holders of Senior Debt and Subordinated Debt may, at
any time and from to time, without the consent of or notice to the Trustee or
the Holders of the Securities, without incurring responsibility to the Holders
of the Securities and without impairing or releasing the subordination
provided in this Article or the obligations hereunder of the Holders of the
Securities to the holders of Senior Debt and Subordinated Debt, do any one or
more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Debt and Subordinated
Debt, or otherwise amend or supplement in any manner Senior Debt and
Subordinated Debt or any instrument evidencing the same or any agreement under
which Senior Debt and Subordinated Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt and Subordinated Debt; (iii) release any Person liable in
any manner for the collection of Senior Debt and Subordinated Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any
other Person.
Section 13.10 Notice to Trustee.
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The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article XIII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Debt and Subordinated Debt or
from any trustee, agent or representative therefor; provided, however, that if
the Trustee shall not have received the notice provided for in this Section
13.10 at least two Business Days prior to the date upon which by the terms
hereof any monies may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest
(including any Additional Interest) on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such monies and to apply the same to the purpose for
which they were received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt and Subordinated Debt (or a
trustee therefor) to establish that such notice has been given by a holder of
Senior Debt and Subordinated Debt (or a trustee therefor). In the event that
the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Debt and Subordinated
Debt to participate in any payment or distribution pursuant to this Article,
the Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt and Subordinated
Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 13.11 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article XIII, the Trustee, subject to the provisions of Section 6.1,
and the Holders of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such Proceeding
is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent
or other Person making such payment or
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distribution, delivered to the Trustee or to the Holders of Securities, for
the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of the Senior Debt and Subordinated 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 XIII.
Section 13.12 Trustee Not Fiduciary for holders of Senior Debt
and Subordinated Debt.
The Trustee, in its capacity as trustee under this Indenture, shall
not be deemed to owe any fiduciary duty to the holders of Senior Debt and
Subordinated Debt and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt and Subordinated Debt shall be entitled by virtue of
this Article or otherwise.
Section 13.13 Rights of Trustee as Holder of Senior Debt and
Subordinated Debt; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIII with respect to any Senior Debt and
Subordinated Debt which may at any time be held by it, to the same extent as
any other holder of Senior Debt and Subordinated Debt, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.
Section 13.14 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article XIII shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article XIII in addition to or in place of the
Trustee.
Section 13.15 Certain Conversions or Exchanges Deemed Payment.
For the purposes of this Article XIII only, (a) the issuance and
delivery of junior securities upon conversion or exchange of Securities shall
not be deemed to constitute a payment or distribution on account of the
principal of (or premium, if any) or interest (including any Additional
Interest) on Securities or on account of the purchase or other acquisition of
Securities, and (b) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion or exchange of a
Security shall be deemed to constitute payment on account of the principal of
such security. For the purposes of
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this Section 13.15, the term "junior securities" means (i) shares of any stock
of any class of the Company and (ii) securities of the Company which are
subordinated in right of payment to all Senior Debt and Subordinated Debt
which may be outstanding at the time of issuance or delivery of such
securities to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article XIII.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
U.S. HOME & GARDEN INC.
By: ______________________________
Its: _____________________________
Attest:
By: ______________________________
Its: _____________________________
WILMINGTON TRUST COMPANY, as
Trustee
By: ______________________________
Its: _____________________________
Attest:
By: ______________________________
Its: _____________________________
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STATE OF CALIFORNIA )
) SS.
COUNTY OF )
On the ____day of ____________, 1998 before me personally came
________________________ to me known, who, being by me duly sworn, did depose
and say that he is _____________________ of U.S. HOME & GARDEN INC. one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; and that he signed his name thereto by authority of
the Board of Directors of said corporation.
[SEAL] _____________________________
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF )
On the_____ day of ________________, 1998 before me personally came
___________________________ to me known, who, being by me duly sworn, did
depose and say that he is _______________________ of WILMINGTON TRUST COMPANY
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; and that he signed his name thereto
by authority of the Board of Directors of said corporation.
[SEAL] _____________________________
Notary Public
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EXHIBIT 4.2
U.S. HOME & GARDEN INC.
_______ % JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES DUE ________, 2028
OFFICERS' CERTIFICATE AND COMPANY ORDER
Pursuant to the Indenture dated as of ________, 1998 (the "Indenture"),
between U.S. Home & Garden Inc., a Delaware corporation (the "Company") and
Wilmington Trust Company, as Debenture Trustee (the "Debenture Trustee") and
resolutions adopted by the Pricing Committee of the Company's Board of Directors
on ________, 1998; this Officers' Certificate is being delivered to the
Debenture Trustee to establish the terms of one series of securities (the
"Securities") in accordance with Section 3.1 of the Indenture, to establish the
form of the Securities of such series in accordance with Section 2.1 of the
Indenture, to request the authentication and delivery of the Securities of such
series pursuant to Section 3.3 of the Indenture and to comply with the
provisions of Section 1.2 of the Indenture. This Officers' Certificate shall be
treated for all purposes under the Indenture as a supplemental indenture
thereto.
All conditions precedent provided for in the Indenture relating to
the establishment of (i) a series of Securities and (ii) the form of
Securities of such series have been complied with.
Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to them in the Indenture.
I. Establishment of Series of Securities pursuant to
Section 3.1 of the Indenture.
There are hereby established pursuant to Section 3.1 of the Indenture
a series of Securities which shall have the following terms:
A. The Securities of such series shall bear the title ____%
Junior Subordinated Deferrable Interest Debentures Due ________, 2028.
B. The aggregate principal amount of such series of
Securities to be issued pursuant to this Officers' Certificate and Company
Order shall be limited to the sum of (i) $ ____________ (except for Securities
authenticated and delivered upon registration of, transfer of, or in exchange
for, or in lieu of, other Securities of such series pursuant to Section 3.4,
3.5, 3.6, 9.6 or 11.7 of the Indenture and except for any Securities which,
pursuant to Section 3.3 of the Indenture, are deemed never to have been
authenticated and delivered thereunder).
<PAGE>
C. The date on which the principal of the Securities is due
and payable shall be ____________, 2028.
D. The Securities shall bear interest at the rate of ___%
per annum (based upon a 360-day year of twelve 30-day months), compounded
monthly, from and including the date of original issuance or from and
including the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may be, payable monthly in arrears on
the ___ day of each calendar month of each year (each, an "Interest Payment
Date"), commencing _______________, 1998, until the principal thereof is paid
or made available for payment. The Business Day next preceding an Interest
Payment Date shall be the "Regular Record Date" for the interest payable on
such Interest Payment Date. Accrued interest that is not paid on such
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at a rate per annum of ___% thereof
compounded quarterly.
In addition, so long as no Event of Default with respect to
the Securities has occurred or is continuing, the Company has the right under
the Indenture at any time during the term of such Securities to defer the
payment of interest at any time or from time to time for a period not
exceeding 60 consecutive monthly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated
Maturity. At the end of such Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon at the annual
rate of ___%, compounded monthly, to the extent permitted by applicable law).
E. Principal of (and premium, if any) and interest on the
Securities will be payable, and, except as provided in Section 3.5 of the
Indenture with respect to a Global Security (as defined below), the transfer
of the Securities will be registrable and Securities (except as provided in
paragraph (Q) hereof) will be exchangeable for Securities bearing identical
terms and provisions at the corporate trust office of Wilmington Trust Company
in the City of Wilmington, Delaware.
F. The Securities will be redeemable in whole at any time
and in part from time to time, at the option of the Company at any time on or
after _____________, 2003, at a redemption price equal to the accrued and
unpaid interest on the Securities so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof.
In addition, upon the occurrence of a Tax Event or an
Investment Company Event (as each such term is defined below) the Company may,
at its option, prepay the Securities in whole (but not in part) at any time
within 90 days of the occurrence of such Tax Event or Investment Company
Event, at a redemption price equal to the accrued and unpaid interest on the
Securities so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof.
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"Tax Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of the Preferred Securities of the Trust, there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days of the date of such
opinion, subject to United States Federal income tax with respect to income
received or accrued on the Securities, (ii) interest payable by the Company on
the Securities is not, or within 90 days of the date of such opinion, will not
be, deductible by the Company, in whole or in part, for United States Federal
income tax purposes, or (iii) the Trust is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Investment Company Event" means, in respect of the Trust,
the receipt by the Trust of an Opinion of Counsel, rendered by a law firm
experienced in such matters, to the extent that, as a result of a change in
law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, the Trust is or will be considered an "investment company" that is
required to be registered under the 1940 Act, which change becomes effective
on or after the date of original issuance of the Preferred Securities of the
Trust.
G. The Company shall not be obligated to redeem or purchase
any Securities pursuant to any sinking fund or analogous provisions or at the
option of the Holder.
H. The Securities will be issued only in fully registered
form and the authorized minimum denomination of the Securities shall be $25.00
and any integral multiple of $25.00 in excess thereof.
I. The Securities shall be denominated, and payments of
principal of (and premium, if any) and interest on the Securities of such
series will be made, in United States dollars.
J. The Securities shall be subject to the Events of Default
specified in Section 5.1, paragraphs (a) through (e), of the Indenture.
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K. The portion of the principal amount of the Securities
which shall be payable upon declaration of acceleration of maturity thereof
shall not be other than the principal amount thereof, provided, that, if such
acceleration is declared by the Holders of at least 25% in aggregate
liquidation amount of the Preferred Securities then outstanding, then, upon
such declaration of acceleration, the Securities which shall be payable shall
be the principal amount thereof plus accrued interest (including any
Additional Interest).
L. The Securities will be issued in fully registered form,
without coupons. The Securities will not be issued in bearer form.
M. The amount of payments of principal of and any premium or
interest on the Securities will not be determined with reference to an index.
N. The Securities shall not be issued in the form of a
temporary Global Security (as defined below).
O. The Securities will initially be in certificated form
registered in the name of Wilmington Trust Company as Property Trustee for the
Trust (the "Certificated Securities"). The Securities may, in the sole
discretion of the Company, be deposited with, and on behalf of, The Depository
Trust Company, New York, New York, as Depositary, and will be represented by a
global security (a "Global Security") registered in the name of a nominee of
the Depositary. If and so long as the Depositary or its nominee is the
registered holder of any Global Security, the Depositary or its nominee, as
the case may be, will be considered the sole Holder of the Securities of such
series represented by such Global Security for all purposes under the
Indenture and the Securities. The Certificated Securities or the Global
Securities, as the case may be, shall bear no legends.
P. The Trustee shall be Paying Agent.
Q. The Securities will not be convertible into any other
securities or property of the Company. The Securities of any series may not be
exchanged for Securities of any other series.
R. The Trust Agreement, the Amended and Restated Trust
Agreement and the Guarantee Agreement are in the forms attached hereto as
Exhibits A, B and C respectively.
S. The Securities are subordinate and subject in right of
payment to the prior payment in full of all amounts then due and payable in
respect of all Senior Debt and Subordinated Debt, as provided in the
Indenture.
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T. The Securities shall have additional terms, which terms
shall not be inconsistent with the provisions of the Indenture.
II. Establishment of Forms of Securities Pursuant to
Section 2.1 of Indenture.
It is hereby established pursuant to Section 2.1 of the
Indenture that the Securities shall be substantially in the form attached as
Exhibit D hereto.
III. Order for the Authentication and Delivery of Securities
Pursuant to Section 3.3 of the Indenture.
It is hereby ordered pursuant to Section 3.3 of the Indenture that
the Trustee authenticate, in the manner provided by the Indenture, Securities
in the aggregate principal amount of $____ registered in the name of
Wilmington Trust Company, as Property Trustee, which Securities have been
heretofore duly executed by the proper officers of the Company and delivered
to you as provided in the Indenture, and to deliver said authenticated
Securities to Wilmington Trust Company or its custodian on or before 9:30
a.m., San Francisco time, on _____________, 1998.
IV. Other Matters.
Attached as Exhibit E hereto are true and correct copies of
resolutions adopted by the Pricing Committee of the Board of Directors of the
Company at a meeting on _____________, 1998. Attached as Exhibit F hereto are
true and correct copies of resolutions adopted by the Board of Directors of
the Company at a meeting on ___, 1998, authorizing the issuance of the
Securities. Such resolutions have not been further amended, modified or
rescinded and remain in full force and effect; and such resolutions (together
with this Officers' Certificate) are the only resolutions or other action
adopted by the Company's Board of Directors or any committee thereof or by any
Authorized Officers relating to the offering and sale of the Securities.
The undersigned have read the pertinent sections of the Indenture
including the related definitions contained therein. The undersigned have
examined the resolutions adopted by the Board of Directors and the Pricing
Committee of the Board of Directors of the Company. In the opinion of the
undersigned, the undersigned have made such examination or investigation as is
necessary to enable the undersigned to express an informed opinion as to
whether or not the conditions precedent to the establishment of (i) a series
of Securities, (ii) the forms of such Securities and (iii) authentication of
such series of Securities, contained in the Indenture have been complied with.
In the opinion of the undersigned, such conditions have been complied with.
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IN WITNESS WHEREOF, the undersigned have executed this Certificate
this _____ day of _____________, 1998.
U.S. HOME & GARDEN INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
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CERTIFICATE OF TRUST
OF
U.S. HOME & GARDEN TRUST I
THIS Certificate of Trust of U.S. Home & Garden Trust I (the
"Trust"), dated as of March 16, 1998, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. C. ss. 3801, et seq.).
1. Name. The name of the business trust formed hereby is U.S.
Home & Garden Trust I.
2. Delaware Trustee. The name and business address of the
trustee of the Trust with a principal place of business in the State of
Delaware are Wilmington Trust Company, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be
effective upon filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of
the Trust, have executed this Certificate of Trust as of the date first-above
written.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as trustee of the Trust
By: /s/ Patricia A. Evans
--------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
RICHARD RALEIGH, not in his individual capacity
but solely as trustee of the Trust
/s/ Richard Raleigh
---------------------------------------------
<PAGE>
TRUST AGREEMENT
OF
U.S. HOME & GARDEN TRUST I
THIS TRUST AGREEMENT is made as of March 16, 1998 (this "Trust
Agreement"), by and among U.S. Home & Garden Inc., as depositor (the
"Depositor"), and Wilmington Trust Company, as trustee (the "Delaware Trustee"),
and Richard Raleigh, as trustee (the "Administrative Trustee" and jointly with
the Delaware Trustee, the "Trustees"). The Depositor and the Trustees hereby
agree as follows:
1. The trust created hereby shall be known as "U.S. Home & Garden Trust
I" (the "Trust"), in which name the Trustees or the Depositor, to the extent
provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trust the sum of $10. Such amount shall constitute the initial trust estate.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. C. ss. 3801, et seq.(the "Business Trust Act"), and that this document
constitute the governing instrument of the Trust. The Trustees are hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in such form as the Trustees may approve.
3. An amended and restated Trust Agreement satisfactory to each party
to it and substantially in the form to be included as an exhibit to the 1933 Act
Registration Statement (as herein defined), or in such other form as the parties
thereto may approve, will be entered into to provide for the contemplated
operation of the Trust created hereby and the issuance of the Preferred or
Capital Securities and Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Trust Agreement, the
Trustees shall not have any duty or obligation hereunder or with respect of the
trust estate, except as otherwise required by applicable law or as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. Notwithstanding the
foregoing, the Trustees may take all actions deemed proper as are necessary to
effect the transactions contemplated herein.
