e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration
No. 333-163330
CALCULATION
OF REGISTRATION FEE
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Maximum
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Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate
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Registration
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Securities to be Registered
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Registered
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per Unit
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Offering Price
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Fee(1)
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7.25% Senior Notes due 2018
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$200,000,000
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99.254%
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$198,508,000
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$14,153.63
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Guarantees of 7.25% Senior Notes due 2018(2)
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Total
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$200,000,000
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$198,508,000
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$14,153.63
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(1)
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Calculated in accordance with Rule 457(r) under the
Securities Act of 1933, as amended (the Securities
Act).
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(2)
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Pursuant to Rule 457(n) of the Securities Act, no separate
registration fee is payable for the guarantees.
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PROSPECTUS SUPPLEMENT
(To prospectus dated January 11, 2010)
$200,000,000
7.25% Senior Notes due 2018
We are offering $200,000,000 aggregate principal amount of
7.25% Senior Notes due 2018. We will pay interest on the
notes on January 15 and July 15 of each year,
beginning July 15, 2010. The notes will mature on
January 15, 2018. We may redeem some or all of the notes at
any time on or after January 15, 2014 at the redemption
prices set forth herein and prior to such date at a
make-whole redemption price. We may also redeem up
to 35% of the notes prior to January 15, 2013 with the net
cash proceeds we receive from certain equity offerings. If a
change of control as described in this prospectus supplement
under the heading Description of the Notes
Repurchase at the Option of Holders
Offer to Repurchase upon Change of Control occurs, we may
be required to offer to purchase the notes from the holders.
The notes will be general unsecured senior obligations and will
rank equally with our unsecured senior indebtedness. The notes
will be guaranteed by certain of our domestic subsidiaries. The
guarantees will rank pari passu to all existing and future
indebtedness and other obligations of the guarantors. The notes
and the guarantees will be effectively subordinated to our and
the guarantors secured obligations, including our senior
secured credit facilities, to the extent of the value of the
collateral securing such obligations and structurally
subordinated to all of the liabilities of any of our
subsidiaries that do not guarantee the notes.
The notes will not be listed on any securities exchange.
Currently, there is no public market for the notes.
Investing in the notes involves risks. See Risk
Factors beginning on
page S-14
for a discussion of certain risks that you should consider in
connection with an investment in the notes.
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Per Note
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Total
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Public offering price(1)
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99.254
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%
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$
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198,508,000
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Underwriting discount
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2.125
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%
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$
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4,250,000
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Proceeds, before expenses, to us(1)
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97.129
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%
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$
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194,258,000
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(1) |
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Plus accrued interest from January 14, 2010, if settlement
occurs after that date. |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only
through the facilities of The Depository Trust Company for
the accounts of its participants, including Euroclear Bank
S.A./N.V., as operator of the Euroclear System, and Clearstream
Banking, société anonyme, on or about
January 14, 2010.
Joint Book-Running Managers
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BofA
Merrill Lynch |
J.P. Morgan |
Senior Co-Managers
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BMO
Capital Markets |
BNP PARIBAS |
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Rabo
Securities USA, Inc. |
Scotia Capital |
Co-Managers
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CALYON |
Fifth Third Securities, Inc. |
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PNC
Capital Markets LLC |
RBS |
The date of this prospectus supplement is January 11, 2010.
TABLE OF
CONTENTS
Prospectus
Supplement
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S-ii
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S-ii
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S-iii
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S-1
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S-14
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S-24
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S-25
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S-26
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S-28
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S-69
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S-72
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S-77
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S-79
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S-79
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Prospectus
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About This Prospectus
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1
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Forward-Looking Statements
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1
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Risk Factors
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2
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The Scotts Miracle-Gro Company
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2
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Ratio of Earnings to Fixed Charges
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3
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Use of Proceeds
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3
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Description of Debt Securities and Guarantees of Debt Securities
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4
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Description of Capital Stock
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12
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Description of Warrants
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15
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Description of Purchase Contracts and Purchase Units
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16
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Plan of Distribution
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17
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Legal Matters
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19
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Experts
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19
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Incorporation by Reference
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19
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Where You Can Find More Information
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20
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S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which contains the terms of this offering of notes.
The second part, the accompanying prospectus dated
January 11, 2010, gives more general information, some of
which may not apply to this offering.
This prospectus supplement and the information incorporated by
reference in this prospectus supplement may add to, update or
change the information in the accompanying prospectus. If
information in this prospectus supplement varies in any way from
the information in the accompanying prospectus or in a document
we have incorporated by reference, you should rely on the
information in the more recent document.
It is important for you to read and consider all information
contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus in making your
investment decision.
No person is authorized to give any information or to make any
representations other than those contained or incorporated by
reference in this prospectus supplement or the accompanying
prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized. This prospectus supplement and the accompanying
prospectus do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the
securities described in this prospectus supplement or an offer
to sell or the solicitation of an offer to buy such securities
in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this prospectus supplement and
the accompanying prospectus, nor any sale made hereunder, shall
under any circumstances create any implication that there has
been no change in our affairs since the date of this prospectus
supplement, or that the information contained or incorporated by
reference in this prospectus supplement or the accompanying
prospectus is correct as of any time subsequent to the date of
such information.
The distribution of this prospectus supplement and the
accompanying prospectus and the offering of the notes in certain
jurisdictions may be restricted by law. This prospectus
supplement and the accompanying prospectus do not constitute an
offer, or an invitation on our behalf or the underwriters or any
one of them, to subscribe to or purchase any of the notes, and
may not be used for or in connection with an offer or
solicitation by anyone, in any jurisdiction in which such an
offer or solicitation is not authorized or to any person to whom
it is unlawful to make such an offer or solicitation. See
Underwriting.
The
Agroblen®,
Agrocote®,
Agroleaf®,
Bug-B-Gon®,
Celaflor®,
Earthgro®,
EZ
Seed®,
Fertiligène®,
Home Defense
Max®,
Hyponex®,
KB®,
Levington®,
LiquaFeed®,
Miracle-Gro®,
Morning
Song®,
Naturen®,
Nexa
Lotte®,
OH2®,
Organic
Choice®,
Ortho®,
Osmocote®,
PatchMaster®,
Peters
Excel®,
Peters
Professional®,
Rout®,
Scotts®,
Scotts
LawnService®,
Scotts Songbird
Selections®,
Shamrock®,
Sierrablen®,
Substral®,
SuperSoil®,
Turf
Builder®,
Weed-B-Gon
Max®,
Weedol®,
Water
Smart®
and
Turf-Seedtm
trademarks and related logos referenced in this prospectus
supplement are registered trademarks or trademarks of The Scotts
Miracle-Gro Company or its subsidiaries in the United States
and/or
certain other countries.
Roundup®
is a registered trademark of Monsanto Technology LLC, an
affiliate of Monsanto Company.
In this prospectus supplement, unless otherwise stated or the
context otherwise requires, references to we,
us, our, Scotts and the
Company refer to The Scotts Miracle-Gro Company and
its consolidated subsidiaries. If we use a capitalized term in
this prospectus supplement and do not define the term in this
document, it is defined in the accompanying prospectus.
INCORPORATION
BY REFERENCE
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange
Commission (the SEC). These SEC filings are
available to the public at the SECs Internet website at
http://www.sec.gov.
You may also read and copy any of these SEC filings at the
SECs Public Reference Room located at
100 F Street, N.E., Washington, D.C. 20549.
Please call
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. Our SEC filings are also available on our website at
http://www.scotts.com.
The information on our website is not a part of this prospectus
supplement.