4. The Depositor, as the depositor of the Trust, is hereby authorized
(i) to file with the Securities and Exchange Commission (the "Commission") and
to execute, in the case of the 1933 Act Registration Statement and 1934 Act
Registration Statement (as herein defined), on behalf of the Trust, (a) a
Registration Statement (the "1933 Act Registration Statement"), including all
pre-effective and post-effective amendments thereto, relating to the
registration under the Securities Act of 1933, as amended (the "1933 Act"), of
the Preferred or Capital Securities of the Trust, (b) any preliminary prospectus
or prospectus or supplement thereto relating to the Capital or Preferred
Securities of the Trust required to be filed pursuant to the 1933 Act, and (c) a
Registration Statement on Form 8-A or other appropriate form (the "1934 Act
Registration Statement"), including all pre-effective and post-effective
amendments thereto, relating to the registration of the Preferred or
<PAGE>
Capital Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to filewith the American Stock Exchange or other exchange, or the
National Association of Securities Dealers ("NASD"), and execute on behalf of
the Trust a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred or Capital Securities of the Trust to be listed
on the American Stock Exchange or such other exchange, or the NASD's Nasdaq
National Market; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred or Capital Securities under the
securities or blue sky laws of such jurisdictions as the Depositor, on behalf of
the Trust, may deem necessary or desirable; and (iv) to execute, deliver and
perform on behalf of the Trust an underwriting agreement with one or more
underwriters relating to the offering of the Preferred or Capital Securities of
the Trust. In the event that any filing referred to in clauses (i), (ii) or
(iii) above is required by the rules and regulations of the Commission, the
American Stock Exchange or other exchange, NASD, or state securities or blue sky
laws to be executed on behalf of the Trust by the Trustees, the Trustees, in
their capacities as trustees of the Trust, are hereby authorized and directed to
join in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that the Trustees, in their capacities as
trustees of the Trust, shall not be required to join in any such filing or
execute on behalf of the Trust any such document unless required by the rules
and regulations of the Commission, the American Stock Exchange or other
exchange, NASD, or state securities or blue sky laws. In connection with all of
the foregoing, the Trustees, solely in their capacities as trustees of the
Trust, and the Depositor hereby constitute and appoint Richard Raleigh as his,
her or its, as the case may be, true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution for the Trustees and the Depositor
or in the Trustees' or the Depositor's name, place and stead, in any and all
capacities, to sign any and all amendments (including all pre-effective and
post-effective amendments) to the 1933 Act Registration Statement and the 1934
Act Registration Statement and to file the same, with all exhibits thereto, and
any other documents in connection therewith, with the Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as the Trustees or the Depositor
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his respective substitute or substitutes, shall do
or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of trustees of the Trust initially shall be two and
thereafter the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written instrument signed by the Depositor which
may increase or decrease the number of trustees of the Trust; provided, however,
that to the extent required by the Business Trust Act, one trustee of the Trust
shall either be a natural person who is a resident of the State of Delaware or,
if not a natural person, an entity which has its principal place of business in
the State of Delaware. Subject to the foregoing, the Depositor is entitled to
appoint or remove without cause any trustee of the Trust at any time. Any
trustee of the Trust may resign upon thirty days' prior notice to the Depositor.
-2-
<PAGE>
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the day and year first above written.
U.S. HOME & GARDEN INC.,
as Depositor
By: /s/ Richard Raleigh
------------------------------------------
Name: Richard Raleigh
Title: Chief Operating Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Delaware Trustee
By: /s/ Patricia A. Evans
------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
RICHARD RALEIGH, not in his individual capacity,
but solely as Administrative Trustee
/s/ Richard Raleigh
------------------------------------------
-3-
<PAGE>
TRUST AGREEMENT
among
U.S. Home & Garden Inc., as Depositor,
Wilmington Trust Company,
as Property Trustee,
Wilmington Trust Company,
as Delaware Trustee,
and
The Administrative Trustees Named Herein
Dated as of ________, 1998
U.S. HOME & GARDEN TRUST I
<PAGE>
U.S. HOME & GARDEN TRUST I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
----------------- ---------------
(Section) 310(a) (1) 8.7
(a) (2) 8.7
(a) (3) 8.7
(a) (4) 2.7 (a) (ii)
(b)
(Section) 311(a) 8.13
(b) 8.13
(Section) 312(a) 5.7
(b) 5.7
(c) 5.7
(Section) 313(a) 8.14 (a)
(a) (4) 8.14 (b)
(b) 8.14 (b)
(c) 10.9
(d) 8.14 (c)
(Section) 314(a) 8.15
(b) Not Applicable
(c) (1) 8.16
(c) (2) 8.16
(c) (3) Not Applicable
(d) Not Applicable
(e) 1.1, 8.16
(Section) 315(a) 8.1 (a), 8.3 (a)
(b) 8.2, 10.9
(c) 8.1 (a)
(d) 8.1, 8.3
(e) Not Applicable
(Section) 316(a) Not Applicable
(a) (1) (A) Not Applicable
(a) (1) (B) Not Applicable
(a) (2) Not Applicable
(b) 5.14
(c) 6.7
(Section) 317(a) (1) Not Applicable
(a) (2) Not Applicable
(b) 5.9
(Section) 318(a) 10.10
- ----------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
TRUST AGREEMENT (this "Trust Agreement"), dated as of ________, 1998,
among (i) U.S. Home & Garden Inc., a Delaware corporation (including any
successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a
Delaware banking corporation duly organized and
<PAGE>
existing under the laws of the State of Delaware, as property trustee (in such
capacity, the "Property Trustee" and, in its separate corporate capacity and not
in its capacity as Property Trustee, the "Bank"), (iii) Wilmington Trust
Company, a Delaware banking corporation organized under the laws of the State of
Delaware, as Delaware trustee (in such capacity, the "Delaware Trustee"), (iv)
___________, an individual, ___________, an individual, and ___________, an
individual, each of whose address is c/o U.S. Home & Garden Inc., 655 Montgomery
Street, San Francisco, California, 94111 (each an "Administrative Trustee" and
collectively the "Administrative Trustees") (the Property Trustee, the Delaware
Trustee and the Administrative Trustees are referred to collectively herein as
the "Trustees") and (v) the several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor, the Delaware Trustee and __________,
____________, and ___________, each as an Administrative Trustee, desire to
declare and establish a business trust pursuant to the Delaware Business Trust
Act by entering into this Trust Agreement, dated as of ________, 1998, and by
the execution and filing by the Delaware Trustee with the Secretary of State of
the State of Delaware of the Certificate of Trust, to be filed on March __,
1998.
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby agrees as follows:
ARTICLE I
DEFINED TERMS
SECTION I.1 Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
3
<PAGE>
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust created and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
4
<PAGE>
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable Bankruptcy Law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90 consecutive
days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Bankruptcy Law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"Bankruptcy Law" means any Federal or state bankruptcy, insolvency,
reorganization or similar law.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the appropriate Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial
interest in the Preferred Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust,
the Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date,
5
<PAGE>
relating to the Preferred Securities Certificates, substantially in the form
attached as Exhibit B, as the same may be amended and supplemented from time to
time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. The Depository Trust
Company will act as the initial Clearing Agency hereunder.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, as amended, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal office of the Property Trustee located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware, 19890-0001,
Attention: Corporate Trust Administration, and (ii) when used with respect to
the Debenture Trustee, the principal office of the Debenture Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware, 19890-0001,
Attention: Corporate Trust Administration.
6
<PAGE>
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's
___% Junior Subordinated Deferrable Interest Debentures, issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means either or both (as
the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificate as provided in Section 5.11(a) and
(b) Preferred Securities Certificates issued in certificated, fully registered
form as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. ss. 3801, et seq., as it may be amended from time to
time.
"Delaware Trustee" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Trust created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
7
<PAGE>
"Distributions" means amounts payable in respect of the Trust Preferred
Securities as provided in Section 4.1.
"Early Dissolution Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(c) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Property Trustee in this Trust Agreement (other
than a covenant or warranty a default in the performance or breach of which is
dealt with in clause (b) or (c) above) and continuation of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the defaulting Property Trustee by the Holders of at least
25% in aggregate liquidation preference of the Outstanding Preferred Securities
a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
8
<PAGE>
"Expiration Date" has the meaning specified in Section 9.1.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the holders
of the Preferred Securities, as amended from time to time.
"Holder" means a Securityholder.
"Indenture" means the Junior Subordinated Indenture, dated as of March
__, 1998, between the Depositor and the Debenture Trustee, as trustee, as
amended or supplemented from time to time.
"Investment Company Event" means the receipt by the Depositor and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which Change
in Investment Company Act Law becomes effective on or after the date or original
issuance of the Preferred Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, adverse claim, hypothecation, assignment,
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture, allocated to the Common Securities and the Trust Preferred Securities
based upon the relative Liquidation Amounts of such classes and the proceeds of
which will be used to pay the Redemption Price of such Trust Securities, and (b)
with respect to a distribution of Debentures to Holders of Trust Securities in
connection with a dissolution or liquidation of the Trust, Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
9
<PAGE>
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Chief Executive Officer, President or a Vice President, and by the
Chief Financial Officer, Treasurer, Secretary or an Assistant Secretary, of the
Depositor, and delivered to the appropriate Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 8.16 shall be the principal
executive, financial or accounting officer of the Depositor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(c) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
[["Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.]]
10
<PAGE>
"Outstanding," when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Trust Securities;
provided that, if such Trust Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Trust Agreement;
and
(c) Trust Securities which have been paid or in exchange for
or in lieu of which other Trust Securities have been executed and
delivered pursuant to Sections 5.4, 5.5, 5.11 and 5.13; provided,
however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Preferred Securities have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, Preferred Securities owned by the Depositor, any
Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in
determining whether any Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or
waiver, only Preferred Securities that such Trustee knows to be so
owned shall be so disregarded and (b) the foregoing shall not apply at
any time when all of the outstanding Preferred Securities are owned by
the Depositor, one or more of the Trustees and/or any such Affiliate.
Preferred Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Administrative Trustees the pledgee's right so to
act with respect to such Preferred Securities and that the pledgee is
not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.9 and shall initially be the Bank.
11
<PAGE>
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures will be held and from which the Property Trustee,
through the Paying Agent, shall make payments to the Securityholders in
accordance with Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust designated as "___% Cumulative Trust Preferred Securities,"
having a Liquidation Amount of $25 per security and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the Person identified as the "Property
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust heretofore created and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Preferred Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Preferred Securities.
12
<PAGE>
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" means a Person in whose name a Trust Security is
registered in the Securities Register; any such Person shall be deemed to be a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under this Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to United States Federal income tax
with respect to income received or accrued on the Debentures, (ii) interest
payable by the Depositor on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, will not be, deductible by the Depositor, in
whole or in part, for United States Federal income tax purposes or (iii) the
Trust is, or will be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Trust Agreement, as the same may be
modified, amended or supplemented in accordance with the applicable provisions
hereof, including (i) all exhibits hereto and (ii) for all purposes of this
Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
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"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriters" means each of the Underwriters named in the Underwriting
Agreement.
"Underwriting Agreement" means that certain Underwriting Agreement,
dated as of April ___, 1998, among the Trust, the Depositor, EVEREN Securities,
Inc. and Josephthal & Co. Inc., as the representatives of the Underwriters.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION II.1 Name.
The Trust continued hereby shall be known as "U.S. HOME & GARDEN TRUST
I," as such name may be modified from time to time by the Administrative
Trustees following written notice to the Holders of Trust Securities and the
other Trustees, in which name the Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other instruments on behalf
of the Trust and sue and be sued.
SECTION II.2 Office of the Delaware Trustee; Principal Place of
Business.
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The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890-0001, Attention: Corporate Trust Administration, or
such other address in the State of Delaware as the Delaware Trustee may
designate by written notice to the Securityholders and the Depositor. The
principal executive office of the Trust is c/o U.S. Home & Garden Inc., 655
Montgomery Street, San Francisco, California, 94111.
SECTION II.3 Initial Contribution of Trust Property; Organizational
Expenses.
The Trustees acknowledges receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
SECTION II.4 Issuance of the Preferred Securities.
The Depositor and an Administrative Trustee, on behalf of the Trust and
pursuant to the Original Trust Agreement, have executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.2 and deliver to the Underwriters named in
the Underwriting Agreement, Preferred Securities Certificates, registered in the
name of the nominee of the initial Clearing Agency, as instructed by EVEREN
Securities, Inc., on behalf of the representatives of the Underwriters, in an
aggregate amount of 2,200,000 Preferred Securities having an aggregate
Liquidation Amount of $55,000,000, against receipt of such aggregate purchase
price of such Preferred Securities of $55,000,000, which amount the
Administrative Trustee shall promptly deliver to the Property Trustee.
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SECTION II.5 Issuance of the Common Securities; Subscription and
Purchase of Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
66,000 Common Securities having an aggregate Liquidation Amount of $1,650,000,
against payment by the Depositor of such amount, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor Debentures, registered in the
name of the Trust and having an aggregate principal amount equal to $56,650,000
and, in satisfaction of the purchase price for such Debentures, the Property
Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of
$56,650,000, such amount being the sum of the amounts delivered to the Property
Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the first
sentence of this Section 2.5.
SECTION II.6 Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the
Debentures, and (b) to engage in those activities necessary, advisable or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
SECTION II.7 Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section and Section 2.6, and in accordance with the
following provisions (i) and (ii), the Trustees shall have the authority to
enter into all transactions and agreements determined by the Trustees to be
appropriate
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in exercising the authority, express or implied, otherwise granted to the
Trustees under this Trust Agreement, and to perform all acts in furtherance
thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect
to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense
Agreement and the Certificate Depository Agreement and such
other agreements as may be necessary or desirable in
connection with the purposes and function of the Trust;
(C) assisting in the registration (including the
execution of a registration statement on the appropriate form)
of the Preferred Securities under the Securities Act of 1933,
as amended, and under state securities or blue sky laws, and
the qualification of this Trust Agreement as a trust indenture
under the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon such securities exchange or exchanges as shall
be determined by the Depositor and the registration of the
Preferred Securities under the Exchange Act, and the
preparation and filing of all periodic and other reports and
other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities
and the Debentures to the Securityholders in accordance with
this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating
agent and Securities Registrar in accordance with this Trust
Agreement;
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
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(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the preparation, execution and filing of the certificate
of cancellation with the Secretary of State of the State of
Delaware;
(I) unless otherwise determined by the Depositor, the
Property Trustee or the Administrative Trustees, or as
otherwise required by the Delaware Business Trust Act or the
Trust Indenture Act, to execute on behalf of the Trust (either
acting alone or together with any or all of the Administrative
Trustees) any documents that the Administrative Trustees have
the power to execute pursuant to this Trust Agreement; and
(J) the taking of any action incidental to the
foregoing as the Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this
Trust Agreement for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the
Payment Account;
(D) the distribution through the Paying Agent of
amounts owed to the Securityholders in respect of the Trust
Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures
to the Securityholders in accordance with this Trust
Agreement;
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(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the preparation, execution and filing of the certificate
of cancellation with the Secretary of State of the State of
Delaware;
(I) after an Event of Default (other than under
paragraph (b), (c), (d) or (e) of the definition of such term
if such Event of Default is by or with respect to the Property
Trustee) the taking of any action incidental to the foregoing
as the Property Trustee may from time to time determine is
necessary or advisable to give effect to the terms of this
Trust Agreement and protect and conserve the Trust Property
for the benefit of the Securityholders (without consideration
of the effect of any such action on any particular
Securityholder);
(J) so long as the Property Trustee is the Securities
Registrar, registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
2.7(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust,
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the following (and any actions taken by the Depositor in furtherance of the
following prior to the date of this Trust Agreement are hereby ratified and
confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution by the Trust of a registration statement
on the appropriate form in relation to the Preferred Securities,
including any amendments thereto;
(ii) the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Preferred
Securities and the determination of any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and the
advice to the Trustees of actions they must take on behalf of the
Trust, and the preparation for execution and filing of any documents to
be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the American Stock Exchange or
any other national stock exchange or the Nasdaq Stock Market for
listing upon notice of issuance of any Preferred Securities;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act, or fail to be classified
as a grantor trust for United States federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust Agreement,
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that each of the Depositor and any Administrative Trustee determines in its
discretion to be necessary or desirable for such purposes, as long as such
action does not adversely affect in any material respect the interests of the
holders of the Preferred Securities.
SECTION II.8 Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
SECTION II.9 Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION III.1 Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION IV.1 Distributions.
(a) The Trust Securities represent undivided beneficial interests in
the Trust Property, and Distributions (including of Additional Amounts) will be
made on the Trust Securities at the rate and on the dates that payments of
interest (including of Additional Interest, as defined in the Indenture) are
made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative,
and will accumulate whether or not there are funds of the Trust
available for the payment of Distributions. Distributions shall accrue
from the date of original issuance of the Trust Securities, and, except
in the event (and to the extent) that the Depositor exercises its right
to defer the payment of interest on the Debentures pursuant to the
Indenture, shall be payable monthly in arrears on the ___th day of each
calendar month of each year, commencing on _______ ___, 1998. If any
date on which a Distribution is otherwise payable on the Trust
Securities is not a Business Day, then the payment of such Distribution
shall be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay)
with the same force and effect as if made on such date (each date on
which distributions are payable in accordance with this Section 4.1(a),
a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are made
when due (and before giving effect to Additional Amounts, if
applicable), Distributions on the Trust Securities shall be payable at
a rate of ___% per annum of the Liquidation Amount of the Trust
Securities. The amount of Distributions payable for any full period
shall be computed on the basis of a 360-day year of twelve 30-day
months. The amount of Distributions for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day year
of twelve 30-day months. The amount of Distributions payable for any
period shall include the Additional Amounts, if any.
(iii) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on
each Distribution Date only to the extent that the Trust has funds then
on hand and available in the Payment Account for the payment of such
Distributions.
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(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be one Business Day prior to such Distribution Date; provided, however,
that in the event that the Preferred Securities do not remain in book-entry-only
form, the relevant record date shall be the date 15 days prior to the relevant
Distribution Date (or, if such date is not a Business Day, the next Business Day
following such date).