S-ii
The SEC allows us to incorporate by reference the
information that we file with the SEC. This means that we can
disclose important information to you by referring you to those
documents. The information we incorporate by reference is
considered part of this prospectus supplement, except that if
information in this prospectus supplement updates information in
a document incorporated by reference that has already been filed
with the SEC, the information in this prospectus supplement will
supersede such information in such document incorporated by
reference. Information that we file later with the SEC will
automatically update and supersede information included or
previously incorporated by reference into this prospectus
supplement from the date we file the document containing such
information.
Except to the extent furnished and not filed with the SEC
pursuant to Item 2.02 or Item 7.01 of
Form 8-K
or as otherwise permitted by the SEC rules, we incorporate by
reference the following documents that we have filed with the
SEC and any future filings we will make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
from the date of this prospectus supplement until the completion
of the offering of the notes or this offering is terminated:
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Annual Report on
Form 10-K
for the fiscal year ended September 30, 2009; and
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Current Reports on
Form 8-K
filed on December 16, 2009 and January 11, 2010.
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We will provide without charge, upon written or oral request, a
copy of any or all of the documents that are incorporated by
reference into this prospectus supplement (other than exhibits,
unless they are specifically incorporated by reference in the
documents). Requests should be directed to: The Scotts
Miracle-Gro
Company, 14111 Scottslawn Road, Marysville, Ohio 43041,
Attention: Treasurer, telephone number
(937) 644-0011.
FORWARD-LOOKING
STATEMENTS
This prospectus supplement and the documents incorporated by
reference herein may contain forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Exchange Act with
respect to our financial condition, results of operations, cash
flows, plans, objectives, strategies, targets, prospects and
business. Forward-looking statements reflect our current
expectations, estimates or projections concerning future results
or events. These statements are generally identified by the use
of forward-looking words or phrases such as believe,
strategy, expect,
anticipate, may, could,
intend, intent, belief,
estimate, plan, foresee,
likely, will, should or
other similar words or phrases. Forward-looking statements are
not guarantees of performance and are inherently subject to
known and unknown risks, uncertainties and assumptions that are
difficult to predict and could cause our actual results and
future events to differ materially from those expressed in or
implied by the forward-looking statements. We cannot assure you
that any of our expectations, estimates or projections will be
achieved and you should not place undue reliance on
forward-looking statements.
The forward-looking statements included or incorporated by
reference in this prospectus supplement are only made as of the
date of this prospectus supplement or the respective document
incorporated by reference herein, as applicable. Except as
required by law, we undertake no obligation to publicly update
any forward-looking statement to reflect subsequent events or
circumstances.
Numerous factors could cause our actual results and events to
differ materially from those expressed or implied by
forward-looking statements, including, without limitation:
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the ongoing governmental investigations regarding our compliance
with the Federal Insecticide, Fungicide, and Rodenticide Act of
1947, as amended (FIFRA);
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compliance with environmental and other public health
regulations;
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increases in the prices of certain raw materials;
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risks related to the current economic crisis;
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the highly competitive nature of our markets;
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S-iii
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the concentration of our sales to a small number of retail
customers;
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adverse weather conditions;
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our historical seasonality;
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the amount of our debt;
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our significant international operations;
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our inability to adequately protect our intellectual property
and other proprietary rights;
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dependence on key personnel;
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termination of the Marketing Agreement with Monsanto Company for
consumer Roundup products (the Marketing Agreement);
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Hagedorn Partnership, L.P. beneficially owns approximately 31%
of our outstanding common shares on a fully diluted basis; and
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any other risk factors set forth below under the heading
Risk Factors or in our reports filed with the SEC
under the Exchange Act.
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The list of factors above is illustrative, but by no means
exhaustive. All forward-looking statements should be evaluated
with the understanding of their inherent uncertainty. All
subsequent written and oral forward-looking statements
concerning the matters addressed in this prospectus supplement
and attributable to us or any person acting on our behalf are
qualified by these cautionary statements.
S-iv
SUMMARY
This summary highlights information about us. It may not
contain all of the information that may be important to you in
deciding whether to invest in the notes. You should read this
entire prospectus supplement and the accompanying prospectus,
together with the information incorporated by reference herein
and therein, including our consolidated financial statements and
related notes, before making an investment decision. Our fiscal
year ends September 30 and whenever we refer to any of our
fiscal years, we refer to the twelve-month period ending
September 30 of such year.
Our
Company
We are a leading global manufacturer and marketer of products
for consumer lawns and gardens and professional horticulture. We
own or market the leading brands in nearly every category of the
non-durable consumer lawn and garden industry in the United
States and have a significant presence in Europe, where we own
several important brands. We also have the second largest market
share position in the fragmented U.S. lawn care service
industry and are expanding our presence in this segment through
our Scotts LawnService business. We believe that our
market leadership position is driven by our leading brands,
innovative products, consumer-focused marketing, superior
product performance, supply chain competence, highly
knowledgeable field sales and merchandising organization and
extensive relationships with major U.S. retailers. During
fiscal 2009, we generated net sales of $3,141.5 million and
Adjusted EBITDA of $350.5 million, which represented an
increase of 5.4% and 10.1%, respectively, from fiscal 2008. We
provide a reconciliation of Adjusted EBITDA to net income in
Summary Consolidated Historical Financial
Data. Our common shares are traded on the New York Stock
Exchange under the symbol SMG and as of
January 7, 2010, we had an equity market capitalization of
approximately $2.63 billion.
The Scotts Miracle-Gro Company traces its heritage back to a
company founded by O.M. Scott in Marysville, Ohio in 1868. In
the mid 1900s, we became widely known for the development of
quality lawn fertilizers and grass seeds that led to the
creation of a new industry consumer lawn care. In
the 1990s, we significantly expanded our product offering with
three powerful leading brands in the U.S. home lawn and
garden industry. First, in fiscal 1995, through a merger with
Sterns Miracle-Gro Products, Inc., we acquired the
Miracle-Gro brand, the industry leader in water-soluble
garden plant foods. Second, in fiscal 1999, we acquired the
Ortho brand in the United States and obtained exclusive
rights to market the consumer Roundup brand within the
United States and other specified countries, thereby adding
industry-leading weed, pest and disease control products to our
portfolio. Today, we believe the Scotts, Turf
Builder, Miracle-Gro, Ortho and Roundup
brands make us the most widely recognized company in the
consumer lawn and garden industry in the United States. Our
leading North American consumer brands include:
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Category
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Brands
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Lawns
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Scotts; Turf Builder
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Gardens
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Miracle-Gro; Osmocote; LiquaFeed;
Organic Choice
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Growing Media
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Miracle-Gro; Scotts; Hyponex;
Earthgro; SuperSoil
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Grass Seed
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Scotts; Turf Builder; EZ Seed;
Patchmaster
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Controls
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Ortho; Home Defense Max; Weed-B-Gon Max;
Bug-B-Gon; Roundup
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Wild Bird Food
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Morning Song; Scotts Songbird Selections
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Our company is organized around three principal business
segments:
Global Consumer (78.2% of net sales for fiscal
2009). In our Global Consumer segment, we
manufacture and market products that provide easy, reliable and
effective solutions to homeowners who seek healthy, weed-free
and pest-free lawns, gardens and indoor plants. Products are
marketed to mass merchandisers, home centers, large hardware
chains, warehouse clubs, distributors, garden centers and
grocers. The
S-1
Global Consumer segment sells products in the United States,
Canada, Europe and Australia in the following categories:
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Lawns. A complete line of granular lawn
fertilizer and combination products, including fertilizer and
crabgrass control, weed control and pest control, is sold under
the Scotts and Turf Builder brand names.
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Gardens. A complete line of granular and
liquid plant foods is marketed under the Miracle-Gro and
Osmocote brand names.