SECTION IV.2 Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust will be required to redeem, subject to Section 4.3, a Like
Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed and
that Distributions thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on
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each Redemption Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 12:00 noon, Eastern time, on the Redemption
Date, subject to Section 4.2(c), with respect to Preferred Securities held in
certificated form, the Property Trustee, subject to Section 4.2(c), will
irrevocably deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and will give the Paying Agent irrevocable instructions and
authority to pay the Redemption Price to the Holders thereof upon surrender of
their Preferred Securities Certificates. With respect to Preferred Securities
held in book-entry form, the Property Trustee, subject to Section 4.2(c), will
irrevocably deposit with the Clearing Agency for the Preferred Securities funds
sufficient to pay the applicable Redemption Price and will give such Clearing
Agency irrevocable instructions and authority to pay the Redemption Price to the
holders thereof. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest,
and such Securities will cease to be outstanding. In the event that any date on
which any Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), with the same force and effect as if made on such date. In the
event that payment of the Redemption Price in respect of any Trust Securities
called for redemption is improperly withheld or refused and not paid either by
the Trust or by the Depositor pursuant to the Guarantee, Distributions on such
Trust Securities will continue to accrue, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the recordholders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, that in the event
that the Preferred Securities do not remain in book-entry-only form, the
relevant record date shall be the date 15 days prior to the relevant Redemption
Date (or, if such date is not a Business Day, the next Business Day following
such date).
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Redemption Price of Trust Securities to be redeemed shall be allocated on a pro
rata basis (based on Liquidation Amounts) among the
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Common Securities and the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected on a pro rata basis (based upon
Liquidation Amounts) not more than 60 days prior to the Redemption Date by the
Property Trustee from the Outstanding Preferred Securities not previously called
for redemption, by such method (including, without limitation, by lot) as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $25 or an integral multiple of
$25 in excess thereof) of the Liquidation Amount of Preferred Securities of a
denomination larger than $25. The Property Trustee shall promptly notify the
Security Registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Preferred Securities shall relate, in the case of
any Preferred Securities redeemed or to be redeemed only in part, to the portion
of the Liquidation Amount of Preferred Securities that has been or is to be
redeemed.
SECTION IV.3 Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.2(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional Amounts, if
applicable) on, or the Redemption Price of, Preferred Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities has been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Preferred Securities and not the Holder of the Common Securities, and only
the Holders of the Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
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SECTION IV.4 Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register, provided that payments will be made by wire transfer if
requested by a holder of at least $1,000,000 aggregate Liquidation Amount of the
Preferred Securities, or, if the Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which shall credit the relevant Persons' accounts at such
Clearing Agency on the applicable Distribution Dates. Payments in respect of the
Common Securities shall be made in such manner as shall be mutually agreed
between the Property Trustee and the Common Securityholder.
SECTION IV.5 Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
federal withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
SECTION IV.6 Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the Debentures of Additional Sums, the Property
Trustee shall promptly pay any taxes, duties or governmental charges of
whatsoever nature (other than withholding taxes) imposed on the Trust by the
United States or any other taxing authority.
SECTION IV.7 Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities
shall be reduced by the amount of any corresponding payment that such Holder
(and any Owner with respect thereto)
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has directly received pursuant to Section 5.8 of the Indenture or Section 5.14
of this Trust Agreement.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION V.1 Initial Ownership.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION V.2 The Trust Securities Certificates.
The Preferred Securities Certificates shall be issued in minimum
denominations of $25 Liquidation Amount and integral multiples of $25 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $25 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by signature of at least
one Administrative Trustee. Trust Securities Certificates bearing the signatures
of individuals who were, at the time when such signatures shall have been
affixed, authorized to sign on behalf of the Trust, shall be validly issued and
entitled to the benefits of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
delivery of such Trust Securities Certificates or did not hold such offices at
the date of delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 5.4, 5.11 and 5.13.
SECTION V.3 Execution and Delivery of Trust Securities Certificates.
On or prior to the Closing Date, the Administrative Trustees shall
cause Trust Securities Certificates, in an aggregate Liquidation Amount as
provided in Section 2.4, to be executed on behalf of the Trust and delivered to
or upon the written order of the Depositor, signed by its Chairman of the Board,
Chief Executive Officer, President or any Vice President and its Chief Fiancial
Officer, Treasurer, Secretary or any Assistant Secretary, without further
corporate action by the Depositor, in authorized denominations.
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SECTION V.4 Registration of Transfer and Exchange of Preferred
Securities Certificates.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Preferred Securities Certificates (the "Securities Register") in which, the
registrar designated by the Depositor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Property Trustee shall be the
initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee or
Trustees.
The Securities Registrar shall not be required to register the transfer
of any Preferred Securities that have been called for redemption. At the option
of a Holder, Preferred Securities Certificates may be exchanged for other
Preferred Securities Certificates in authorized denominations of the same class
and of a like aggregate Liquidation Amount upon surrender of the Preferred
Securities Certificates to be exchanged at the office or agency maintained
pursuant to Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by an
Administrative Trustee in accordance with such Person's customary practice. The
Trust shall not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of business 15
calendar days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close business on
the day of such mailing or (ii) register the transfer of or exchange any
Preferred Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
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No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
SECTION V.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and make available for delivery, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION V.6 Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in
whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by any notice
to the contrary.
SECTION V.7 Access to List of Securityholders' Names and Addresses.
At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee (a) semi-annually on or before
January 1 and July 1 in each year, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Securityholders as of
the most recent record date and (b) promptly after receipt by any Administrative
Trustee or the
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Depositor of a request therefor from the Property Trustee, such other
information as the Property Trustee may reasonably require in order to enable
the Property Trustee to discharge its obligations under this Trust Agreement, in
each case to the extent such information is in the possession or control of the
Administrative Trustees or the Depositor and is not identical to a previously
supplied list or has not otherwise been received by the Property Trustee in its
capacity as Securities Registrar. The rights of Securityholders to communicate
with other Securityholders with respect to their rights under this Trust
Agreement or under the Trust Securities, and the corresponding rights of the
Trustee shall be as provided in the Trust Indenture Act. Each Securityholder, by
receiving and holding a Trust Securities Certificate, and each Owner shall be
deemed to have agreed not to hold the Depositor, the Property Trustee or the
Administrative Trustees accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION V.8 Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Preferred Securities Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustees in respect of the Trust Securities Certificates may be served.
The Administrative Trustees initially designate the principal corporate trust
office of the Property Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890- 0001, Attention: Corporate Trust Administration, as
the principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
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SECTION V.9 Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee shall
no longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and upon removal of a
Paying Agent such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall
apply to the Property Trustee also in its role as Paying Agent, for so long as
the Property Trustee shall act as Paying Agent and, to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Trust
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION V.10 Ownership of Common Securities by Depositor.
At the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, other than a transfer in connection with a consolidation or merger of
the Depositor into another Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE."
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SECTION V.11 Book-Entry Preferred Securities Certificates; Common
Securities Certificate.
(a) The Preferred Securities Certificates, upon original issuance, will
be issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of
_______________, the nominee of the initial Clearing Agency, and no Owner will
receive a Definitive Preferred Securities Certificate, representing such Owners'
interest in such Preferred Securities, except as provided in Section 5.13.
Unless and until Definitive Preferred Securities Certificates have been issued
to Owners pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full
force and effect;
(ii) the Securities Registrar, the Paying Agent and the
Trustees shall be entitled to deal with the Clearing Agency for all
purposes of this Trust Agreement relating to the Book-Entry Preferred
Securities Certificates (including the payment of the Liquidation
Amount of and Distributions on the Preferred Securities evidenced by
Book-Entry Preferred Securities Certificates) the Book-Entry Preferred
Securities Certificates and shall have no obligations to the Owners
thereof;
(iii) to the extent that the provisions of this Section 5.11
conflict with any other provisions of this Trust Agreement, the
provisions of this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements
between such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Preferred Securities Certificates are issued
pursuant to Section 5.13, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments on the Preferred Securities to such Clearing
Agency Participants. Any Clearing Agency designated pursuant here to
will not be deemed an agent of the Trustee for any purpose.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
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SECTION V.12 Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
SECTION V.13 Definitive Preferred Securities Certificates.
If (a) the Depositor advises the Trustees in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
with respect to the Preferred Securities Certificates, and the Depositor is
unable to locate a qualified successor, (b) the Depositor at its option advises
the Trustees in writing that it elects to terminate the book-entry system
through the Clearing Agency or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Property Trustee in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interest of the Owners of Preferred
Securities Certificates, then the Property Trustee shall notify the Clearing
Agency and the Clearing Agency shall notify all Owners of Preferred Securities
Certificates and the other Trustees of the occurrence of any such event and of
the availability of the Definitive Preferred Securities Certificates to Owners
of such class or classes, as applicable, requesting the same. Upon surrender to
the Property Trustee of the typewritten Preferred Securities Certificate or
Certificates representing the Book-Entry Preferred Securities Certificates by
the Clearing Agency, accompanied by registration instructions, the
Administrative Trustees, or any one of them, shall execute the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Preferred Securities Certificates, the Trustees shall recognize
the Holders of the Definitive Preferred Securities Certificates as
Securityholders. The Definitive Preferred Securities Certificates shall be
engraved and executed in accordance with the applicable rules of the American
Stock Exchange or such other national exchange or over-the-counter market on
which the Preferred Securities are then listed for trading.
SECTION V.14 Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any
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right or title therein other than the undivided beneficial interest in the
assets of the Trust conferred by their Trust Securities and they shall have no
right to call for any partition or division of property, profits or rights of
the Trust except as described below. The Trust Securities shall be personal
property giving only the rights specifically set forth therein and in this Trust
Agreement. The Trust Securities shall have no preemptive or similar rights and
when issued and delivered to Securityholders against payment of the purchase
price therefor will be fully paid and nonassessable by the Trust. The Holders of
the Trust Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of at least 25% in Liquidation Amount of the Preferred
Securities then Outstanding shall have such right by a notice in writing to the
Depositor and the Debenture Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Debentures shall
become immediately due and payable, provided that the payment of principal and
interest on such Debentures shall remain subordinated to the extent provided in
the Indenture.
At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest (including
any Additional Interest (as defined in the Indenture)) on all
of the Debentures,
(B) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Debentures, and
(C) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
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expenses, disbursements and advances of the Debenture Trustee
and the Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.13 of the Indenture.
The Holders of a majority in aggregate Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities all or part of which is represented by Book-Entry Preferred
Securities Certificates, a record date shall be established for determining
Holders of Outstanding Preferred Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Property
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such Holder (a "Direct
Action"). Except as set forth in Section 5.14(b) and this Section 5.14(c), the
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Holders of Preferred Securities shall have no right to exercise directly any
right or remedy available to the holders of, or in respect of, the Debentures.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION VI.1 Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2
and in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities, provided, however, that where a consent under
the Indenture would require the consent of each Holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of Preferred Securities, except by a subsequent vote of the Holders of Preferred
Securities. The Property Trustee shall notify all Holders of the Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that such action shall not
cause the Trust to fail to be classified as a grantor trust for United States
federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the
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powers, preferences or special rights of the Preferred Securities, whether by
way of amendment to the Trust Agreement or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to the terms of this
Trust Agreement, then the Holders of Outstanding Preferred Securities as a class
will be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of the Holders of at
least a majority in Liquidation Amount of the Outstanding Preferred Securities.
Notwithstanding any other provision of this Trust Agreement, no amendment to
this Trust Agreement may be made if, as a result of such amendment, it would
cause the Trust to fail to be classified as a grantor trust for United States
federal income tax purposes.
SECTION VI.2 Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.9 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION VI.3 Meetings of Preferred Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of Holders of
record of 25% of the Outstanding Preferred Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Preferred Securityholders to
vote on any matters as to which Preferred Securityholders are entitled to vote.
Holders of record of 50% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their Liquidation
Amount) held by the Preferred Securityholders of record present, either in
person or by proxy, at such meeting shall constitute the action of the Preferred
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
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SECTION VI.4 Voting Rights.
Securityholders shall be entitled to one vote for each $25 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
SECTION VI.5 Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Securities are held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION VI.6 Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding a majority of all Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing (based upon their aggregate Liquidation Amount).
SECTION VI.7 Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date,
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not more than 90 days prior to the date of any meeting of Securityholders or the
payment of a Distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION VI.8 Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of
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the Liquidation Amount of such Trust Security or by one or more duly appointed
agents each of which may do so pursuant to such appointment with regard to all
or any part of such liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any Person.
SECTION VI.9 Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION VII.1 Representations and Warranties of the Bank.
The Bank hereby represents and warrants for the benefit of the
Depositor and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and has
taken all necessary action to authorize
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the execution, delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding agreement of
the Bank enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(d) the execution, delivery and performance of this Trust Agreement has
been duly authorized by all necessary corporate or other action on the part of
the Bank and does not require any approval of stockholders of the Bank and such
execution, delivery and performance will not (i) violate the charter or bylaws
of the Bank, (ii) violate any provision of, or constitute, with or without
notice or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Bank is a party or by
which it is bound, or (iii) violate any law, governmental rule or regulation of
the United States or the State of Delaware, as the case may be, governing the
banking, trust or general powers of the Bank or any order, judgment or decree
applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank of
this Trust Agreement nor the consummation of any of the transactions by the
Property Trustee or the Delaware Trustee (as appropriate in context)
contemplated herein or therein requires the consent or approval of, the giving
of notice to, the registration with or the taking of any other action with
respect to any governmental authority or agency under any existing federal law
governing the banking, trust or general powers of the Bank, as the case may be,
under the laws of the United States or the State of Delaware;
(f) there are no proceedings pending or, to the best the Bank's
knowledge, threatened against or affecting the Property Trustee or the Delaware
Trustee in any court or before any governmental authority, agency or arbitration
board or tribunal which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and authority of
the Bank to enter into or perform its obligations as one of the Trustees under
this Trust Agreement.
SECTION VII.2 Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
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(a) the Trust Securities Certificates issued at the Closing Date on
behalf of the Trust have been duly authorized and will have been, duly and
validly executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of each such date, entitled to the benefits
of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the State
of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank, the Property Trustee or the
Delaware Trustee, as the case may be, of Bank, this Trust Agreement.
ARTICLE VIII
THE TRUSTEES
SECTION VIII.1 Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section.
No Administrative Trustee or the Delaware Trustee shall be subject to any
liability under this Trust Agreement except for its own grossly negligent
action, its own grossly negligent failure to act, or its own willful misconduct.
To the extent that, at law or in equity, a Trustee has duties (including
fiduciary duties) and liabilities relating thereto to the Trust or to the
Securityholders, such Trustee shall not be liable to the Trust or to any
Securityholder for such Trustee's good faith reliance on the provisions of this
Trust Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of the Trustees otherwise existing at law or
in equity, are agreed by the Depositor and the Securityholders to replace such
other duties and liabilities of the Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to
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enable the Property Trustee or a Paying Agent to make payments in accordance
with the terms hereof. Each Securityholder, by its acceptance of a Trust
Security, agrees that it will look solely to the revenue and proceeds from the
Trust Property to the extent legally available for distribution to it as herein
provided and that the Trustees are not personally liable to it for any amount
distributable in respect of any Trust Security or for any other liability in
respect of any Trust Security. This Section 8.1(b) does not limit the liability
of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the
case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of the Trust Securities
given in accordance with this Trust Agreement relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such Property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree with the
Depositor; and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Payment Account maintained by the Property Trustee pursuant to Section
3.1 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or misconduct of
the Administrative Trustees or the Depositor.
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SECTION VIII.2 Certain Notices.
(a) Within 5 Business Days after the occurrence of any Event of Default
actually known to a Responsible Officer of the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in Section
10.9, notice of such Event of Default to the Securityholders, the Administrative
Trustees and the Depositor, unless the Event of Default shall have been cured or
waived. For purposes of this Section the term "Event of Default" means any event
that is, or after notice or lapse of time or both would become, and Event of
Default.
(b) The Administrative Trustees shall transmit, to the Securityholders
in the manner and to the extent provided in Section 10.9, notice of the
Depositor's election to begin or further extend an Extension Period (as defined
in the Indenture) on the Debentures (unless such election shall have been
revoked) within the time specified for transmitting such notice to the holders
of the Debentures pursuant to the Indenture as originally executed.
SECTION VIII.3 Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to which
the Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking,
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by the Depositor; provided, however, that if the Property Trustee does not
receive such instructions of the Depositor within ten Business Days after it has
delivered such notice, or such reasonably shorter period of time set forth in
such notice (which to the extent practicable shall not be less than two Business
Days), it may, but shall be under no duty to, take or refrain from taking such
action not inconsistent with this Trust Agreement as it shall deem advisable and
in the best interests of the Securityholders, in which event the Property
Trustee shall have no liability except for its own bad faith, negligence or
willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Depositor or
the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
(f) the Property Trustee may consult with counsel (which counsel may be
counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice, such counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees; the Property Trustee shall
have the right at any time to seek instructions concerning the administration of
this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or
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document, unless requested in writing to do so by one or more Securityholders,
but the Property Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION VIII.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION VIII.5 May Hold Securities.