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Growing Media. A complete line of growing
media products for indoor and outdoor uses is marketed under the
Miracle-Gro, Scotts, Hyponex, Earthgro
and SuperSoil brand names. These products include
potting mix, garden soils, seeding soil, topsoil, manures,
sphagnum peat and decorative barks and mulches.
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Grass Seed. We offer a broad line of grass
seed products for consumers. Our leading grass seed products are
sold under the Scotts, Turf Builder, EZ Seed
and PatchMaster brand names.
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Controls. A broad line of weed control, indoor
and outdoor pest control and plant disease control products is
marketed under the Ortho brand name, as well as the
Roundup brand name through an exclusive marketing
agreement with Monsanto Company.
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Wild Bird Food and Other Consumer Products. We
manufacture and market an assortment of wild bird food products
as well as other consumer products such as several lines of
high-quality lawn spreaders.
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Global Professional (9.3% of net sales for fiscal
2009). The Global Professional business sells
products to commercial nurseries and greenhouses and specialty
crop growers primarily in North America, Europe, the Middle
East, Africa, Latin America, Australia, New Zealand and
throughout the Far East. Our professional products include a
broad line of sophisticated controlled-release fertilizers,
water-soluble fertilizers, plant protection products, wetting
agents, growing media and grass seed that are sold under brand
names that include Osmocote, Sierrablen, Peters
Professional, Peters Excel, Agroblen,
Agrocote, Agroleaf, Rout, OH2,
Scotts Professional Seed and Scotts Turf-Seed.
Scotts LawnService (7.4% of net sales for fiscal
2009). The Scotts LawnService segment
provides residential lawn care, lawn aeration, tree and shrub
care and limited pest control services in the United States. As
of September 30, 2009, Scotts LawnService had
82 company-operated locations and 78 independent franchises.
Competitive
Strengths
We believe the following competitive strengths differentiate us
from our competitors and contribute to our continued success:
Strong Portfolio of Brands. We consider our
industry-leading brands to be our most important competitive
advantage. We believe the Scotts, Turf Builder,
Miracle-Gro, Ortho and Roundup brands make
us the most widely recognized company in the consumer lawn and
garden industry in the United States. The strength of the
Scotts brand has been a critical aspect of the success of
Scotts LawnService. We also own many of the leading
brands in the European marketplace, including Celaflor,
Fertiligène, KB, Levington,
Miracle-Gro, Nexa Lotte, Shamrock,
Substral and Weedol.
We have helped to build awareness of our brands through
consistently investing in advertising and marketing. We are the
major media advertiser in the North American consumer lawn and
garden industry. During fiscal 2009, we spent over
$76 million advertising our portfolio of brands utilizing
various media outlets. Due to regional differences in the start
and duration of the lawn and garden season, we believe tailoring
the timing and delivery of our marketing efforts should help us
capture market share across all regions. Therefore, we have
increased our focus on localizing our advertising programs, with
local advertising accounting for approximately 45% of our total
advertising spend in fiscal 2009 as compared to 15% in fiscal
S-2
2008. In addition, we continue to increase our utilization of
weather-triggered media vehicles, such as radio, television and
digital, to maintain flexibility and improve effectiveness of
our advertising expenditures.
Market Leadership in a Stable and Growing
Industry. As we celebrate more than
100 years of selling products to consumers, we believe we
have the leading market share in nearly every major
U.S. category in which our Global Consumer business
competes. We have been able to achieve this market leading
position through a combination of internal growth driven by
product line extensions and innovative new product launches,
award-winning marketing campaigns and acquisitions.
Because of the strength of our brands and our market share, we
believe we are well positioned to benefit from the favorable
trends in the consumer lawn and garden industry. The lawn and
garden categories we participate in constitute a market in the
United States exceeding $5 billion. Analysts expect the
industry to grow at a low to mid-single digit growth rate. The
drivers of this growth include: (i) the aging of the
U.S. population, as gardening is a top leisure activity
and, more importantly, participation is positively correlated
with age; (ii) the above-average population growth in the
southern regions of the United States with longer lawn and
garden seasons; (iii) the current focus on health and
wellness and the increased interest in vegetable gardening; and
(iv) homeowners seeking to protect the value of their homes
through attractive landscaping. Approximately 80% of individuals
55 and older the fastest-growing segment of the
population participated in gardening in 2008. In
addition, between 2000 and 2007, the top five population gains
occurred in states California, Texas, Florida,
Georgia and Arizona with longer growing seasons and,
as a result, we expect to benefit from incremental usage
occasions.
Focus on Product Innovation. We view our
commitment to innovation as a competitive advantage and
continually invest in research and development to improve our
products and develop new products. Over the past three years, we
have invested approximately $140 million in research and
development which has contributed to our worldwide portfolio of
patents and exclusive licenses to proprietary technologies.
Scotts EZ Seed, introduced in 2009, is an example of our
ongoing innovation. This unique lawn repair product combines
Scotts grass seed with granular fertilizer in a
proprietary growing material having superior water absorbency
qualities. By retaining moisture, the growing material allows
for better seed germination and supports less frequent watering,
resulting in a higher level of consumer success. Similarly, our
proprietary Water Smart grass seed allows consumers to
successfully grow turf while using less water.
Unrivaled Relationships with Key Retailers. We
believe our retail partners continue to view the lawn and garden
category, as well as Scotts, as critical to their success. We
believe that our leading brands and our aggressive advertising
make our products traffic builders at retail
locations, and, together with our position as the leading
nationwide supplier of a full line of consumer lawn and garden
products, give us an advantage in selling to retailers, who
value the efficiency of dealing with a limited number of
suppliers. We are the largest vendor to the lawn and garden
departments at Home Depot, Walmart and Lowes, and we have
sales teams dedicated to each of these retailers year-round to
work with their associates to help maximize store shelf
productivity, drive consumer traffic, improve merchandising and
support new products. In 2009, we were named supplier of the
year by Home Depot and ACE Hardware. Our strategic plan
continues to focus on further assisting our retail partners in
order to improve their sales and the productivity of their lawn
and garden departments. We believe this strategy makes us a more
critical component to their success and helps to ensure our
continued growth.
We view our U.S. sales force as a major competitive
advantage that helps us strengthen our relationship with our
retail partners. By increasing the size of our sales force over
several years, we have taken a more proactive role in helping
our retail partners merchandise their lawn and garden
departments and maximize the productivity of this space. In
addition to working closely with retailers, our nearly
2,000 person full-time and seasonal U.S. in-store
sales force also provides us with an opportunity to interact
face-to-face
with and educate consumers
at-the-shelf.
By helping consumers answer their lawn and garden questions, we
believe we can drive higher sales of our products.
S-3
A World Class Supply Chain. We believe
our supply chain is another major competitive advantage that has
allowed us to build unrivaled relationships with our key retail
partners. Our manufacturing and distribution network is
strategically located around North America and Europe to
efficiently supply our key retail partners. We consider our
order fill rate which measures the accuracy of
shipments to be an important measure of customer
service. In fiscal 2009, we achieved a global order fill rate of
98.6%. Additionally, over the past several years, the supply
chain has helped us improve our inventory turns, as well as
those of our retail partners. In fiscal 2009, we commenced a
three-year plan aimed to further regionalize our
U.S. supply chain, which we believe will allow us to
increase efficiency and better serve our retail partners. We
have also made substantial investments to lower the cost
structure of our supply chain operations in Europe while
simultaneously improving customer service levels.
Strong Financial Performance and Significant Cash Flow
Generation. We have grown our net sales from
$2,871.8 million in fiscal 2007 to $3,141.5 million in
fiscal 2009, representing a compound annual growth rate of 4.6%.