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Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, except as provided in the definition of the term "Outstanding"
in Article I and subject to Sections 8.8 and 8.13, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
SECTION VIII.6 Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation
for all services rendered by them hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) as specified in a separate agreement between any of the Trustees
and the Depositor;
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its gross negligence (or ordinary
negligence in the case of the Property Trustee), bad faith or willfulness; and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or dissolution of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or ordinary negligence in the case of the Property Trustee), bad
faith or willful misconduct with respect to such acts or omissions.
The provisions of this Section 8.6 shall survive the termination of
this Trust Agreement.
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No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may (subject to Section 8.8) engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Trust Securities shall have no rights by
virtue of this Trust Agreement in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. Neither the Depositor, nor any Trustee, shall be obligated to present
any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken by
the Trust, and the Depositor or any Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Trustee may
engage or be interested in any financial or other transaction with the Depositor
or any Affiliate of the Depositor, or may act as depository for, trustee or
agent for, or act on any committee or body of holders of, securities or other
obligations of the Depositor or its Affiliates.
SECTION VIII.7 Corporate Property Trustee Required; Eligibility of
Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
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SECTION VIII.8 Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION VIII.9 Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Depositor and the Administrative
Trustees, by agreed action of the majority of such Trustees, shall have power to
appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery, and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Property Trustee
either to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age and
a resident of the United States or (ii) a legal entity with its principal place
of business in the United States that shall act through one or more persons
authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties,
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and obligations hereunder in respect of the custody of securities, cash and
other personal property held by, or required to be deposited or pledged with,
the Trustees specified hereunder shall be exercised solely by such Trustees and
not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION VIII.10 Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
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Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time by giving written notice thereof to the Common
Securityholder. If the instrument of acceptance by the successor Trustee
required by Section 8.11 shall not have been delivered to the Relevant Trustee
within 30 days after the giving of such notice of resignation, the Relevant
Trustee may petition, at the expense of the Trust, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). In no event will the Holders of
the Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustees. An Administrative Trustee may be removed by the
Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section 8.11. If an
Administrative Trustee shall resign, be removed or become incapable of acting as
Administrative Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder by Act of the Common
Securityholder delivered to the Administrative Trustee shall promptly appoint a
successor Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Securities for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
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The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.9 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
SECTION VIII.11 Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
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SECTION VIII.12 Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
SECTION VIII.13 Preferential Collection of Claims Against Depositor or
Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
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Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION VIII.14 Reports by Property Trustee.
(a) Not later than July 31 of each year commencing with the year
commencing January 1, 1999, the Property Trustee shall transmit to all
Securityholders in accordance with Section 10.9, and to the Depositor, a brief
report dated as of the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if
to the best of its knowledge it has continued to be eligible under said
Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with
all of its obligations under this Trust Agreement during the
twelve-month period (or, in the case of the initial report, the period
since the Closing Date) ending with such December 31 or, if the
Property Trustee has not complied in any material respect with such
obligations, a description of such noncompliance; and
(iii) any change in the property and funds in its possession
as Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Securityholders
such reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with each national stock exchange
(including the American Stock Exchange), the Nasdaq Stock Market or such other
interdealer quotation system or self-regulatory organization upon which the
Trust Securities are listed or traded, with the Commission and with the
Depositor.
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SECTION VIII.15 Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
SECTION VIII.16 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION VIII.17 Number of Trustees.
(a) The number of Trustees shall be five (5) provided that the Holder
of all of the Common Securities by written instrument may increase or decrease
the number of Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 8.10, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Trust Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Trust Agreement.
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SECTION VIII.18 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
SECTION VIII.19 Voting.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION IX.1 Dissolution Upon Expiration Date.
Unless dissolved earlier, the Trust shall automatically dissolve on
____________, 2029 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
SECTION IX.2 Early Dissolution.
The first to occur of any of the following events is an "Early
Dissolution Event," upon the occurrence of which the Trust shall dissolve:
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(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the Depositor at
any time to dissolve the Trust and distribute Debentures to Securityholders in
exchange for a Like Amount of the Preferred Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
SECTION IX.3 Dissolution.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall dissolve upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders, and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Delaware Business Trust Act.
SECTION IX.4 Liquidation.
(a) If an Early Dissolution Event specified in clause (a), (b) or (d)
of Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated
by the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 9.4(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
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(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for
certificates representing the Like Amount of the Debentures, or if
Section 9.4(d) applies receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Administrative Trustees shall establish a record date for
such distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to holders of Trust Securities Certificates, upon surrender of such
certificates to the Administrative Trustees or their agent for exchange, (iii)
the Depositor shall use its best efforts to have the Debentures listed on the
American Stock Exchange or on such other exchange, interdealer quotation system
or self-regulatory organization as the Preferred Securities are then listed,
(iv) any Trust Securities Certificates not so surrendered for exchange will be
deemed to represent a Like Amount of Debentures, accruing interest at the rate
provided for in the Debentures from the last Distribution Date on which a
Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments of interest or principal will be made to Holders of Debentures
represented by such certificates) and (v) all rights of Securityholders holding
Trust Securities will cease, except the right of such Securityholders to receive
a Like Amount of Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
wound-up or terminated, by the Property Trustee in such manner as the Property
Trustee determines. In such event, on the date of the dissolution of the Trust,
Securityholders will be entitled to receive out of
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the assets of the Trust available for distribution to Securityholders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to the Liquidation Amount per Trust Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If, upon any such winding up or
termination, the Liquidation Distribution can be paid only in part because the
Trust has insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts payable
by the Trust on the Trust Securities shall be paid on a pro rata basis (based
upon Liquidation Amounts). The Holder of the Common Securities will be entitled
to receive Liquidation Distributions upon any such winding-up or termination pro
rata (determined as aforesaid) with Holders of Preferred Securities, except
that, if a Debenture Event of Default has occurred and is continuing, Holders of
the Preferred Securities shall have a priority over the Holders of Common
Securities.
SECTION IX.5 Mergers, Consolidations, Amalgamations or
Replacements of the Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except pursuant
to this Section 9.5 or Section 9.4. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the Holders of
the Preferred Securities, the Property Trustee or the Delaware Trustee, the
Trust may merge with or into, consolidate, amalgamate, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to a trust organized as such under the laws of any State; provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Depositor expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Debentures, (iii) the Successor Securities are listed or traded,
or any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement,
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conveyance, transfer or lease, neither the Trust nor such successor entity will
be required to register as an investment company under the 1940 Act and (viii)
the Depositor owns all of the Common Securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION X.1 Limitation of Rights of Securityholders.
The death or incapacity of any person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or any
Securityholder for such person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION X.2 Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Administrative Trustees and the Depositor, without the
consent of any Securityholders, (i) to cure any ambiguity, correct or supplement
any provision herein which may be inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, which shall not be inconsistent with the other
provisions of this Trust Agreement, or (ii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
investment company under the 1940 Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any such amendments of this Trust
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Agreement shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any provision of this
Trust Agreement may be amended by the Administrative Trustees and the Property
Trustee with (i) the consent of Trust Securityholders representing not less than
a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to the Trustees
in accordance with such amendment will not affect the Trust's status as a
grantor trust for United States federal income tax purposes or the Trust's
exemption from status of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Administrative Trustee shall enter into or consent to any amendment to this
Trust Agreement which would (i) cause the Trust to fail or cease to qualify for
the exemption from status of an investment company under the 1940 Act, (ii)
cause the Trust to fail or cease to be classified as a grantor trust for United
States federal income tax purposes, or (iii) cause the Preferred Securities to
be delisted by the American Stock Exchange.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Delaware Trustee or the Depositor, as the case may
be, this Trust Agreement may not be amended in a manner which imposes any
additional obligation on the Depositor or the Delaware Trustee.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under
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this Trust Agreement. The Property Trustee shall be entitled to receive an
Opinion of Counsel and an Officers' Certificate stating that any amendment to
this Trust Agreement is in compliance with this Trust Agreement.
SECTION X.3 Counterparts.
This Trust Agreement may be executed in one or more counterparts, each
of which shall be an original and all of which shall constitute one and the same
instrument.
SECTION X.4 Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates 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 X.5 Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION X.6 Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest shall
accrue thereon for the period after such date.
SECTION X.7 Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor
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to the Depositor, the Trust or the Relevant Trustee, including any successor by
operation of law. Except in connection with a consolidation, merger or sale
involving the Depositor that is permitted under Article Eight of the Indenture
and pursuant to which the assignee agrees in writing to perform the Depositor's
obligations hereunder, the Depositor shall not assign its obligations hereunder.
SECTION X.8 Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION X.9 Reports, Notices and Demands.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to U.S. Home & Garden
Inc., 655 Montgomery Street, San Francisco, California, 94111, Attention: Robert
Kassel, President. Such notice, demand or other communication to or upon a
Securityholder shall be deemed to have been sufficiently given or made, for all
purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (a) with respect to the Property Trustee to Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington ,
Delaware 19890-0001, Attention: Corporate Trust Department; (b) with respect to
the Delaware Trustee, to Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; and (c) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention Administrative
Trustees of U.S. HOME & GARDEN TRUST I." Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by
the Trust or the Property Trustee.
SECTION X.10 Agreement Not to Petition.
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Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any Bankruptcy Laws or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 10.10, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such petition by
the Depositor against the Trust or the commencement of such action and raise the
defense that the Depositor has agreed in writing not to take such action and
should be stopped and precluded therefrom and such other defenses, if any, as
counsel for the Trustee or the Trust may assert. The provisions of this Section
10.10 shall survive the termination of this Trust Agreement.
SECTION X.11 Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION X.12 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER,
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WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF
THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
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IN WITNESS WHEREOF, the undersigned have executed this Trust Agreement
this 27th day of January, 1998.
U.S. HOME & GARDEN INC. U.S. HOME & GARDEN TRUST I
By: ______________________ __________________________________
Name: Jerry A. Gordon Name:
Title: President and Title: Administrative Trustee
Chief Operating Officer
WILMINGTON TRUST COMPANY, __________________________________
as Property Trustee Name:
Title: Administrative Trustee
By: ______________________ __________________________________
Name: Name:
Title: Title: Administrative Trustee
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: ______________________
Name:
Title:
<PAGE>
Certificate of Trust
<PAGE>
EXHIBIT B
DTC Letter of Representations
<PAGE>
EXHIBIT C
Certificate Evidencing Common Securities
<PAGE>
EXHIBIT D
Agreement as to Expenses and Liabilities
<PAGE>
EXHIBIT E
Certificate Evidencing Trust Preferred Securities
<PAGE>
TABLE OF CONTENTS
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ARTICLE I Defined Terms........................................................................................... 1
ARTICLE II Establishment of the Trust............................................................................. 10
Section 2.1...........................................................................................Name 10
Section 2.2....................................Office of the Delaware Trustee; Principal Place of Business 11
Section 2.3................................Initial Contribution of Trust Property; Organizational Expenses 11
Section 2.4...........................................................Issuance of the Preferred Securities 11
Section 2.5.....................Issuance of the Common Securities; Subscription and Purchase of Debentures 11
Section 2.6...........................................................................Declaration of Trust 12
Section 2.7...............................................Authorization to Enter into Certain Transactions 12
Section 2.8................................................................................Assets of Trust 15
Section 2.9........................................................................Title to Trust Property 16
ARTICLE III Payment Account....................................................................................... 16
Section 3.1................................................................................Payment Account 16
ARTICLE IV Distributions; Redemption.............................................................................. 16
Section 4.1..................................................................................Distributions 16
Section 4.2.....................................................................................Redemption 17
Section 4.3.............................................................Subordination of Common Securities 19
Section 4.4.............................................................................Payment Procedures 20
</TABLE>
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Section 4.5........................................................................Tax Returns and Reports 20
Section 4.6....................................................Payment of Taxes, Duties, Etc. of the Trust 20
Section 4.7.........................................Payments under Indenture or Pursuant to Direct Actions 20
ARTICLE V Trust Securities Certificates........................................................................... 21
Section 5.1..............................................................................Initial Ownership 21
Section 5.2..............................................................The Trust Securities Certificates 21
Section 5.3........................................Execution and Delivery of Trust Securities Certificates 21
Section 5.4.....................Registration of Transfer and Exchange of Preferred Securities Certificates 21
Section 5.5.............................Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates 22
Section 5.6.................................................................Persons Deemed Securityholders 23
Section 5.7.........................................Access to List of Securityholders' Names and Addresses 23
Section 5.8................................................................Maintenance of Office or Agency 23
Section 5.9....................................................................Appointment of Paying Agent 24
Section 5.10...................................................Ownership of Common Securities by Depositor 24
Section 5.11...................Book-Entry Preferred Securities Certificates; Common Securities Certificate 25
Section 5.12....................................................................Notices to Clearing Agency 25
Section 5.13..................................................Definitive Preferred Securities Certificates 26
Section 5.14.....................................................................Rights of Securityholders 26
ARTICLE VI Acts of Securityholders; Meetings; Voting.............................................................. 28
Section 6.1...................................................................Limitations on Voting Rights 28
Section 6.2.............................................................................Notice of Meetings 29
Section 6.3..........................................................Meetings of Preferred Securityholders 29
Section 6.4..................................................................................Voting Rights 30
Section 6.5..................................................................................Proxies, etc. 30
</TABLE>
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Section 6.6.......................................................Securityholder Action by Written Consent 30
Section 6.7......................................................Record Date for Voting and Other Purposes 30
Section 6.8........................................................................Acts of Securityholders 31
Section 6.9..........................................................................Inspection of Records 32
ARTICLE VII Representations and Warranties........................................................................ 32
Section 7.1.....................................................Representations and Warranties of the Bank 32
Section 7.2....................................................Representations and Warranties of Depositor 33
ARTICLE VIII The Trustees......................................................................................... 33
Section 8.1............................................................Certain Duties and Responsibilities 33
Section 8.2................................................................................Certain Notices 35
Section 8.3.............................................................Certain Rights of Property Trustee 35
Section 8.4.........................................Not Responsible for Recitals or Issuance of Securities 37
Section 8.5............................................................................May Hold Securities 37
Section 8.6..................................................................Compensation; Indemnity; Fees 38
Section 8.7...................................Corporate Property Trustee Required; Eligibility of Trustees 39
Section 8.8..........................................................................Conflicting Interests 39
Section 8.9...............................................................Co-Trustees and Separate Trustee 39
Section 8.10.............................................Resignation and Removal; Appointment of Successor 41
Section 8.11........................................................Acceptance of Appointment by Successor 42
Section 8.12...................................Merger, Conversion, Consolidation or Succession to Business 43
Section 8.13..................................Preferential Collection of Claims Against Depositor or Trust 43
Section 8.14...................................................................Reports by Property Trustee 44
Section 8.15...............................................................Reports to the Property Trustee 44
Section 8.16..............................................Evidence of Compliance with Conditions Precedent 45
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8.17............................................................................Number of Trustees 45
Section 8.18...........................................................................Delegation of Power 45
Section 8.19........................................................................................Voting 46
ARTICLE IX Dissolution, Liquidation and Merger.................................................................... 46
Section 9.1...............................................................Dissolution Upon Expiration Date 46
Section 9.2..............................................................................Early Dissolution 46
Section 9.3....................................................................................Dissolution 46
Section 9.4....................................................................................Liquidation 47
Section 9.5............................Mergers, Consolidations, Amalgamations or Replacements of the Trust 48
ARTICLE X Miscellaneous Provisions................................................................................ 49
Section 10.1.......................................................Limitation of Rights of Securityholders 49
Section 10.2.....................................................................................Amendment 49
Section 10.3..................................................................................Counterparts 51
Section 10.4..................................................................................Separability 51
Section 10.5.................................................................................Governing Law 51
Section 10.6..............................................................Payments Due on Non-Business Day 51
Section 10.7....................................................................................Successors 51
Section 10.8......................................................................................Headings 51
Section 10.9..................................................................Reports, Notices and Demands 52
Section 10.10....................................................................Agreement Not to Petition 52
Section 10.11.......................................Trust Indenture Act; Conflict with Trust Indenture Act 53
Section 10.12..............................Acceptance of Terms of Trust Agreement, Guarantee and Indenture 54
</TABLE>
<PAGE>
Index of Exhibits:
EXHIBIT A -- Certificate of Trust
EXHIBIT B -- DTC Letter of Representations
EXHIBIT C -- Form of Certificate Evidencing Common Securities
EXHIBIT D -- Agreement as to Expenses and Liabilities
EXHIBIT E -- Form of Certificate Evidencing Trust Preferred Securities
<PAGE>
EXHIBIT 4.5
THIS TRUST PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF
THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF
THE DEPOSITARY TRUST COMPANY (THE "DEPOSITORY") OR A NOMINEE OF THE
DEPOSITORY. THIS TRUST PREFERRED SECURITY IS EXCHANGEABLE FOR TRUST PREFERRED
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT AND
NO TRANSFER OF THIS TRUST PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS
TRUST PREFERRED SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS TRUST PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK) TO
U.S. HOME & GARDEN TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY TRUST PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.,
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
CERTIFICATE NUMBER P-1 NUMBER OF TRUST
PREFERRED SECURITIES: ____
CUSIP NO.