During the same time period, our organic net sales growth
(defined as our sales growth excluding the impact of
fluctuations in foreign exchange rates, product recalls and
acquisitions) averaged 4.9%. Despite difficult economic
conditions during fiscal 2009, we believe we were able to
increase our market share in every consumer lawn and garden
category we participate in within the United States, and grow
our net sales and Adjusted EBITDA by 5.4% and 10.1%,
respectively, from fiscal 2008. We attribute these results both
to our ability to partner with retailers to leverage the
resilience of the lawn and garden category and to our improved
marketing and consumer outreach strategy. We believe that our
operating model, which includes low capital expenditure
requirements and efficient working capital management, generates
stable and significant free cash flow. During the last three
fiscal years, we had average operating cash flows of
$237.4 million. During the same time period, our capital
expenditures (including investments in property, plant and
equipment and intellectual property) averaged
$63.2 million, which represents 2.1% of average net sales.
As a result, we have reduced our total debt (net of cash and
cash equivalents) position from $1,049.9 million at
September 30, 2007 to $738.5 million at
September 30, 2009.
Experienced and Incentivized Management
Team. Our senior management team has significant
experience in the lawn and garden industry with an average of
12 years in the industry. James Hagedorn has been with our
Company for 22 years and has served as the Chief Executive
Officer since May 2001. In October 2008, Mark Baker was named
President and Chief Operating Officer. This management team has
demonstrated its ability to grow the business through effective
brand building and financial discipline. Additionally, we
believe our management team is committed and incentivized. As of
September 30, 2009, our board of directors and executive
officers collectively owned, individually or in partnership with
members of their families, approximately 33% of our common
shares.
Our
Strategy
Our strategic plan is focused on leveraging our key competitive
advantages to extend category and market share growth and reduce
costs, further distancing us from the competition.
Continue to Drive Growth and Profitability from the Core
North America Consumer Business. We seek to raise
household penetration of our products, as well as the frequency
with which existing consumers use our products, and enhance the
profitability of our business. We believe this can be
accomplished by (i) increasing our familiarity with our
consumers and customers at a localized level, (ii) building
our portfolio of simple, significant and sustainable products
through innovation and (iii) leveraging our strong customer
relationships. We will also evaluate selective acquisitions as
opportunities arise. Our initiatives around this strategy are as
follows:
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|
|
Migration to a more regionalized operating
model. We are migrating to an enhanced operating
model which pushes accountability to a more granular geographic
level. This model results in the establishment of regional
offices (collectively, the Regions), with oversight
of execution within geographical areas sharing more similar
agronomic characteristics. We believe this model will improve
our intimacy with our consumers, retailers and competitors
relative to our prior, more centralized model. We expect that
pushing greater accountability out to the Regions will
|
S-4
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|
|
|
|
also improve the capacity of the headquarters function to focus
on long-term, category growth with consumer driven innovation.
|
The Regions will take the lead in enhancing our understanding of
our consumers what they need, how they participate
in the lawn and garden category, what drives them to buy, where
they shop and many other insights. The Regions will focus on
increasing both the overall participation rate in lawn and
garden activities and our market share by meeting the unique
needs of consumers at the local level. To achieve these
objectives, the Regions will work closely with our retail
partners at a local level to optimize merchandising and
programs. We believe, even in a difficult economy, it is
important to continue to expand our strategy of strengthening
our relationship with the consumer. This will allow us to
leverage the cornerstone of our business our
brands and drive higher usage of our products.
Headquarters will support the Regions with effective programs
and services to attract more consumers and enhance support to
our retailers, as well as to continue to drive innovation in our
products, services, programs and operations in ways designed to
keep consumers engaged in lawn and garden activities and to
improve business efficiency for the long term.
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|
|
Regionalization of supply chain. Our strategy
also incorporates long-term initiatives to further increase the
cost productivity of our U.S. supply chain model. In fiscal
2009, we commenced a three-year plan aimed to regionalize our
supply chain by co-locating fertilizer and growing media
distribution centers to allow for more full truckload
deliveries, thereby lowering costs. Following completion of this
co-distribution model, we anticipate that up to half of our
third-party warehouse square footage could be eliminated. We
have also begun to roll out a regional packaged goods filling
and distribution strategy. The investments associated with our
regional manufacturing and distribution should allow us to more
efficiently supply our key retail accounts and diversify our
manufacturing footprint. With investments in regional
facilities, we anticipate realizing cost savings from a
combination of reduced in-bound and out-bound freight coupled
with reduced inventory investments.
|
We believe all of these efforts to regionalize our supply chain
can result in cumulative cost savings of $50 million and
reduce inventories by $100 million. These strategic efforts
not only present a significant economic benefit to us, but to
our retail partners as well, through more frequent store
replenishment, improved inventory turns and reduced order lead
times.
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|
|
|
|
Focus on innovation. Our strategic plan is
heavily focused on driving innovation, which we believe is
necessary to achieve higher sales and profits. Throughout our
history, innovation has been the foundation of our consumer
business. We continually invest in research and development, in
the laboratory and at the consumer level, to improve our
products, manufacturing processes, packaging and delivery
systems. Our long-standing commitment to innovation is evidenced
by our worldwide portfolio of patents. In addition to the
benefits of our own research and development, we actively seek
ways to leverage the research and development activities of our
suppliers.
|
We believe our innovation strategy resulted in the successful
launch of several new products in 2009, including Turf
Builder Water Smart Grass Seed and EZ Seed Grass
Seed. Research and development will be front and center again in
2010 with the introduction of approximately 15 new products. We
believe our longer term opportunities are even more encouraging.
We have obtained global exclusivity on a breakthrough active
ingredient for weed control. Although regulatory approval is
still needed, we are optimistic that the product could radically
change the way in which consumers control weeds in their lawns
by making it easier to eliminate and prevent weeds. In addition,
we continue to make progress with a naturally derived
bioherbicide that could provide a new way to control broadleaf
weeds.
Strengthen Our Global Consumer Business
Internationally. We continue to believe in the
long-term growth potential of our Global Consumer business
internationally. In order to maximize value in this business,
S-5
we have sharpened our focus by: (i) reducing costs in the
business to improve profitability and allow for investments in
marketing; (ii) aligning the organization by category
rather than by geography to better leverage our knowledge of the
marketplace and the consumer; and (iii) better leveraging
our innovation competencies. We have implemented a global supply
chain to provide our smaller, international market segments with
access to the benefits of the larger company, such as lower
packaging costs and the ability to source products globally from
any company-owned plant. The first steps of the organizational
realignment have taken place, and as part of a broader corporate
initiative, they will continue to evolve in fiscal 2010 and
beyond. Finally, we are combining global scale with locally
tailored products to streamline our technology platform in the
international Global Consumer business. As an example, when we
introduced LiquaFeed Plant Food to a variety of European
countries in fiscal 2008, each label carried the same design and
branding while the claims and instructions were displayed in the
local language. At the same time, the European business doubled
sales of natural products in fiscal 2008 by launching Naturen
sub-branded
products as a locally driven effort.
Expand Scotts LawnService. The number of
homeowners who want to maintain their lawns and gardens but do
not want to do the work themselves represents a significant
portion of the total lawn and garden market. We believe that our
portfolio of well-known brands provides us with a unique ability
to extend our business into lawn and garden services and that
the strength of our brands provides us with a competitive
advantage in acquiring new customers. We have spent the past
several years developing our Scotts LawnService business
model and the business has grown significantly, from revenues of
$41.2 million in fiscal 2001 to revenues of
$231.1 million in fiscal 2009. This growth has come from
geographic expansion, acquisitions and organic growth fueled by
our direct marketing programs. Although we have not made any
lawn service acquisitions in the last two fiscal years, we will
continue to evaluate selective acquisitions as opportunities
arise. We will also continue to invest in the Scotts
LawnService business infrastructure in order to continually
improve customer service throughout the organization and
leverage economies of scale as we continue to grow.
Recent
Developments
Excluding the financial results of Smith & Hawken
(which will be reported as a discontinued operation beginning in
the first fiscal quarter of 2010), we anticipate net sales
growth of 3% to 5% in fiscal 2010, primarily driven by unit
volume growth in our Global Consumer business. We also
anticipate that our fiscal 2010 free cash flow, gross margin
rate, selling, general and administrative expenses and effective
tax rate will be generally consistent with our fiscal 2009
financial results, after adjusting to exclude the impact of
non-recurring items and the impact of Smith & Hawken.
For our fiscal first quarter, we expect our seasonal loss to
exceed the prior year primarily due to reduced gross margin
rates. This is principally an outcome of the timing of
recognition of the costs of higher priced commodities. We expect
gross margin rates to be favorable to the prior year for the
remaining three quarters of fiscal 2010, contributing to our
expectation of full year gross margin rates approximately
equivalent to the prior year.
These are forward-looking statements and actual results may
vary, possibly materially. Please see Forward-Looking
Statements and Risk Factors.
Corporate
Information
Our executive offices are located at 14111 Scottslawn Road,
Marysville, Ohio 43041, and our telephone number is
(937) 644-0011.
S-6
THE
OFFERING
The summary below describes the principal terms of the notes.
Certain of the terms and conditions described below are subject
to important limitations and exceptions. For a more detailed
description of the terms and conditions of the notes, see the
section entitled Description of the Notes. As used
in this section, references to the Company mean The
Scotts Miracle-Gro Company and not any of its subsidiaries.
|
|
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Issuer |
|
The Scotts Miracle-Gro Company. |
|
Notes Offered |
|
$200,000,000 aggregate principal amount of 7.25% Senior
Notes due 2018. |
|
Maturity |
|
The notes will mature on January 15, 2018. |
|
Interest |
|
7.25% per year. |
|
Interest Payment Date |
|
January 15 and July 15 of each year, commencing
July 15, 2010. Interest will accrue from January 14,
2010. |
|
Guarantees |
|
As of the issue date, the notes will be guaranteed by each of
our subsidiaries that guarantees our senior secured credit
facilities. |
|
Ranking |
|
The notes will be senior unsecured obligations of the Company
and will rank senior in right of payment to any of the
Companys future debt that is expressly subordinated in
right of payment to the notes. The notes will rank equal in
right of payment with all of the Companys existing and
future unsecured senior debt and will be effectively
subordinated to all of the Companys secured debt to the
extent of the value of the collateral securing such debt and
structurally subordinated to all of the liabilities of any of
the Companys subsidiaries that do not guarantee the notes. |
|
|
|
The guarantees will be general unsecured obligations of the
guarantors and will rank senior in right of payment to any of
their future debt that is expressly subordinated in right of
payment to the guarantees. The guarantees will rank equal in
right of payment with all existing and future unsecured
liabilities of such guarantors that are not so subordinated and
will be effectively subordinated to all of such guarantors
secured debt to the extent of the value of the collateral
securing such debt and structurally subordinated to all of the
liabilities of any of our subsidiaries that do not guarantee the
notes. |
|
|
|
As of September 30, 2009, after giving effect to this
offering and the use of proceeds therefrom, the Company and the
guarantors would have had total secured debt of approximately
$604.4 million (excluding letters of credit of
$35.9 million), and approximately $1,417.0 million of
additional secured debt would have been available to be borrowed
under our senior secured revolving credit facility. As of
September 30, 2009, the notes and the guarantees would have
been structurally subordinated to approximately
$222.2 million of indebtedness of the non-guarantor
subsidiaries, all of which was incurred under our senior secured
credit facilities. |
|
Optional Redemption |
|
At any time prior to January 15, 2013, the Company may
redeem up to 35% of the notes with the net cash proceeds of
certain equity offerings at the redemption price set forth under
Description of the Notes Optional
Redemption. |
S-7
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|
|
|
At any time prior to January 15, 2014, the Company may
redeem the notes, in whole or in part, at a
make-whole redemption price, plus accrued and unpaid
interest to the date of redemption as set forth under
Description of the Notes Optional
Redemption. On and after January 15, 2014, the
Company may redeem the notes, in whole or in part, at the
redemption prices set forth under Description of the
Notes Optional Redemption plus accrued and
unpaid interest. |
|
Change of Control |
|
If specific kinds of changes of control occur and the Company
has not previously exercised its right to redeem all of the
outstanding notes as described under Description of the
Notes Optional Redemption, the Company must
offer to purchase the notes at a price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest. |
|
Covenants |
|
The indenture governing the notes, as supplemented and amended
by a supplemental indenture, which we collectively refer to as
the indenture, will, among other things, restrict our ability
and the ability of our restricted subsidiaries to: |
|
|
|
incur
additional indebtedness and issue certain preferred shares;
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|
make
certain distributions, investments and other restricted payments;
|
|
|
|
sell
certain assets;
|
|
|
|
agree
to restrictions on the ability of restricted subsidiaries to
make payments to us;
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|
create
liens and enter into sale-leaseback transactions;
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merge,
consolidate or sell substantially all of our assets; and
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enter
into certain transactions with affiliates.
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These covenants are subject to important exceptions and
qualifications described under the heading Description of
the Notes. |
|
Use of Proceeds |
|
We intend to use the net proceeds from this offering to repay
outstanding borrowings under our senior secured revolving credit
facility. See Use of Proceeds. Affiliates of certain
of the underwriters are currently lenders under our senior
secured revolving credit facility and, accordingly, they will
receive a portion of the proceeds from the sale of the notes in
this offering. See Underwriting Conflicts of
Interest. |
S-8
|
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No Public Market |
|
The notes are a series of securities for which there is
currently no established trading market. The underwriters have
advised us that they presently intend to make a market in the
notes. However, you should be aware that they are not obligated
to make a market and may discontinue their market-making
activities at any time without notice. As a result, a liquid
market for the notes may not be available if you try to sell
your notes. We do not intend to apply for a listing of the notes
on any securities exchange or any automated dealer quotation
system. |
|
Form |
|
The notes will be represented by registered global securities
registered in the name of Cede & Co., the nominee of
the depositary, The Depository Trust Company. Beneficial
interests in the notes will be shown on, and transfers will be
effected through, records maintained by The Depository
Trust Company and its participants. |
|
Risk Factors |
|
See Risk Factors beginning on
page S-14
of this prospectus supplement for important information
regarding us and an investment in the notes. |
|
Conflicts of Interest |
|
As described under Use of Proceeds, we intend to use
the net proceeds from this offering to repay borrowings under
our senior secured revolving credit facility. Affiliates of
certain of the underwriters are lenders under our senior secured
revolving credit facility. Those underwriters whose affiliates
will receive at least 5% of the total net proceeds (not
including underwriting compensation) from this offering are
considered by the Financial Industry Regulatory Authority, Inc.