--------------
CERTIFICATE EVIDENCING TRUST PREFERRED SECURITIES
OF
U.S. HOME & GARDEN TRUST I
_____% CUMULATIVE TRUST PREFERRED SECURITIES,
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
U.S. HOME & GARDEN TRUST I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of _______________________ (______) Trust
Preferred Securities of the Trust representing an undivided beneficial
interest in the assets of the Trust and designated the U.S. HOME & GARDEN
TRUST I Cumulative Trust Preferred Securities, (liquidation amount $25 per
Trust Preferred Security) (the "Trust Preferred Securities"). The Trust
Preferred Securities are transferable on the books and records of the Trust,
<PAGE>
in person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer as provided in Section 5.4 of
the Trust Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Trust
Preferred Securities are set forth in, and this certificate and the Trust
Preferred Securities represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of ___________, 1998, as the same may be
amended from time to time (the "Trust Agreement") including the designation of
the terms of Trust Preferred Securities as set forth therein. The Holder is
entitled to the benefits of the Guarantee Agreement entered into by U.S. Home
& Garden Inc., a Delaware corporation, and Wilmington Trust Company, a
Delaware banking corporation, as guarantee trustee, dated as of ___________,
1998, (the "Guarantee"), to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the Holder without
charge upon written request to the Trust at its principal place of business or
registered office.
Upon receipt of this certificate, the Holder is bound by the Trust Agreement
and is entitled to the benefits thereunder.
In Witness Whereof, one of the Administrative Trustees of
the Trust has executed this certificate this ______ day of ____________, 1998.
U.S. HOME & GARDEN TRUST I
By:
-----------------------------------
Administrative Trustee
<PAGE>
ASSIGNMENT
For Value Received, the undersigned assigns and transfers this Trust
Preferred Security to:_______________________________________________________
(Insert assignee's social security or tax identification number)
___________________________________
___________________________________
(Insert address and zip code of assignee)
and irrevocably appoints______________________________________________________
______________________________________________________________________________
as agent to transfer this Trust Preferred Security Certificate on the books of
the Trust. The agent may substitute another to act for him or her.
Date:____________________
Signature:_________________________________________________________________
(Sign exactly as your name appears on the other side of this Trust
Preferred Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
Rule 17Ad-15 of the regulations promulgated under Securities Exchange Act of
1934, as amended.
-3-
<PAGE>
EXHIBIT 4.6
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES:
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
U.S. HOME & GARDEN TRUST I
______% COMMON SECURITIES
(LIQUIDATION AMOUNT $25 PER COMMON SECURITY)
U.S. HOME & GARDEN TRUST I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that U.S.
Home & Garden Inc. (the "Holder") is the registered owner of _________________
(_____________ ) common securities of the Trust representing an undivided
beneficial interest in the assets of the Trust and designated the Common
Securities (liquidation amount $25 per Common Security) (the "Common
Securities"). In accordance with Section 5.10 of the Trust Agreement (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the
terms and provisions of, the Amended and Restated Trust Agreement of the Trust
dated as of _____________, 1998, as the same may be amended from time to time
(the "Trust Agreement") including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at
its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
In Witness Whereof, one of the Administrative Trustees of the Trust has
executed this certificate this _____ day of _____________, 1998.
U.S. HOME & GARDEN TRUST I
By:
--------------------------
Name:
Title: Administrative Trustee
<PAGE>
EXHIBIT 4.7
GUARANTEE AGREEMENT
BETWEEN
U.S. HOME & GARDEN INC.
(AS GUARANTOR)
AND
WILMINGTON TRUST COMPANY
(AS TRUSTEE)
DATED AS OF
___________, 1998
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust Section of
Indenture Act of 1939, as amended Guarantee Agreement
- --------------------------------- -------------------
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
316(c) 9.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
- -----------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS..................................................... 1
SECTION 1.1 Definitions........................................... 1
ARTICLE II. TRUST INDENTURE ACT............................................ 4
SECTION 2.1 Trust Indenture Act; Application....................... 4
SECTION 2.2 List of Holders........................................ 4
SECTION 2.3 Reports by the Guarantee Trustee....................... 5
SECTION 2.4 Periodic Reports to the Guarantee Trustee.............. 5
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.............................................. 5
SECTION 2.6 Events of Default; Waiver.............................. 5
SECTION 2.7 Event of Default; Notice............................... 6
SECTION 2.8 Conflicting Interest................................... 6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE
TRUSTEE........................................................ 6
SECTION 3.1 Powers and Duties of the Guarantee
Trustee................................................ 6
SECTION 3.2 Certain Rights of Guarantee Trustee.................... 8
SECTION 3.3 Indemnity.............................................. 10
ARTICLE IV. GUARANTEE TRUSTEE.............................................. 10
SECTION 4.1 Guarantee Trustee; Eligibility......................... 10
SECTION 4.2 Appointment, Removal and Resignation
of the Guarantee Trustee............................... 11
ARTICLE V. GUARANTEE....................................................... 11
SECTION 5.1 Guarantee.............................................. 11
SECTION 5.2 Waiver of Notice and Demand............................ 12
SECTION 5.3 Obligations Not Affected............................... 12
SECTION 5.4 Rights of Holders...................................... 13
SECTION 5.5 Guarantee of Payment................................... 13
SECTION 5.6 Subrogation............................................ 13
SECTION 5.7 Independent Obligations................................ 14
ARTICLE VI. COVENANTS AND SUBORDINATION.................................... 14
SECTION 6.1 Subordination.......................................... 14
SECTION 6.2 Pari Passu Guarantees ................................. 14
i
<PAGE>
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE.............................................. 14
SECTION 7.1 Guarantor May Consolidate, Etc., Only
on Certain Terms....................................... 14
SECTION 7.2 Successor Guarantor Substituted........................ 15
ARTICLE VIII. TERMINATION................................................... 15
SECTION 8.1 Termination............................................ 15
ARTICLE IX. MISCELLANEOUS.................................................. 16
SECTION 9.1 Successors and Assigns................................. 16
SECTION 9.2 Amendments............................................. 16
SECTION 9.3 Notices................................................ 16
SECTION 9.4 Benefit................................................ 17
SECTION 9.5 Interpretation......................................... 17
SECTION 9.6 Governing Law.......................................... 18
ii
<PAGE>
GUARANTEE AGREEMENT
THIS GUARANTEE AGREEMENT, dated as of ________________,
1998, is executed and delivered by U.S. HOME & GARDEN INC., a Delaware
corporation (the "Guarantor") having its principal office at 655 Montgomery
Street, San Francisco, California 74111, and WILMINGTON TRUST COMPANY, a
Delaware banking corporation, as trustee (the "Guarantee Trustee"), for the
benefit of the Holders from time to time of the Preferred Securities (as
defined herein) of U.S. Home & Garden Trust I, a Delaware statutory business
trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Trust
Agreement, dated as of ________, 1998 (the "Trust Agreement"), among the
Guarantor, as Depositor, Wilmington Trust Company as Property Trustee,
Wilmington Trust Company, as Delaware Trustee, the Administrative Trustees
named therein and the Holders from time to time of undivided beneficial
interests in the assets of the Trust, the Trust issued $55,000,000 aggregate
Liquidation Amount (as defined in the Trust Agreement) of its ___% Cumulative
Trust Preferred Securities, Liquidation Amount $25 per Trust Preferred
Security (the "Preferred Securities");
WHEREAS, the Preferred Securities will be issued by the
Trust and the proceeds thereof, together with the proceeds from the issuance
of the Trust's Common Securities (as defined below), will be used to purchase
the Debentures (as defined in the Trust Agreement) of the Guarantor which was
deposited with Wilmington Trust Company, as Property Trustee under the Trust
Agreement, as trust assets;
WHEREAS, as an incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth herein, to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement and pursuant to Section 5.1 hereof extends the Guarantee
for the benefit of the Holders from time to time of the Preferred Securities.
ARTICLE I. DEFINITIONS
SECTION 1.1 Definitions.
As used in this Guarantee Agreement, the terms set forth
below shall, unless the context otherwise requires, have the following
meanings. Capitalized or otherwise defined terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Trust
Agreement and the Indenture (as defined herein), each as in effect on the date
hereof.
<PAGE>
"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; provided, however, that an
Affiliate of the Guarantor shall not be deemed to be an Affiliate of the
Trust. For purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" means either the board of directors of
the Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Trust.
"Event of Default" means a default by the Guarantor on any
of its payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received notice of default and shall not
have cured such default within 90 days after receipt of such notice.
"Guarantee" has the meaning set forth in Section 5.1.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities,
to the extent not paid or made by or on behalf of the Trust: (i) any accrued
and unpaid Distributions (as defined in the Trust Agreement) required to be
paid on the Preferred Securities, to the extent the Trust shall have funds on
hand available therefor at such time, (ii) the applicable Redemption Price (as
defined in the Trust Agreement), to the extent the Trust shall have funds on
hand available therefor at such time, and (iii) upon a voluntary or
involuntary termination, winding up or liquidation of the Trust, unless
Debentures are distributed to the Holders, the lesser of (a) the aggregate of
the Liquidation Distribution (as defined in the Trust Agreement) and (b) the
amount of assets of the Trust remaining available for distribution to Holders
of Preferred Securities after satisfaction of liabilities to creditors of the
Trust as required by applicable law.
"Guarantee Trustee" means Wilmington Trust Company, until a
Successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee Agreement, and thereafter
means each such Successor Guarantee Trustee.
-2-
<PAGE>
"Holder" means any holder, as registered on the books and
records of the Trust, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as
of ____________, 1998, as supplemented and amended, between the Guarantor and
Wilmington Trust Company, as trustee.
"List of Holders" has the meaning specified in Section
2.2(a).
"Majority in Liquidation Amount of the Preferred Securities"
means, except as provided by the Trust Indenture Act, a vote by the Holder(s),
voting separately as a class, of more than 50% of the Liquidation Amount of
all then outstanding Preferred Securities issued by the Trust.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of
Directors of such Person or the President or a Vice President of such Person,
and by the Chief Financial Officer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each such officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Other Guarantees" means any guarantees similar to the
Guarantee issued, from time to time, by the Guarantor on behalf of holders of
one or more series of Preferred Securities issued by any U.S. Home & Garden
Trust (as defined in the Indenture) other than the Trust.
-3-
<PAGE>
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" means, with respect to the Guarantee
Trustee, any officer of the Corporate Trust Department of the Guarantee
Trustee and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as
amended.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under
Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of
1939, as amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this
Guarantee Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2 List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to
the Guarantee Trustee (a) semiannually, on or before ____and ____ of each year,
a list, in such form as the Guarantee Trustee may reasonably require, of the
names and addresses of the Holders ("List of Holders") as of a date not more
than 15 days prior to the delivery thereof, and (b) at such other times as the
Guarantee Trustee may request in writing, within 30 days after the receipt by
the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the Guarantor and
is not identical to a previously supplied list of Holders or has not otherwise
been received by the Guarantee Trustee in its capacity as such. The Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
-4-
<PAGE>
(b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3 Reports by the Guarantee Trustee.
Not later than ____ of each year, commencing in the year
beginning January 1, 1998, the Guarantee Trustee shall provide to the Holders
such reports as are required by Section 313 of the Trust Indenture Act, if
any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Guarantee Trustee shall also comply with the requirements
of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the
Securities and Exchange Commission and the Holders such documents, reports and
information, if any, as required by Section 314 of the Trust Indenture Act and
the compliance certificate required by Section 314 of the Trust Indenture Act,
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.
The Guarantor shall provide to the Guarantee Trustee, on an
annual basis, such evidence of compliance with such conditions precedent, if
any, provided for in this Guarantee Agreement that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the
Preferred Securities may, by vote, on behalf of the Holders, waive any past
Event of Default and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Guarantee Agreement,
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent therefrom.
-5-
<PAGE>
SECTION 2.7 Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, except in the case of a default in the payment of
a Guarantee Payment, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the Board of Directors, the executive committee
or a trust committee of directors and/or Responsible Officers of the Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Guarantee Trustee shall have
received written notice, or a Responsible Officer charged with the
administration of this Guarantee Agreement shall have obtained written notice,
of such Event of Default.
SECTION 2.8 Conflicting Interest.
The Trust Agreement shall be deemed to be specifically
described in this Guarantee Agreement for the purpose of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee to any Person except to a Holder exercising his or her rights
pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance
by such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee
shall automatically vest in any Successor Guarantee Trustee, upon acceptance
by such Successor Guarantee Trustee of its appointment hereunder, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing,
the Guarantee Trustee shall enforce this Guarantee for the benefit of the
Holders.
-6-
<PAGE>
(c) The Guarantee Trustee, before the occurrence of
any Event of Default and after the curing of all Events of
Default that may have occurred, shall undertake to perform only such duties as
are specifically set forth in this Guarantee Agreement, and no implied
covenant shall be read into this Guarantee Agreement against the Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Guarantee Agreement, and use the
same degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default that
may have occurred:
(A) The duties and obligations of the
Guarantee Trustee shall be determined solely by the express
provisions of this Guarantee Agreement, and the Guarantee
Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in
this Guarantee Agreement; and
(B) in the absence of bad faith on the
part of the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee
and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or
opinions that by any provision hereof or of the Trust
Indenture Act are specifically required to be furnished to
the Guarantee Trustee, the Guarantee Trustee shall be under
a duty to examine the same to determine whether or not they
conform to the requirements of this Guarantee Agreement;
(ii) The Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee, or exercising any
trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and
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(iv) no provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers,
if the Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not reasonably assured to
it.
SECTION 3.2 Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document reasonably
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor
contemplated by this Guarantee Agreement shall be sufficiently
evidenced by an Officers' Certificate unless otherwise prescribed
herein.
(iii) Whenever, in the administration of this
Guarantee Agreement, the Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting to take any action hereunder, the Guarantee Trustee (unless
other evidence is herein specifically prescribed) may, in the absence
of bad faith on its part, request and rely upon an Officers'
Certificate which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel, and the written advice or opinion of such legal counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by it hereunder in good faith and in accordance with such
advice or opinion. Such legal counsel may be legal counsel to the
Guarantor or any of its Affiliates and may be one of its employees.
The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent jurisdiction.
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(v) The Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Guarantee Agreement at the request or direction of any Holder,
unless such Holder shall have provided to the Guarantee Trustee such
adequate security and indemnity as would satisfy a reasonable person
in the position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might
be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Guarantee Trustee; provided that, nothing contained in this Section
3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through its agents or attorneys, and the Guarantee
Trustee shall not be responsible for any misconduct or negligence on
the part of any such agent or attorney appointed with due care by it
hereunder.
(viii) Whenever in the administration of this
Guarantee Agreement the Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Guarantee Trustee (A) may
request instructions from the Holders, (B) may refrain from enforcing
such remedy or right or taking such other action until such
instructions are received, and (C) shall be protected in acting in
accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or imposed
on it in any jurisdiction in which it shall be illegal, or in which the
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Guarantee Trustee shall be construed to be a duty to act in accordance with
such power and authority.
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SECTION 3.3 Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for,
and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on the part of the Guarantee Trustee, arising
out of or in connection with the acceptance or administration of this
Guarantee Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1 Guarantee Trustee: Eligibility.
(a) There shall at all times be a Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and
surplus of at least $50,000,000, and shall be a corporation meeting
the requirements of Section 310(a) of the Trust Indenture Act. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority, then, for the purposes of this Section
4.1(a)(ii) and to the extent permitted by the Trust Indenture Act,
the combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
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SECTION 4.2 Appointment, Removal and Resignation of
the Guarantee Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a
Successor Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Guarantee Trustee
and delivered to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by instrument in writing executed
by such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Guarantee Trustee may petition, at the expense of the Guarantor, any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as
it may deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay
in full on a subordinated basis to the Holders the Guarantee Payments (without
duplication of amounts theretofore paid by or on behalf of the Trust), as and
when due, regardless of any defense, right of set-off or counterclaim which
the Trust may have or assert other than the defense of payment (the
"Guarantee"). The Guarantee is a continuing guarantee, and the Guarantor
fully, knowingly and unconditionally waives any right the Guarantor may have
to revoke the Guarantee as to any future transactions under Section 2815 of
the California Civil Code or otherwise. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by the Guarantor to the Holders or by causing the Trust to pay such amounts to
the Holders.
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SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Trust or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.3 Obligations Not Affected.
The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities to
be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of
all or any portion of the Distributions (other than an extension of time for
payment of Distributions that results from the extension of any interest
payment period on the Debentures as provided in the Indenture), Redemption
Price, Liquidation Distribution or any other sums payable under the terms of
the Preferred Securities or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the Preferred
Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust or
any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
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(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders.
The Guarantor expressly acknowledges that: (i) this
Guarantee will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce
this Guarantee on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee in respect of this Guarantee Agreement or exercising
any trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Guarantee Agreement,
without first instituting a legal proceeding against the Guarantee Trustee,
the Trust or any other Person.
SECTION 5.5 Guarantee of Payment.
This Guarantee creates a guarantee of payment and not of
collection. This Guarantee will not be discharged except by payment of the
Guarantee Payments in full (without duplication of amounts theretofore paid by
the Trust) or upon distribution of Debentures to Holders as provided in the
Trust Agreement.
SECTION 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Trust in respect of any amounts paid to the Holders by
the Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Trust pursuant to section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all
cases as a result of payment under this Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
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SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder
are independent of the obligations of the Trust with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.1 Subordination.
The obligations of the Guarantor under this Guarantee will
constitute unsecured obligations of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt and Subordinated Debt (as
defined in the Indenture) in the same manner as Debentures (as defined in the
Trust Agreement).
SECTION 6.2 Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee shall
rank pari passu with the obligations of the Guarantor under all Other
Guarantees.
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 7.1 Guarantor May Consolidate, Etc., Only on
Certain Terms.
The Guarantor shall not consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate
with or merge into the Guarantor or convey, transfer or lease its properties
and assets substantially as an entirety to the Guarantor, unless:
(1) in case the Guarantor shall consolidate with
or merge into another Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Guarantor is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and assets
of the Guarantor substantially as an entirety shall be a corporation,
partnership or trust organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall
expressly assume the Guarantor's obligations under this Guarantee;
(2) immediately after giving effect thereto, no Event
of Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
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(3) such consolidation, merger, conveyance,
transfer or lease is permitted under the Trust Agreement and the Indenture and
does not give rise to any breach or violation of the Trust Agreement or the
Indenture; and
(4) the Guarantor has delivered to the Guarantee
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, conveyance, transfer or lease and assumption of
the Guarantor's obligations under this Guarantee Agreement comply with this
Article and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Guarantee Trustee, subject to
Section 3.1 hereof, may rely upon such Officers' Certificate and Opinion of
Counsel as conclusive evidence that such transaction complies with this
Section 7.1.
SECTION 7.2 Successor Guarantor Substituted.
Upon any consolidation or merger by the Guarantor with or
into any other Person, or any conveyance, transfer or lease by the Guarantor
of its properties and assets substantially as an entirety to any Person in
accordance with Section 7.1, the successor Person formed by such consolidation
or into which the Guarantor is merged or to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Guarantor under this Guarantee Agreement with the same
effect as if such successor Person had been named as the Guarantor herein; and
in the event of any such conveyance, transfer or lease the Guarantor shall be
discharged from all obligations and covenants under this Guarantee Agreement.
ARTICLE VIII. TERMINATION
SECTION 8.1 Termination.
This Guarantee Agreement shall terminate and be of no
further force and effect upon the earliest of (i) full payment of the
applicable Redemption Price of all Preferred Securities, (ii) the distribution
of Debentures to the Holders in exchange for all of the Preferred Securities
or (iii) full payment of the amounts payable in accordance with the Trust
Agreement upon liquidation of the Trust. Notwithstanding the foregoing clauses
(i) through (iii), this Guarantee Agreement will continue to be effective or
will be reinstated if it has been terminated pursuant to one of such clauses
(i) through (iii), as the case may be, if at any time any Holder must restore
payment of any sums paid with respect to Preferred Securities or this
Guarantee Agreement.
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ARTICLE IX. MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article VII hereof and Article VIII of the Indenture, the Guarantor shall not
assign its obligations hereunder.
SECTION 9.2 Amendments.
Except with respect to any changes which do not adversely
affect the rights of the Holders in any material respect (in which case no
vote will be required), this Guarantee Agreement may not be amended without
the prior approval of the Holders of not less than a Majority in Liquidation
Amount of the Preferred Securities. The provisions of Article VI of the Trust
Agreement concerning meetings of the Holders shall apply to the giving of such
approval.
SECTION 9.3 Notices.
Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the party
giving such notice, and delivered, telecopied or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address set
forth below or such other address, facsimile number or to the attention of
such other Person as the Guarantor may give notice to the Holders:
U.S. Home & Garden Inc.
655 Montgomery Street
San Francisco, California 94111
Facsimile No.: (415) 616-8110
Attention: Robert Kassel
(b) if given to the Trust, in care of the Guarantee Trustee,
at the Trust's (and the Guarantee Trustee's) address set forth below or such
other address as the Guarantee Trustee on behalf of the Trust may give notice
to the Holders:
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U.S. Home & Garden Inc.
655 Montgomery Street
San Francisco, California 94111
Facsimile No.: (415) 616-8110
Attention: Robert Kassel
with a copy to:
Wilmington Trust Company
1100 North Market
Wilmington, Delaware 19890
Facsimile No.: (302) 651-1000
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth
on the books and records of the Trust.
All notices hereunder shall be deemed to have been given
when received in person, telecopied with receipt confirmed, or mailed by first
class mail, postage prepaid, except that if a notice or other document is
refused delivery or cannot be delivered because of a changed address of which
no notice was given, such notice or other document shall be deemed to have
been delivered on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Guarantee is solely for the benefit of the Holders and
is not separately transferable from the Preferred Securities.
SECTION 9.5 Interpretation.
In this Guarantee Agreement, unless the context otherwise
requires:
(a) capitalized terms used in this Guarantee Agreement but
not defined in the preamble hereto have the respective meanings assigned to
them in Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;
(d) all references in this Guarantee Agreement to Articles
and Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
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(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the contest otherwise requires;
(f) a reference to the singular includes the plural
and vice versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 9.6 Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
U.S. HOME & GARDENS INC.
By:______________________________
Name: Robert Kassel
Title: Chairman of the Board
and Chief Operating Officer
WILMINGTON TRUST COMPANY
as Guarantee Trustee
By:_______________________________
Name:
Title:
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EXHIBIT 4.8
AGREEMENT AS TO EXPENSES AND LIABILITIES
Agreement As To Expenses And Liabilities (this "Agreement"),
dated as of ____________, 1998, between U.S. HOME & GARDEN INC., a Delaware
corporation (the "Company"), and U.S. HOME & GARDEN TRUST I, a Delaware
business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities
(the "Common Securities") to and receive Junior Subordinated Deferrable
Interest Debentures (the "Debentures") from the Company and to issue and sell
__% Cumulative Trust Preferred Securities (the "Trust Preferred Securities")
with such powers, preferences and special rights and restrictions as are set
forth in the Amended and Restated Trust Agreement of the Trust dated as of
__________, 1998, as the same may be amended from time to time (the "Trust
Agreement");
WHEREAS, the Company will directly or indirectly own
all of the Common Securities of the Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each
holder of the Trust Preferred Securities, which purchase the Company hereby
agrees shall benefit the Company and which purchase the Company acknowledges
will be made in reliance upon the execution and delivery of this Agreement,
the Company and the Trust hereby agree as follows:
ARTICLE I
Section 1.1 Guarantee by the Company.
Subject to the terms and conditions hereof, the Company
hereby irrevocably and unconditionally guarantees to each person or entity to
whom the Trust is now or hereafter becomes indebted or liable (the
"Beneficiaries") the full payment, when and as due, of any and all Obligations
(as hereinafter defined) to such Beneficiaries. As used herein, "Obligations"
means any costs, expenses or liabilities of the Trust, other than obligations
of the Trust to pay to holders of any Trust Preferred Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the Trust Preferred Securities or such other similar interests, as
the case may be. This Agreement is intended to be for the benefit of, and to
be enforceable by, all such Beneficiaries, whether or not such Beneficiaries
have received notice hereof.
<PAGE>
Section 1.2 Term of Agreement.
This Agreement shall terminate and be of no further force
and effect upon the later of (a) the date on which full payment has been made
of all amounts payable to all holders of all the Trust Preferred Securities
(whether upon redemption, liquidation, exchange or otherwise) and (b) the date
on which there are no Beneficiaries remaining; provided, however, that this
Agreement shall continue to be effective or shall be reinstated, as the case
may be, if at any time any holder of Trust Preferred Securities or any
Beneficiary must restore payment of any sums paid under the Trust Preferred
Securities, under any Obligation, under the Guarantee Agreement dated the date
hereof by the Company and Wilmington Trust Company, a Delaware banking
corporation, as guarantee trustee, or under this Agreement, for any reason
whatsoever. This Agreement is continuing, irrevocable, unconditional and
absolute and the Company fully, knowingly and unconditionally waives any right
to revoke the guarantee contained in this Agreement under Section 2895 of the
California Civil Code or otherwise.
Section 1.3 Waiver of Notice.
The Company hereby waives notice of acceptance of this
Agreement and of any Obligation to which it applies or may apply, and the
Company hereby waives presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
Section 1.4 No Impairment.
The obligations, covenants, agreements and duties of the
Company under this Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of
all or any portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the Obligations
or any action on the part of the Trust granting indulgence or extension of any
kind; or
(c) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt
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of, or other similar proceedings affecting, the Trust or any of the assets of
the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Company with respect to the happening of any of the
foregoing.
Section 1.5 Enforcement.
A Beneficiary may enforce this Agreement directly against
the Company and the Company waives any right or remedy to require that any
action be brought against the Trust or any other person or entity before
proceeding against the Company.
Section 1.6 Subrogation.
The Company shall be subrogated to all (if any) rights of
the Trust in respect of any amounts paid to the Beneficiaries by the Company
under this Agreement; provided, however, that the Company shall not (except to
the extent required by mandatory provisions of law) be entitled to enforce or
exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Agreement, if, at the time of any such payment, any amounts
are due and unpaid under this Agreement.
ARTICLE II
Section 2.1 Binding Effect.
All guarantees and agreements contained in this Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the Beneficiaries.
Section 2.2 Amendment.
So long as there remains any Beneficiary or any Trust
Preferred Securities are outstanding, this Agreement shall not be modified or
amended in any manner adverse to such Beneficiary or to the holders of the
Trust Preferred Securities.
Section 2.3 Notices.
Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by delivering the
same against receipt therefor, by facsimile transmission (confirmed by mail),
or by registered or certified mail, addressed as follows (and if so given,
shall be deemed given when mailed):
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U.S. HOME & GARDEN TRUST I
655 Montgomery Street
San Francisco, California 94111
Facsimile No.: (415) 616-8110
Attention: Robert Kassel
U.S. HOME & GARDEN INC.
655 Montgomery Street
San Francisco, California 94111
Facsimile No.: (415) 616-8110
Attention: Robert Kassel
Section 2.4 Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES).
This Agreement is executed as of the day and year first
above written.
U.S. HOME & GARDEN INC.
By:________________________________
Name: Robert Kassel
Title: Chairman of the Board and
Chief Executive Officer
U.S. HOME & GARDEN TRUST I
By:________________________________
Name:
Title: Administrative Trustee
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EXHIBIT 4.9
Face of Security
U.S. HOME & GARDEN INC.
__% JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURE DUE _________, 2028
Registered No. _____________ Principal Amount: $___________
U.S. HOME & GARDEN INC., a corporation organized and
existing under the laws of Delaware (hereinafter called the "Company", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Wilmington Trust Company, as
Property Trustee, for U.S. HOME & GARDEN TRUST I, or registered assigns, the
principal sum of $__________ on __________, 2028; provided that the Company may
shorten the Stated Maturity of the principal of this Security to a date not
earlier than __________, 2003. The Company further promises to pay interest,
compounded monthly, on said principal sum from the date of original issuance or
from the most recent interest payment date (each such date, an "Interest Payment
Date") on which interest has been paid or duly provided for, monthly (subject to
deferral as set forth herein) in arrears on the ____ day of each calendar month
of each year commencing ___________, 1998 at the rate of ___% per annum, until
the principal hereof shall have become due and payable, plus Additional
Interest, if any, until the principal hereof is paid or duly provided for or
made available for payment and on any overdue principal and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the rate of ___% per annum,
compounded monthly. The amount of interest payable for any period shall be
computed on the basis of twelve 30-day months and a 360-day year. The amount of
interest payable for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on this Security is not a Business
Day, then a payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if made
on the date the payment was originally payable. A "Business Day" shall mean any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of California are authorized or required by law or executive order to
remain closed or on a day on which the Corporate Trust Office of the Trustee, or
the principal office of the Property Trustee under the Trust
<PAGE>
Agreement (hereinafter referred to) for U.S. HOME & GARDEN TRUST I is closed
for business. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest installment, which shall be the next Business Day preceding
such Interest Payment Date. Any such interest installment not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to holders
of Securities of this series not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is
continuing, the Company shall have the right at any time during the term of
this Security to defer payment of interest on this Security, at any time or
from time to time, for up to 60 consecutive monthly interest payment periods
with respect to each deferral period (each an "Extension Period"), (during
which Extension Periods the Company shall have the right to make partial
payments of interest on any Interest Payment Date, and at the end of which the
Company shall pay all interest then accrued and unpaid (together with
Additional Interest thereon to the extent permitted by applicable law));
provided, however, that no Extension Period shall extend beyond the Stated
Maturity of the principal of this Security; provided, further, that during any
such Extension Period, the Company shall not, and shall not permit any
Subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred atock), (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt security of the
Company (including Securities issued by the Company pursuant to the Indenture
other than the Securities represented by this certificate) that ranks pari
passu with or junior in interest to this Security, (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities
of any Subsidiaries of the Company if such guarantee ranks pari pasau in all
respects with or junior in interest to this Security (other than (a) dividends
or distributions in capital stock of the Company (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
-2-
<PAGE>
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the U.S. Home & Garden Inc. Guarantee
related to the Trust Preferred Securities issued by U.S. HOME & GARDEN TRUST
I, and (d) purchases of Common Stock related to the issuance of Common Stock
or rights under any of the Company's benefit plans for its directors,
officers, employees or consultants or (iv) redeem, purchase or acquire less
than all of the Securities represented by this certificate or any of the
Preferred Securities. Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 60 consecutive
interest payment periods or to extend beyond the Stated Maturity. Upon the
termination of any such Extension Period and upon the payment of all amounts
then due on any Interest Payment Date, and subject to the foregoing
limitation, the Company may elect to begin a new Extension Period. No interest
shall be due and payable during an Extension Period except at the end thereof.
The Company shall give the Trustee, the Property Trustee and the
Administrative Trustees of U.S. HOME & GARDEN TRUST I notice of its election
to begin any Extension Period at least one Business Day prior to the earlier
of (i) the date on which Distributions on the Trust Preferred Securities would
be payable except for the election to begin or extend such Extension Period,
(ii) the date the Administrative Trustees are required to give notice to the
American Stock Exchange, the New York Stock Exchange, the Nasdaq Stock Market,
Inc. or other applicable stock exchange or automated quotation system on which
the Preferred Securities are then listed or quoted or to holders of such
Preferred Securities on the record date, or (iii) the date such Distributions
are payable, but in any event not less than one Business Day prior to such
record date. The Trustee shall give notice of the Company's election to begin
a new Extension Period to the holders of the Preferred Securities. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period.
Payment of the principal of (and premium, if any) and
interest on this Security will be made at the office or agency of the Trustee
or at the office of such paying agent or paying agents as the Company may
designate from time to time, maintained for that purpose in the United States,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made (i)
by check mailed to the address of the person entitled thereto as such address
shall appear in the Securities Register or (ii) by transfer to an account
maintained by the person entitled thereto, in immediately available funds, at
such place and to such account as may be designated by the Person entitled
thereto as specified in the Securities Register.
-3-
<PAGE>
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, unsecured and will rank junior and
subordinate and subject in right of payments to the prior payment in full of
all Senior Debt and Subordinated Debt, and this Security is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
actions as may be necessary or appropriate to effectuate the subordination so
provided, and (c) appoints the Trustee his attorney-in-fact for any and all
such purposes. Each Holder hereof, by his acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Debt and Subordinated Debt, whether now
outstanding or hereafter incurred, and waives reliance by each such holder
upon said provisions.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
U.S. HOME & GARDEN INC.
a Delaware corporation
By:___________________________
Name:
Title:
Attest:
- -----------------------------
Name:
Title:
-4-
<PAGE>
Reverse of Security
This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under a Junior Subordinated Indenture, dated as
of ____________, 1998 (herein called the "Indenture"), between the Company and
Wilmington Trust Company, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Trustee, the Company and the Holders of the Securities, and
of the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to $_______.
All terms used in this Security that are defined in the
Indenture and in the Amended and Restated Trust Agreement, dated as of
__________, 1998, as amended (the "Trust Agreement"), for U.S. HOME & GARDEN
TRUST I among U.S. Home & Garden Inc., as Depositor, and the Trustees named
therein, shall have the meanings assigned to them in the Indenture or the
Trust Agreement, as the case may be.
The Company may at any time, at its option, on or after
_________ , 2003, and subject to the terms and conditions of Article XI of the
Indenture, redeem this Security in whole at any time or in part from time to
time, without premium or penalty, at a redemption price equal to the accrued
and unpaid interest on the Security so redeemed to the Redemption Date, plus
100% of the principal amount thereof.