(FINRA) to have a conflict of interest with us in
regards to this offering. As a result, this offering is being
conducted in accordance with the applicable requirements of NASD
Rule 2720 and FINRA Rule 5110 regarding the
underwriting of securities of a company with a member that has a
conflict of interest within the meaning of those rules. NASD
Rule 2720(a)(2) requires that under these circumstances a
qualified independent underwriter participate in the preparation
of the prospectus and exercise the usual standards of due
diligence in respect thereto. Scotia Capital (USA) Inc. has
agreed to act as the qualified independent underwriter with
respect to this offering. We have agreed to indemnify Scotia
Capital (USA) Inc. in its capacity as qualified independent
underwriter against certain liabilities under the Securities
Act. No underwriter having a conflict of interest under NASD
Rule 2720 will confirm sales to any account over which the
underwriter exercises discretionary authority without the
specific written approval of the accountholder. See
Underwriting Conflicts of Interest. |
S-9
SUMMARY
CONSOLIDATED HISTORICAL FINANCIAL DATA
The summary consolidated historical financial data presented
below as of and for the fiscal years ended September 30,
2007, 2008 and 2009 is derived from our audited financial
statements. You should read this information in conjunction with
our consolidated financial statements and related notes thereto
and Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in our
Annual Report on
Form 10-K
for the fiscal year ended September 30, 2009, as well as
our Current Report on
Form 8-K
dated January 11, 2010, each of which is incorporated by
reference herein.
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|
|
|
|
|
|
|
|
|
|
|
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Fiscal Year Ended September 30,
|
|
|
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2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Dollars in millions)
|
|
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Consumer
|
|
$
|
2,176.2
|
|
|
$
|
2,250.1
|
|
|
$
|
2,457.6
|
|
Global Professional
|
|
|
281.9
|
|
|
|
348.8
|
|
|
|
293.1
|
|
Scotts LawnService
|
|
|
230.5
|
|
|
|
247.4
|
|
|
|
231.1
|
|
Corporate & Other
|
|
|
184.0
|
|
|
|
158.6
|
|
|
|
160.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment total
|
|
|
2,872.6
|
|
|
|
3,004.9
|
|
|
|
3,142.6
|
|
Roundup amortization(1)
|
|
|
(0.8
|
)
|
|
|
(0.8
|
)
|
|
|
(0.8
|
)
|
Product registrations and recall matters-returns(2)
|
|
|
|
|
|
|
(22.3
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
2,871.8
|
|
|
|
2,981.8
|
|
|
|
3,141.5
|
|
Cost of sales
|
|
|
1,867.3
|
|
|
|
1,999.9
|
|
|
|
2,034.2
|
|
Cost of sales impairment, restructuring and other
charges(3)
|
|
|
|
|
|
|
15.1
|
|
|
|
6.6
|
|
Cost of sales product registration and recall
matters(2)
|
|
|
|
|
|
|
27.2
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,004.5
|
|
|
|
939.6
|
|
|
|
1,089.0
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(4)
|
|
|
700.9
|
|
|
|
717.6
|
|
|
|
799.2
|
|
Impairment, restructuring and other charges(3)
|
|
|
38.0
|
|
|
|
121.7
|
|
|
|
8.1
|
|
Product registration and recall matters(2)
|
|
|
|
|
|
|
12.7
|
|
|
|
16.8
|
|
Other income, net
|
|
|
(11.5
|
)
|
|
|
(10.4
|
)
|
|
|
(2.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
277.1
|
|
|
|
98.0
|
|
|
|
267.1
|
|
Costs related to refinancing
|
|
|
18.3
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
70.7
|
|
|
|
82.2
|
|
|
|
56.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
188.1
|
|
|
|
15.8
|
|
|
|
210.7
|
|
Income taxes
|
|
|
74.7
|
|
|
|
26.7
|
|
|
|
57.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
113.4
|
|
|
$
|
(10.9
|
)
|
|
$
|
153.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
246.6
|
|
|
$
|
200.9
|
|
|
$
|
264.6
|
|
Investing activities
|
|
|
(72.2
|
)
|
|
|
(59.1
|
)
|
|
|
(83.3
|
)
|
Financing activities
|
|
|
(158.8
|
)
|
|
|
(123.0
|
)
|
|
|
(194.0
|
)
|
Depreciation and amortization
|
|
|
67.5
|
|
|
|
70.3
|
|
|
|
60.4
|
|
Capital expenditures(5)
|
|
|
54.0
|
|
|
|
60.2
|
|
|
|
75.4
|
|
Adjusted EBITDA(6)
|
|
|
382.6
|
|
|
|
318.4
|
|
|
|
350.5
|
|
Ratio of earnings to fixed charges(7)
|
|
|
2.9
|
x
|
|
|
1.2
|
x
|
|
|
3.7
|
x
|
Balance Sheet Data (at period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
67.9
|
|
|
$
|
84.7
|
|
|
$
|
71.6
|
|
Working capital(8)
|
|
|
412.7
|
|
|
|
366.8
|
|
|
|
334.1
|
|
Total assets
|
|
|
2,277.2
|
|
|
|
2,156.3
|
|
|
|
2,220.1
|
|
Total debt
|
|
|
1,117.8
|
|
|
|
999.5
|
|
|
|
810.1
|
|
Net debt(9)
|
|
|
1,049.9
|
|
|
|
914.8
|
|
|
|
738.5
|
|
Total shareholders equity
|
|
|
479.3
|
|
|
|
436.7
|
|
|
|
584.5
|
|
As Adjusted Data(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net(11)
|
|
$
|
67.8
|
|
Net debt
|
|
|
743.8
|
|
Ratio of net debt to Adjusted EBITDA
|
|
|
2.1
|
x
|
Ratio of Adjusted EBITDA to interest expense, net(11)
|
|
|
5.2
|
x
|
S-10
|
|
|
(1) |
|
In 1999, we obtained exclusive rights to market the consumer
Roundup brand in the United States and other specified
countries. Pursuant to the Marketing Agreement between us and
Monsanto Company, we were required to pay a marketing fee of
$32 million to Monsanto. We have deferred this amount on
the basis that the payment will provide a future benefit through
commissions that will be earned under the Marketing Agreement.
Based on our current assessment of the likely term of the
Marketing Agreement, the useful life over which the marketing
fee is being amortized is 20 years. |
|
(2) |
|
As a result of product registration and recall matters, we have
reversed sales associated with estimated returns of affected
products, recorded charges for affected inventory and recorded
other registration and recall-related costs. The effects of
these adjustments were charges of $51.1 million and
$28.6 million for fiscal 2008 and fiscal 2009,
respectively. Included within these pre-tax charges are non-cash
charges pertaining to the write-down of inventory related to the
destruction of goods associated with regulatory and registration
matters, which were $13.3 million and $2.9 million for
fiscal 2008 and fiscal 2009, respectively. |
|
(3) |
|
Impairment, restructuring and other charges in fiscal 2007 were
$38.0 million, which included a non-cash goodwill and
intangible asset impairment charge of $35.3 million, of
which $29.2 million related to the Smith & Hawken
goodwill and intangibles, $2.2 million for a goodwill
impairment charge related to our turfgrass biotechnology program
and $3.9 million was associated with information technology
initiatives in our Scotts LawnService segment. The remaining
$2.7 million of non-cash impairment, restructuring and
other charges related to certain assets and ongoing monitoring
and remediation costs associated with our turfgrass
biotechnology program. Impairment, restructuring and other
charges in fiscal 2008 were $136.8 million, which included
a non-cash charge of $123.3 million to reflect the decline
in the fair value of certain goodwill and other assets evidenced
by the decline in value of our common shares and a non-cash
charge of $13.5 million primarily related to leasehold
improvements of Smith & Hawken. Impairment,
restructuring and other charges in fiscal 2009 were
$14.7 million and related to the closure process of
Smith & Hawken. These charges were comprised of the
termination of retail site lease obligations, agency fees,
severance and benefit commitments, charges related to
inventories, and impairment of retail site improvements and
fixtures. Of the $14.7 million related to the closure
process of Smith & Hawken, $12.7 million
represented non-cash charges. |
|
(4) |
|
Includes non-cash stock-based compensation expense of
$13.3 million, $12.5 million and $14.5 million
for fiscal 2007, fiscal 2008 and fiscal 2009, respectively. |
|
(5) |
|
Capital expenditures include investments in property, plant and
equipment and investments in intellectual property. |
|
(6) |
|
Adjusted EBITDA is defined as net income (loss) before interest,
taxes, depreciation and amortization as well as certain other
items such as the impact of discontinued operations, the
cumulative effect of changes in accounting, costs associated
with debt refinancing and other non-recurring, non-cash items
affecting net income. Our ability to generate cash flows
sufficient to cover our debt service costs is essential to our
ability to maintain our borrowing capacity under our senior
secured credit facilities. We believe Adjusted EBITDA provides
additional information for determining our ability to meet debt
service requirements. The presentation of Adjusted EBITDA herein
is intended to be consistent with the calculation of that
measure as required by our senior secured credit facilities and
used to calculate the Leverage Ratio (as defined in our senior
secured credit facilities) (maximum of 3.75x at
September 30, 2009 pursuant to the credit facilities) and
the Interest Coverage Ratio (as defined in our senior secured
credit facilities) (minimum of 3.50x for the year ended
September 30, 2009 pursuant to the credit facilities).