Upon the occurrence and during the continuation of a Tax
Event or Investment Company Event in respect of U.S. HOME & GARDEN TRUST I,
the Company may, at its option, at any time within 90 days of the occurrence
of such Tax Event or Investment Company Event, redeem this Security, in whole
but not in part, subject to the provisions of Section 11.7 and the other
provisions of Article XI of the Indenture, at a redemption price equal to the
accrued and unpaid interest on the Security so redeemed to the Redemption
Date, plus 100% of the principal amount thereof.
In the event of redemption of this Security in part only, a
new Security or Securities of this series for the portion hereof not redeemed
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for satisfaction and
discharge of the entire indebtedness of this Security upon
-5-
<PAGE>
compliance by the Company with certain conditions set forth in
the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the Company and the Trustee at any time to enter into a supplemental
indenture or indentures for the purpose of modifying in any manner the rights
and obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such
series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof
or in exchange therefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the
Indenture, if an Event of Default with respect to the Securities of this
series at the time Outstanding occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Securities of this series may declare the principal amount
of all the Securities of this series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders),
provided that, in the case of the Securities of this series issued to U.S.
HOME & GARDEN TRUST I, if upon an Event of Default, the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Securities of this
series fails to declare the principal of all the Securities of this series to
be immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the Trust Preferred Securities then outstanding shall
have such right by a notice in writing to the Company and the Trustee; and
upon any such declaration the principal amount of and the accrued interest
(including any Additional Interest) on all the Securities of this series shall
become immediately due and payable, provided that the payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate,
and in the coin or currency, herein prescribed.
-6-
<PAGE>
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2
of the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing and
thereupon one or more new Securities of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees. No service charge shall be made for
any such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Securities of this series are issuable only in
registered form without coupons in minimum denominations of $25 and any
integral multiples of $25 in excess thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of this series
are exchangeable for a like aggregate principal amount of Securities of such
series of a different authorized denomination, as requested by the Holder
surrendering the same.
The Company and, by its acceptance of this Security or a
beneficial interest therein, the Holder of, and any Person that acquires a
beneficial interest in, this Security agree that for United States Federal,
state and local tax purposes it is intended that this Security constitute
indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
-7-
<PAGE>
This is one of the Securities referred to in the within
mentioned Indenture.
Dated:_____________, 1998
WILMINGTON TRUST COMPANY,
as Trustee
By:_____________________________
Authorized Officer
-8-
<PAGE>
FOURTH AMENDMENT
TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT ("Fourth Amendment") dated as
of February 26, 1998, by and among EASY GARDENER, INC. (f.k.a. Easy Gardener
Acquisition Corp.), a Delaware corporation, (the "Borrower") U.S. HOME & GARDEN
INC., a Delaware corporation, ("Guarantor"), THE PROVIDENT BANK, an Ohio banking
corporation, ("Agent") and LASALLE NATIONAL BANK, ANTARES LEVERAGED CAPITAL
CORP. and THE PROVIDENT BANK ("Lenders").
PRELIMINARY STATEMENT
WHEREAS, Borrower, Agent and Lenders have entered into a Credit
Agreement dated as of August 9, 1996, as amended by a First Amendment to Credit
Agreement dated as of April 3, 1997, by a Second Amendment dated as of May 9,
1997, and by a Third Amendment dated as of June 30, 1997 (the "Credit
Agreement") whereby Lenders agreed on August 9, 1996 to make Term Loans to
Borrower in an amount up to $25,250,000.00. Prior to the Fourth Amendment
Closing Date (as defined below), the amount outstanding thereunder had been
reduced to $20,270,000.00. The Lenders have agreed in connection with this
Fourth Amendment and in connection with the closings of the Weed Wizard
Acquisition and the Land Master Acquisition (each as defined below) to make
additional Term Loan amounts available to Borrower up to an aggregate of
$10,000,000.00 ("Fourth Amendment Advance") on the Fourth Amendment Closing Date
subject to the terms and conditions hereof; and
WHEREAS, Borrower has changed its name from Easy Gardener Acquisition
Corp. to Easy Gardener, Inc. on July 3, 1997; and
WHEREAS, Borrower has requested Agent and Lenders to provide additional
loans to fund the purchase by Borrower of the assets of Landmaster Products,
Inc. and Weed Wizard, Inc. and to provide general working capital; and
WHEREAS, Borrower, Agent and Lenders now wish to amend the Credit
Agreement in accordance with the terms and provisions hereof;
NOW, THEREFORE, the parties hereto agree to supplement and amend the
Credit Agreement upon such terms and conditions as follows:
1. Capitalized Terms. All capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement unless the context hereof
requires otherwise. Any definitions as capitalized terms set forth herein shall
be deemed incorporated into the Credit Agreement as amended by this Fourth
Amendment.
2. Name Change. All references to "Easy Gardener Acquisition Corp." in
the Credit
<PAGE>
-2-
Agreement and in the Schedules and Exhibits thereto are hereby amended to read
"Easy Gardener, Inc.".
3. Definitions; Exhibits; and Schedules;
a) The definition of "Applicable Margin" contained in Section
1.2 of the Credit Agreement is hereby amended to delete the words "(but not the
Term Loan II)" contained in the proviso of such definition.
b) The following definitions contained in Section 1.2 of the
Credit Agreement are hereby amended in their entirety to read as follows:
"Interest Expense" means, for any period, and with respect to
Borrower and its Subsidiaries on a consolidated basis, interest expense
of such Persons determined in accordance with GAAP, including interest
paid or expensed during such period, plus interest required or
permitted to be capitalized in accordance with GAAP, excluding the
amortization of all fees and closing costs payable in connection with
the incurrence of the Indebtedness under this Agreement.
"Loans" means the Revolving Credit Loans and the Term Loan.
"Pledge Agreement" means a pledge agreement substantially in
the form of Exhibit I hereto pledging (a) all of the issued and
outstanding capital stock of Borrower, of whatever class or
description, made by Guarantor to the Agent for the benefit of Lenders
as additional collateral security for the payment of Guarantor's
obligations under the Guaranty Agreement; and (b) all of the capital
stock of each direct or indirect Subsidiary of Borrower or Guarantor
now owned or hereafter formed or acquired, of whatever class or
description, made by the holder of such stock to the Agent for the
benefit of the Lender as additional collateral security for the Loans
or the Subsidiary Guaranty of such Subsidiary, as the case may be; in
each case, with such changes in the text of the Pledge Agreement to
reflect the obligations secured thereby.
"Revolving Credit Commitment" means Eight Million and 00/100
Dollars ($8,000,000.00) during the months of June through October and
Twenty Million and 00/100 Dollars ($20,000,000.00) during the months of
November through May of each year.
"Term Loan" has the meanings set forth in Section 2.4.
"Term Notes" has the meanings set forth in Section 2.5.
c) Section 1.2 of the Credit Agreement is hereby amended to
add the following definitions to read in their entirety as follows:
<PAGE>
-3-
"Fourth Amendment Closing Date" means February 26, 1998.
"Landmaster" means Landmaster Products, Inc.
"Landmaster Acquisition" means the acquisition by Borrower of
substantially all of the assets of Landmaster pursuant to the terms of
the Landmaster Acquisition Agreement.
"Landmaster Acquisition Agreement" means the Assets Purchase
Agreement dated within ninety (90) days of the Fourth Amendment Closing
Date, among Borrower, Guarantor, Landmaster and the various
shareholders thereto.
"Weed Wizard" means Weed Wizard, Inc., a Georgia corporation.
"Weed Wizard Acquisition" means the acquisition by Weed Wizard
Acquisition Corp. of substantially all of the assets of Weed Wizard
pursuant to the terms of the Weed Wizard Acquisition Agreement.
"Weed Wizard Acquisition Agreement" means the Assets Purchase
Agreement dated as of February 26, 1998, among Weed Wizard Acquisition
Corp., Guarantor, Weed Wizard, Paul Butler, Don Bryan, Mabel Bryan,
Norman Adams, and James Anderson.
"Weed Wizard Acquisition Corp." means Weed Wizard Acquisition
Corp., a Delaware corporation.
d) The following definitions contained in Section 1.2 of the
Credit Agreement are deleted in their entirety:
"Term Loan I" and "Term Loan II" have the respective meanings
set forth in Section 2.4.
"Term Notes I" and " Term Notes II" have the respective
meanings set forth in Section 2.4.
e) Schedule 1 of the Credit Agreement is hereby amended in its
entirety to read as listed on Schedule 1 to this Fourth Amendment.
<PAGE>
f) The Credit Agreement is hereby amended to add a new
Schedule 4.17 to read in its entirety as Schedule 4.17 to this Fourth Amendment.
g) Exhibit B of the Credit Agreement is hereby amended in its
entirety by Exhibit B attached to this Fourth Amendment.
h) Exhibit C of the Credit Agreement is hereby amended in its
entirety by Exhibit C attached to this Fourth Amendment.
i) Exhibit D of the Credit Agreement is hereby amended in its
entirety by Exhibit D attached to this Fourth Amendment.
j) Exhibit E of the Credit Agreement is hereby deleted as an
Exhibit to the Credit Agreement.
4. General. All references to "Term Loans" in the Credit Agreement are
hereby amended to read "Term Loan". All references to "Term Loan I" in the
Credit Agreement are hereby amended to read "the Term Loan".
5. Term Loan Commitments. (a) Section 2.4 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 2.4 Term Loan Commitments. Each Lender, severally and
not jointly, subject to the terms and conditions of this Agreement, hereby
agrees to make loans to Borrower in an amount equal to its Participation
Percentage of the term loans of Thirty Million Two Hundred Seventy Thousand and
00/100 Dollars ($30,270,000.00) ("Term Loan")."
6. Term Promissory Notes. Section 2.5 of the Credit Agreement is hereby
amended in its entirety to read as follows:
"Section 2.5 Term Promissory Notes. The absolute and
unconditional obligation of the Borrower to repay the principal of the
Term Loan and the interest thereon shall be evidenced by promissory
notes executed by the Borrower to each Lender in substantially the form
of Exhibit D attached to this Agreement ("Term Notes"). In the event of
an assignment under Section 10.17(a), Borrower shall issue new notes to
reflect the new Credit Commitments of the assigning Lender and the
assignee thereof. The Term Notes shall include the following terms:
<PAGE>
"(a) Terms. Each Term Note shall be dated as of the Fourth
Amendment Closing Date and shall mature and be due and payable in full on June
30, 2002.
"(b) Interest Rate. Each Term Note shall bear interest
(computed on the basis of the actual number of days elapsed over a 360-day year)
on the daily outstanding principal balance thereunder at a rate per annum
calculated in accordance with Section 2.6 hereof.
"(c) Interest Payment Dates. Interest on the Term Notes shall
be payable in accordance with Section 2.6(g), and on the date the Term Loan is
due (whether by maturity, acceleration or otherwise).
"(d) Principal Payments on Term Loan. Quarterly installments
of principal on the Term Loan shall be payable commencing on March 31, 1998 and
on each Principal Payment Date thereafter in accordance with the following
schedule and such payment shall be distributed ratably among the Lenders in
accordance with their respective Credit Commitments:
===============================================================================
Payment Date Principal Payment
- --------------------------------------------------------------------------------
March 31, 1998 1,000,000
- -------------------------------------------------------------------------------
June 30, 1998 1,600,000
- -------------------------------------------------------------------------------
September 30, 1998 200,000
- -------------------------------------------------------------------------------
December 31, 1998 200,000
- -------------------------------------------------------------------------------
March 31, 1999 1,500,000
- -------------------------------------------------------------------------------
June 30, 1999 2,100,000
- -------------------------------------------------------------------------------
September 30, 1999 900,000
- -------------------------------------------------------------------------------
December 31, 1999 900,000
- -------------------------------------------------------------------------------
March 31, 2000 2,000,000
- -------------------------------------------------------------------------------
June 30, 2000 2,600,000
- -------------------------------------------------------------------------------
<PAGE>
===============================================================================
Payment Date Principal Payment
- --------------------------------------------------------------------------------
September 30, 2000 1,000,000
- -------------------------------------------------------------------------------
December 31, 2000 1,000,000
- -------------------------------------------------------------------------------
March 31, 2001 2,500,000
- -------------------------------------------------------------------------------
June 30, 2001 3,100,000
- -------------------------------------------------------------------------------
September 30, 2001 1,000,000
- -------------------------------------------------------------------------------
December 31, 2001 1,000,000
- -------------------------------------------------------------------------------
March 31, 2002 2,500,000
- -------------------------------------------------------------------------------
June 30, 2002 5,170,000
- -------------------------------------------------------------------------------
7. Interest Payable on the Loans.
a) Section 2.6(a) of the Credit Agreement is hereby amended to
delete the second sentence thereof in its entirety, which prior to the Fourth
Amendment reads as follows:
"The Term Loans II shall bear interest on the outstanding principal
amount thereof at an annual rate equal to the Prime Rate plus six
percent (6%)."
b) Section 2.6(c) of the Credit Agreement is hereby amended to
delete the parenthetical clause in the first sentence thereof which reads "(but
no part of the Term Loan II)".
8. Prepayments of Principal. Section 2.9(b) of the Credit Agreement is
hereby amended to delete the last sentence thereof in its entirety, which prior
to the Fourth Amendment reads as follows:
"Borrower shall have no right to prepay Term Loan II, unless Borrower
shall have prepaid in full Term Loan I and terminated the Revolving
Credit Commitment, in which event Term Loan II shall be prepaid in
full and without premium or penalty applicable to Term Loan II."
9. Prepayments of Principal; Use of Proceeds. All references to "the
Weatherly Acquisition" in Sections 2.9(d) and 2.13 of the Credit Agreement are
hereby amended to read "the Landmaster Acquisition or the Weed Wizard
Acquisition".
10. Application of Funds.
<PAGE>
a) Section 2.11(d) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(d) Fourth, to the payment of principal then due on the Term
Loan Notes;"
b) Section 2.11(f) of the Credit Agreement is hereby deleted
in its entirety.
c) Section 2.11(g) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(f) Sixth, if no Default or Event of Default exists or if all
Obligations have been paid or satisfied in full, the surplus remaining (if any)
to the Borrower as provided in Section 2.7(b)."
11. Capitalization. Section 4.17 of the Credit Agreement is hereby
amended in its entirety to read as follow:
"Section 4.17 Capitalization. Borrower has no Subsidiaries except as
set forth on Schedule 4.17. The Guarantor owns One Hundred Percent
(100%) of the capital stock of Borrower."
12. Undisclosed Liabilities; Transactions with Affiliates; Limitation
on Guarantee Obligations; Limitation on Fundamental Changes. All references to
"the Weatherly Acquisition Agreement" in Sections 4.26(e), 6.2(a)(ii)(B),
6.2(b)(iii), 6.13(e) and 6.14 of the Credit Agreement are hereby amended to read
"the Weatherly Acquisition Agreement, the Landmaster Acquisition Agreement or
the Weed Wizard Acquisition Agreement".
13. Limitations on Restricted Payments. The reference in Section 6.1(a)
of the Credit Agreement to "One Hundred Twenty-Five Thousand and 00/100 Dollars
($125,000)" is hereby amended to read "Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00)"
14. Interest Coverage Ratio. Section 6.5 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 6.5 Interest Coverage Ratio. On each Computation Date set
forth below, the Borrower shall not permit, for the relevant Reference
Period the Interest Coverage Ratio to be less than the minimum ratio
specified below:
<PAGE>
MINIMUM INTEREST
COMPUTATION DATE COVERAGE RATIO
---------------- --------------
December 31, 1996 1.00
March 31, 1997 2.80
June 30, 1997 3.60
September 30, 1997 3.80
December 31, 1997 4.00
March 31, 1998 3.75
June 30, 1998 3.75
September 30, 1998 3.75
December 31, 1998 3.75
March 31, 1999 4.25
June 30, 1999 4.25
Each Computation Date from September 30, 1999
through June 30, 2002 5.00"
15. Maintenance of Net Worth. The reference in Section 6.6 of the
Credit Agreement to "24,000,000.00" is hereby amended to read "33,000,000.00."
16. Debt Service Coverage Ratio. Section 6.7 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 6.7 Debt Service Coverage Ratio. On each Computation Date
set forth below, the Borrower shall not permit, for the relevant
Reference Period its Debt Service Coverage Ratio to be less than the
minimum ratio specified below:
COMPUTATION DATE RATIO
---------------- -----
December 31, 1996 --
March 31, 1997 1.04
June 30, 1997 1.25
September 30, 1997 1.35
December 31, 1997 1.45
March 31, 1998 1.50
June 30, 1998 through June 30, 2002 1.60"
17. EBITDA. Section 6.8 of the Credit Agreement is hereby amended in
its entirety to read as follows:
<PAGE>
"Section 6.8 EBITDA. Borrower shall not permit EBITDA for the
Reference Period ending on each Computation Date set forth below to be
less than the dollar amount set forth below opposite such date.
COMPUTATION DATE AMOUNT
---------------- ------
December 31, 1996 $1,400,000
March 31, 1997 6,700,000
June 30, 1997 11,500,000
September 30, 1997 12,000,000
December 31, 1997 12,000,000
March 31, 1998 13,000,000
June 30, 1998 14,000,000
September 30, 1998 14,000,000
December 31, 1998 14,000,000
March 31, 1999 15,500,000
June 30, 1999 17,000,000
September 30, 1999 17,000,000
December 31, 1999 17,000,000
March 31, 2000 17,000,000
Each Computation Date from June 30, 2000
through June 30, 2002 18,500,000"
18. Fixed Charge Coverage. Section 6.9 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 6.9 Fixed Charge Coverage.Borrower shall not permit its
Fixed Charge Coverage Ratio for the Reference Period ending on the
dates set forth below to be less than the amount set forth opposite
such date.
COMPUTATION DATE RATIO
---------------- -----
December 31, 1996 0.40
March 31, 1997 0.90
June 30, 1997 1.00
September 30, 1997 1.03
Each Computation Date from December 31, 1997
through June 30, 2002 1.05"
<PAGE>
19. Limitations on Capital Expenditures. The reference in Section 6.11
of the Credit Agreement to "Seven Hundred Thousand and 00/100 Dollars
($700,000.00)" is hereby amended to read "One Million and 00/100 Dollars
($1,000,000.00) in the fiscal year ending June 30, 1998 and One Million Two
Hundred Thousand and 00/100 Dollars ($1,200,000.00) in each fiscal year
thereafter."
20. Limitation on Investments, Loans and Advances. Section 6.16(d) of
the Credit Agreement is hereby amended in its entirety to read as follows:
"(d) investments by Borrower and/or Guarantor,
directly and/or indirectly, in Landmaster or Weed Wizard and/or any of
Landmaster's or Weed Wizard's Subsidiaries and the making by Borrower
and/or Guarantor, directly or indirectly, to Borrower and/or any of
Borrower's Subsidiaries of loans, advances, extensions of credit
(including pursuant to Finance Lease and/or operating lease
transactions with Borrower and/or any of Borrower's Subsidiaries) and
capital contributions to finance or fund the working capital
requirements and other corporate purposes of Borrower and/or any of its
Subsidiaries; and"
21. Reaffirmation of Covenants, Warranties and Representations.
Borrower hereby agrees and covenants that all representations and warranties in
the Credit Agreement, including without limitation all of those warranties and
representations set forth in Article 4 are true and accurate as of the date
hereof. Borrower further reaffirms all covenants in the Credit Agreement, and
reaffirms each of the affirmative covenants set forth in Article 5 and negative
covenants set forth in Article 6 thereof, as if fully set forth herein, except
to the extent modified by this Fourth Amendment.
22. Conditions Precedent to Closing of Fourth Amendment. On or prior to
the Fourth Amendment Closing Date, each of the following conditions precedent
shall have been satisfied:
a) Certified Copies of Charter Documents. Agent shall have
received from the Borrower and Guarantor copies, certified by a duly authorized
officer of the Borrower and Guarantor to be true and complete on and as of the
Closing Date, of each of the charter or other organization documents and by-laws
of the Borrower, Weed Wizard Acquisition Corp. and Guarantor each as in effect
on such date of certification (together with any amendments thereto);
<PAGE>
b) Documents. Each of the documents to be executed and
delivered at the Fourth Amendment Closing and all other certificates, documents
and instruments to be executed in connection herewith shall have been duly and
properly authorized, executed and delivered by Borrower and shall be in full
force and effect on and as of the Fourth Amendment Closing Date.
c) Corporate Structure. The ownership, capital, corporate,
tax, organizational and legal structure (including articles of incorporation and
bylaws, shareholder agreements and management) of Guarantor and Borrower shall
be reasonably satisfactory to Agent.
d) Legality of Transactions. No change in applicable law shall
have occurred as a consequence of which it shall have become and continue to be
unlawful for Agent and each Lender to perform any of its agreements or
obligations under any of the Loan Documents, or for Borrower to perform any of
its agreements or obligations under any of the Loan Documents.
e) Changes; None Adverse. Since the date of the most recent
balance sheets of Borrower delivered to Agent, no changes shall have occurred in
the assets, liabilities, financial condition, business, operations or prospects
of Borrower which, individually or in the aggregate, are material to Borrower,
and Agent shall have completed such review of the status of all current and
pending legal issues as Agent shall deem necessary or appropriate.
f) Asset Purchase Agreements. Lenders shall have received a
copy of the Weed Wizard Acquisition Agreement executed by the parties thereto.
g) Weed Wizard Acquisition. Guarantor shall be prepared to
close the Weed Wizard Acquisition, and in connection therewith Guarantor shall
have received or have binding commitments to receive, contingent only upon the
making of up to Seven Million Five Hundred Thousand Dollars ($7,500,000) of the
Fourth Amendment Advance, an additional Ten Million Dollars ($10,000,000) in
equity for Borrower funded to Borrower's account with The Provident Bank, on
terms and conditions reasonably satisfactory to Agent, Borrower shall cause Weed
Wizard Acquisition Corp. to enter into a Subsidiary Guaranty substantially in
the form of Exhibit O to the Credit Agreement.
h) Land Master Acquisition. Borrower shall make all reasonable
efforts to close the Land Master Acquisition and Lender shall receive a copy of
the Landmaster Acquisition Agreement if executed. If Borrower shall fail to
close the Land Master Acquisition within ninety (90) days of the Fourth
Amendment Closing Date Lender shall not be obligated to fund the undisbursed
portion of the Fourth Amendment Advance and the final payment on the Term Loan
shall be reduced by an amount equal to the unfunded amount of the Fourth
Amendment Advance.
<PAGE>
i) Additional Security for Loans. As additional collateral
security for such of the Obligations as are described in the Credit Agreement,
the following documents constituting part of the Security Documents thereunder
shall be delivered to the Agent on behalf of the Lenders:
(i) a Pledge Agreement in substantially the form of Exhibit I
to the Credit Agreement executed by Borrower with respect to the stock
of Weed Wizard Acquisition Corp. with appropriate changes in text
thereof to reflect that such Pledge Agreement secures the direct
obligations of Borrower or a Subsidiary Guarantee, as the case may be;
(ii) a Subsidiary Guaranty from Weed Wizard Acquisition Corp.
in substantially the form of Exhibit O to the Credit Agreement; and
(iii) a Subsidiary Security Agreement from Weed Wizard
Acquisition Corp. in substantially the form of Exhibit P to the Credit
Agreement.
j) Perfection of Security Interests. Agent shall have received
all Uniform Commercial Code Financing Statements required or, in Agent's
opinion, advisable to be filed in order to create, in favor of the Agent for the
benefit of Lenders, a perfected Lien on the Collateral with respect to which a
Lien can be perfected by means of filing Uniform Commercial Code Financing
Statements (or for the filing of an application for certificate of title); said
Financing Statements shall have been properly filed in each office in each
jurisdiction in which such filings are required or, in the opinion of Agent,
advisable; Agent shall have received confirmation from its local counsel or
local counsel to Borrower that all such filings and recordations have been made,
and that all necessary filing, subscription and inscription fees and all
recording and other similar fees, and all taxes and other expenses related to
such filings and recordings have been paid or provided for in full by or on
behalf of Borrower;
k) Priority. Agent shall have received evidence reasonably
satisfactory to Lenders that Agent's Liens for the benefit of Lenders are first
and prior, and there are no other superior, equal, or inferior Liens except the
Permitted Liens;
l) Audit. Agent shall have completed its audit of the business
operations, facilities and books and records of Borrower, Guarantor and Weed
Wizard Acquisition Corp., including but not limited to, review of all material
agreements, contracts and commitments of Borrower, Guarantor and Weed Wizard
Acquisition Corp., including, but not limited to, the
<PAGE>
Landmaster Acquisition Agreement and the Weed Wizard Acquisition Agreement; all
insurance policies and programs of Borrower, Guarantor and Weed Wizard
Acquisition Corp.; the pension and employee benefit plans of Borrower, Guarantor
and Weed Wizard Acquisition Corp.; all tax returns, filings and audit
information relating to Borrower, Guarantor and Weed Wizard Acquisition Corp.;
accounts receivable and inventory; and information regarding any pending or
threatened litigation, claims or actions against Borrower, Guarantor and Weed
Wizard Acquisition Corp., which audit shall be reasonably satisfactory to Agent;
m) Financial Statements and Projections. Agent shall have
received the audited statements of the Borrower for 1996 and 1997, unaudited
statements for the period from January 1, 1997 to the end of the most recent
month completed prior to the Fourth Amendment Closing Date, projections of the
Borrower's operations for the entire term of the Loans, and such other financial
information regarding Borrower's operations as Agent may reasonably require;
n) Other Information. Agent shall have received such other
information concerning the Borrower, the Landmaster Acquisition, the Weed Wizard
Acquisition and the transactions contemplated hereby as Agent may reasonably
require.
o) Closing Fee. Borrower shall have paid to Agent, for the Pro
Rate benefit of each Lender, a closing fee in the amount of One Hundred Thousand
Dollars ($100,000).
23. Miscellaneous. Borrower shall reimburse Agent for all fees and
disbursements of legal counsel to Agent which shall have been incurred by Agent
in connection with the preparation, negotiation, review, execution and delivery
of this Fourth Amendment and the handling of any other matters incidental
hereto.
a) All of the terms, conditions and provisions of the
Agreement not herein modified shall remain in full force and effect. In the
event a term, condition or provision of the Agreement conflicts with a term,
condition or provision of this Fourth Amendment, the latter shall govern.
b) This Fourth Amendment shall be governed by and shall be
construed and interpreted in accordance with the laws of the State of Ohio.
c) This Fourth Amendment shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, successors and
assigns.
d) This Fourth Amendment may be executed in several
counterparts, each of
<PAGE>
which shall constitute an original, but all which together shall constitute one
and the same agreement.
[Remainder of page intentionally left blank. Signature page follows.]
<PAGE>
IN WITNESS WHEREOF, this Fourth Amendment has been duly executed and
delivered by or on behalf of each of the parties as of the day and in the year
first above written.
EASY GARDENER, INC, Borrower THE PROVIDENT BANK, Lender
By: /s/ Richard J. Raleigh By: /s/ Nick Jevic
- --------------------------------- ---------------------------------
Name: Richard J. Raleigh Name: Nick Jevic
Title: VP Title: VP
U.S. HOME & GARDEN INC., Guarantor LASALLE NATIONAL BANK, Lender
By: /s/ Richard J. Raleigh By: /s/ Stefano Robertson
- --------------------------------- ---------------------------------
Name: Richard J. Raleigh Name: Stefano Robertson
Title: COO Title: VP
THE PROVIDENT BANK, Agent ANTARES LEVERAGED CAPITAL CORP., Lender
By: /s/ Eric Hansen
By: /s/ Nick Jevic ---------------------------------
- --------------------------------- Name: Eric Hansen
Name: Nick Jevic Title: VP
Title: VP
<PAGE>
SCHEDULE I TO FOURTH AMENDMENT
Lender Credit Commitment
------ -----------------
The Provident Bank Revolving Credit Commitment:
Percentage: 37.254902% During months of November
through May:
$7,450,980.40
During months of June through
October:
$2,980,392.16
Term Loan Commitment:
$11,277,058.84
LaSalle National Bank Revolving Credit Commitment:
Percentage: 29.411765% During months of November
through May:
$5,882,353.00
During months of June through
October:
$2,352,941.20
Term Loan Commitment:
$8,902,941.27
Antares Leveraged Capital Corp. Revolving Credit Commitment:
Percentage: 33.333333% During months of November
through May:
$6,666,666.60
During months of June through
October:
$2,666,666.64
Term Loan Commitment:
$10,089,999.90
<PAGE>
SUBSIDIARIES OF U.S. HOME & GARDEN INC.
STATE OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
- ------------------ ----------------------
Easy Gardener, Inc. Delaware
Emerald Products Corp. Delaware
Golden West Agri-Products, Inc. California
Weatherly Consumer Products Group, Inc.* Delaware
Weatherly Consumer Products, Inc.+ Delaware
Weed Wizard Acquisition Corp.* Delaware
U. S. Home & Gardent Trust I Delaware
- ----------------
* Subsidiary of Easy Gardener, Inc.
+ Subsidiary of Weatherly Consumer Products Group, Inc.
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
U.S. Home & Garden Inc.
San Francisco, California
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-1 of our report dated August 1, 1997, except
for Note 15 which is as of September 15, 1997, relating to the consolidated
financial statements of U.S. Home & Garden Inc. and of our report dated October
20, 1997, relating to the consolidated financial statements of Weatherly
Consumer Products Group,Inc., both of which are contained in that Prospectus,
and, our report dated August 1, 1997, relating to the Schedule of U.S. Home &
Garden Inc. which is contained in Part II of the Registration Statement.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
------------------------
BDO SEIDMAN,LLP
San Francisco, California
March 20, 1998
<PAGE>
Registration No.
================================================================================
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) ____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
U.S. HOME & GARDEN INC.
(Exact name of obligor as specified in its charter)
Delaware 77-0262908
(State of incorporation) (I.R.S. employer identification no.)
655 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
___% Junior Subordinated Interest Debentures of U.S. Home & Garden Inc.
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 18th day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ W. Chris Sponenberg By:/s/ Emmett R. Harmon
-------------------------- -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE>
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
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<PAGE>
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
<PAGE>
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification.
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
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<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, 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, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 18, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
ASSETS
<TABLE>
<CAPTION>
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................236,646
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 331,880
Available-for-sale securities.............................................................................1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income............. 3,822,320
LESS: Allowance for loan and lease losses........... 59,373
LESS: Allocated transfer risk reserve............... 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,762,947
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................ 22
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................4,905
Other assets................................................................................................100,799
Total assets..............................................................................................5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
<TABLE>
<S> <C>
Deposits:
In domestic offices.......................................................................................4,034,633
Noninterest-bearing................ 839,928
Interest-bearing................... 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.....................................................................61,290
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................673,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 76,458
Total liabilities.........................................................................................5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
2
<PAGE>
Registration No.
===============================================================================
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) ____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
- ------------------------ ------------------------------------
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
U.S. HOME & GARDEN INC.
(Exact name of obligor as specified in its charter)
Delaware 77-0262908
(State of incorporation) (I.R.S. employer identification no.)
655 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
U.S. Home & Garden Inc. Guarantee with respect to
____% Cumulative Trust Preferred Securities
(Title of the indenture securities)
===============================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 18th day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By:/s/ Emmett R. Harmon
_______________________ ______________________
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
<PAGE>
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
3
<PAGE>
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
5
<PAGE>
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
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(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
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(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
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<PAGE>
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at
least two-thirds of the outstanding shares of capital stock
of the Corporation entitled to vote generally in the
election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that some lesser percentage
may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
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(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE>
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
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(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
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Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
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Section 2. The Vice Chairman of the Board. The Vice
Chairman of the Board of Directors shall preside at all meetings of the Board of
Directors at which the Chairman of the Board shall not be present and shall have
such further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
7
<PAGE>
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, 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, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
9
<PAGE>
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 18, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- --------------------------------------------------------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
--------
<TABLE>
ASSETS
<CAPTION>
<S> <C>
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................236,646
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 331,880
Available-for-sale securities.............................................................................1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,762,947
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................ 22
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................4,905
Other assets................................................................................................100,799
Total assets..............................................................................................5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................4,034,633
Noninterest-bearing ................ 839,928
Interest-bearing.................... 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.....................................................................61,290
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................673,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 76,458
Total liabilities.........................................................................................5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
2
<PAGE>
Registration No.
================================================================================
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) _____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
U.S. HOME & GARDEN INC.
U.S. HOME & GARDEN TRUST I
(Exact name of obligor as specified in its charter)
Delaware 77-0262908
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
655 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
____% Cumulative Trust Preferred Securities of
U.S. Home & Garden Trust I
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 18th day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ W. Chris Sponenberg By:/s/ Emmett R. Harmon
------------------------- --------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE>
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
10
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification.
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
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<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
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<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
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<PAGE>
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
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<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, 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, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses
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under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 18, 1998 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
---------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................236,646
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 331,880
Available-for-sale securities.............................................................................1,258,661
Federal funds sold and securities purchased under agreements to resell...................................... 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,762,947
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................129,740
Other real estate owned...................................................................................... 2,106
Investments in unconsolidated subsidiaries and associated companies............................................ 22
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................4,905
Other assets................................................................................................100,799
Total assets..............................................................................................5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase................................. 575,827
Demand notes issued to the U.S. Treasury.....................................................................61,290
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................673,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 76,458
Total liabilities.........................................................................................5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................385,018
Net unrealized holding gains (losses) on available-for-sale securities........................................7,362
Total equity capital........................................................................................454,998
Total liabilities, limited-life preferred stock, and equity capital.......................................5,919,206
</TABLE>
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