Adjusted EBITDA is not necessarily the same as the definition of
Consolidated Cash Flow in the indenture governing
the notes. Adjusted EBITDA is not intended to represent cash
flow from operations as defined by generally accepted accounting
principles (GAAP) and should not be used as an
alternative to net income as an indicator of operating
performance or to cash flow as a measure of liquidity. |
S-11
The following table represents a reconciliation of net income
(loss) to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Dollars in millions)
|
|
|
Net income to Adjusted EBITDA Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
113.4
|
|
|
$
|
(10.9
|
)
|
|
$
|
153.3
|
|
Interest expense
|
|
|
70.7
|
|
|
|
82.2
|
|
|
|
56.4
|
|
Income taxes
|
|
|
74.7
|
|
|
|
26.7
|
|
|
|
57.4
|
|
Depreciation and amortization
|
|
|
67.5
|
|
|
|
70.3
|
|
|
|
60.4
|
|
Loss on impairment and other charges(a)
|
|
|
38.0
|
|
|
|
136.8
|
|
|
|
7.4
|
|
Smith & Hawken closure process, non-cash portion(b)
|
|
|
|
|
|
|
|
|
|
|
12.7
|
|
Product registration and recall matters, non-cash portion(c)
|
|
|
|
|
|
|
13.3
|
|
|
|
2.9
|
|
Costs related to refinancing
|
|
|
18.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
382.6
|
|
|
$
|
318.4
|
|
|
$
|
350.5
|
|
|
|
|
(a) |
|
Loss on impairment and other charges in fiscal 2007 were
$38.0 million, which included a non-cash goodwill and
intangible asset impairment charge of $35.3 million, of
which $29.2 million related to the Smith & Hawken
goodwill and intangibles, $2.2 million for a goodwill
impairment charge related to our turfgrass biotechnology program
and $3.9 million was associated with information technology
initiatives in our Scotts LawnService segment. The remaining
$2.7 million of other non-cash charges related to certain
assets and ongoing monitoring and remediation costs associated
with our turfgrass biotechnology program. Loss on impairment and
other charges in fiscal 2008 were $136.8 million, which
included a non-cash charge of $123.3 million to reflect the
decline in the fair value of certain goodwill and other assets
evidenced by the decline in value of our common shares and a
non-cash charge of $13.5 million primarily related to
leasehold improvements of Smith & Hawken. Loss on
impairment and other charges in fiscal 2009 were
$7.4 million, representing non-cash charges related to the
write-down of inventory necessitated by the significant decline
in the market pricing and demand for professional grass seed in
North America. |
|
(b) |
|
Represents the non-cash charges incurred in fiscal 2009 related
to the closure process of Smith & Hawken. Total
charges incurred in fiscal 2009 related to the closure process
of Smith & Hawken were $14.7 million, comprised
of the termination of retail site lease obligations, agency
fees, severance and benefit commitments, charges related to
inventories, and impairment of retail site improvements and
fixtures. $2.0 million of non-recurring cash charges
related to the closure process of Smith & Hawken has
not been added back to net income to calculate Adjusted EBITDA. |
|
(c) |
|
Represents the non-cash charges incurred in fiscal 2008 and
fiscal 2009 related to product registration and recall matters.
Total charges incurred in fiscal 2008 and fiscal 2009 related to
product registration and recall matters were $51.1 million
and $28.6 million, respectively, and were comprised of
reversed sales associated with estimated returns of affected
products, charges for affected inventory and other registration
and recall-related costs. $37.8 million and
$25.7 million of non-recurring cash charges have not been
added back to net income to calculate Adjusted EBITDA in fiscal
2008 and fiscal 2009, respectively. |
|
|
|
(7) |
|
Earnings consist of income before income taxes, fixed charges,
amortization of capitalized interest, adjustments for minority
interests in consolidated subsidiaries and distributed earnings
of equity method investees less interest capitalized. Fixed
charges consist of interest on borrowings, amortization of
deferred financing costs, capitalized interest, the proportion
deemed representative of the interest factor within rent expense
and interest on deposits. We did not have any preferred shares
outstanding during the periods indicated. |
S-12
For fiscal 2009, after giving pro forma effect to this offering
and the use of proceeds thereof as described in this prospectus
supplement as if they occurred at the beginning of the period,
our ratio of earnings to fixed charges would have been 3.2x.
|
|
|
(8) |
|
Working capital is defined as current assets less current
liabilities. |
|
(9) |
|
Net debt is defined as total debt less cash and cash equivalents. |
|
(10) |
|
Adjusted to give effect to this offering and the use of proceeds
therefrom as described in this prospectus supplement as if they
occurred at the beginning of the period for statement of
operations data and at period end for balance sheet data. |
|
(11) |
|
Eliminates interest on borrowings under our senior secured
revolving credit facility that are being repaid and reflects
additional interest related to the notes offered hereby. |
S-13
RISK
FACTORS
An investment in the notes involves risks. You should
consider carefully the risk factors included below as well as
those discussed under the caption Risk Factors in
our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2009, together with
all of the other information included in, or incorporated by
reference into, this prospectus supplement and the accompanying
prospectus, before making a decision to invest in the notes.
Some of these factors relate principally to our business. The
risks and uncertainties described below are not the only ones
facing us. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also have a
material adverse effect on our business and operations. If any
of the matters included in the following risks were to occur,
our business, financial condition, results of operations, cash
flows or prospects could be materially adversely affected. In
such case, you may lose all or part of your original
investment.
Risks
Relating to Our Business
The
ongoing governmental investigations regarding our compliance
with FIFRA could adversely affect our financial condition,
results of operations or cash flows.
Our products that contain pesticides must comply with FIFRA and
be registered with the U.S. Environmental Protection Agency
(the U.S. EPA) (and similar state agencies)
before they can be sold or distributed. In April 2008, we became
aware that a former associate apparently deliberately
circumvented Company policies and U.S. EPA regulations
under FIFRA by failing to obtain valid registrations for
products
and/or
causing invalid product registration forms to be submitted to
regulators. Since that time, internal and third-party reviews
have identified additional potential pesticide product
registration issues (some of which appear unrelated to the
actions of the former associate) and we have been cooperating
with both the U.S. EPA and the U.S. Department of
Justice (the U.S. DOJ) in related civil and
criminal investigations into the pesticide product registration
issues.
In connection with the registration investigations and FIFRA
compliance review process, we have recorded, and in the future
expect to record, charges and costs for estimated retailer
inventory returns, consumer returns and replacement costs, costs
to rework existing products, inventory write-downs and legal and
professional fees and costs associated with administration of
the registration investigations and compliance review process.
Because these expected future charges are based on estimates,
they may increase as a result of numerous factors, many of which
are beyond our control, including the number and type of legal
or regulatory proceedings relating to the registration
investigations and FIFRA compliance review process and
regulatory or judicial orders or decrees that may require us to
take certain actions in connection with the registration
investigations and FIFRA compliance review process or to pay
civil or criminal fines
and/or
penalties at the state
and/or
federal level.
The U.S. EPA and U.S. DOJ investigations continue and
may result in future state, federal or private actions including
fines and/or
penalties with respect to known or potential additional product
registration issues. Until the U.S. EPA and U.S. DOJ
investigations are complete, we cannot reasonably determine the
scope or magnitude of possible liabilities that could result
from known or potential product registration issues, and no
reserves for these potential liabilities have been established
as of September 30, 2009. However, it is possible that such
liabilities, including fines, penalties, judgments
and/or
litigation costs could be material and have an adverse effect on
our financial condition, results of operations or cash flows.
There can be no assurance that the ultimate outcome of the
investigations will not result in further action against us,
whether administrative, civil or criminal, by the U.S. EPA,
the U.S. DOJ, state regulatory agencies or private
litigants, and any such action, in addition to the costs we have
incurred and would continue to incur in connection therewith,
could materially and adversely affect our financial condition,
results of operations or cash flows. For example, the
realization of a significant fine, penalty or judgment against
us could materially affect our ability to remain in compliance
with the leverage ratio or other covenants of our senior secured
credit facilities, potentially causing us to have to seek an
amendment or waiver from our lending group, which may increase
our costs of borrowing.
S-14
Product recalls, our inability to ship, sell or transport
affected products and the on-going governmental investigations
may harm our reputation and acceptance of our products by our
retail customers and consumers, which may materially and
adversely affect our business operations, decrease sales and
increase costs.
Compliance
with environmental and other public health regulations could
increase our costs of doing business or limit our ability to
market all of our products.
Local, state, federal and foreign laws and regulations relating
to environmental matters affect us in several ways. In the
United States, all products containing pesticides must comply
with FIFRA and be registered with the U.S. EPA (and similar
state agencies) before they can be sold or distributed. The
inability to obtain or maintain such compliance, or the
cancellation of any registration, could have an adverse effect
on our business, the severity of which would depend on the
products involved, whether another product could be substituted
and whether our competitors were similarly affected. We attempt
to anticipate regulatory developments and maintain registrations
of, and access to, substitute active ingredients, but there can
be no assurance that we will be able to avoid or reduce these
risks. In the European Union (the EU), the European
Parliament has adopted various forms of regulation which may
substantially restrict or eliminate our ability to market and
sell certain of our consumer and professional pesticide products
in their current form in the EU. In addition, in Canada,
regulations have been adopted by several provinces that
substantially restrict our ability to market and sell certain of
our consumer pesticide products.
Under the Food Quality Protection Act, enacted by the
U.S. Congress in 1996, food-use pesticides are evaluated to
determine whether there is reasonable certainty that no harm
will result from the cumulative effects of pesticide exposures.
Under this Act, the U.S. EPA is evaluating the cumulative
risks from dietary and non-dietary exposures to pesticides. The
pesticides in our products, certain of which may be used on
crops processed into various food products, are typically
manufactured by independent third parties and continue to be
evaluated by the U.S. EPA as part of this exposure risk
assessment. The U.S. EPA or the third-party registrant may
decide that a pesticide we use in our products will be limited
or made unavailable to us. For example, in December 2000, the
U.S. EPA reached agreement with various parties, including
manufacturers of the active ingredient diazinon, regarding a
phased withdrawal from retailers by December 2004 of residential
uses of products containing diazinon, which was also used in our
lawn and garden products. We cannot predict the outcome or the
severity of the effect of continuing evaluations.
In addition, the use of certain pesticide and fertilizer
products is regulated by various local, state, federal and
foreign environmental and public health agencies. These
regulations may include requirements that only certified or
professional users apply the product or that certain products be
used only on certain types of locations, require users to post
notices on properties to which products have been or will be
applied, or require notification to individuals in the vicinity
that products will be applied in the future or ban the use of
certain ingredients. Even if we are able to comply with all such
regulations and obtain all necessary registrations, we cannot
provide assurance that our products, particularly pesticide
products, will not cause injury to the environment or to people
under all circumstances. The costs of compliance, remediation or
products liability have adversely affected operating results in
the past and could materially adversely affect future quarterly
or annual operating results.
Perceptions that the products we produce and market are not safe
could adversely affect us and contribute to the risk we will be
subjected to legal action. We manufacture and market a number of
complex chemical products, such as fertilizers, certain growing
media, herbicides and pesticides. On occasion, allegations are
made that some of our products have failed to perform up to
expectations or have caused damage or injury to individuals or
property. Based on reports of contamination at a third-party
suppliers vermiculite mine, the public may perceive that
some of our products manufactured in the past using vermiculite
are or may be contaminated. Public perception that our products
are not safe, whether justified or not, could impair our
reputation, involve us in litigation, damage our brand names and
have a material adverse effect on our business.
The harvesting of peat for our growing media business has come
under increasing regulatory and environmental scrutiny. In the
United States, state regulations frequently require us to limit
our harvesting and
S-15
to restore the property to an
agreed-upon
condition. In some locations, we have been required to create
water retention ponds to control the sediment content of
discharged water. In the United Kingdom, our peat extraction
efforts are also the subject of regulation.
In addition to the regulations already described, local, state,
federal and foreign agencies regulate the disposal, transport,
handling and storage of waste, remediation of contaminated
sites, air and water discharges from our facilities, and
workplace health and safety.
Under certain environmental laws, we may be liable for the costs
of investigation, and remediation of certain regulated
materials, as well as related costs of investigation and damage
to natural resources, at various properties, including our
current and former properties, as well as offsite waste handling
or disposal sites that we have used. Liability may be imposed
upon us without regard to whether we knew of or caused the
presence of such materials and, under certain circumstances, on
a joint and several basis. There can be no assurances that any
such locations, or locations that we may acquire in the future,
will not result in liability to us under such laws or expose us
to third party actions such as tort suits based on alleged
conduct or environmental conditions.
The adequacy of our current non-FIFRA compliance related
environmental reserves and future provisions is based on our
operating in substantial compliance with applicable
environmental and public health laws and regulations, as well as
the assumptions that we have both identified all of the
significant sites that must be remediated and that there are no
significant conditions of potential contamination that are
unknown to us.
If there is a significant change in the facts and circumstances
surrounding these assumptions, or in current enforcement
policies or requirements, or if we are found not to be in
substantial compliance with applicable environmental and public
health laws and regulations, there could be a material adverse
impact on future environmental capital expenditures and other
environmental expenses and our financial condition, results of
operations or cash flows.
Increases
in the prices of certain raw materials could adversely affect
our results of operations.
Our ability to manage our cost structure can be adversely
affected by movements in commodity and other raw material
prices. Market conditions may limit our ability to raise selling
prices to offset increases in our raw material costs. The
uniqueness of our technologies can limit our ability to locate
or utilize alternative inputs for certain products. For certain
inputs, new sources of supply may have to be qualified under
regulatory standards, which can require additional investment
and delay bringing a product to market.
We
face risks related to the current economic crisis.
The continued credit crisis and related turmoil in the global
financial system may have an impact on our business and our
financial condition. Global economic conditions have
significantly impacted economic markets generally with certain
sectors, including financial industries and retail business
being particularly impacted. Our ability to generate revenue
depends significantly on discretionary consumer spending. It is
difficult to predict new general economic conditions that could
impact consumer and customer demand for our products or our
ability to manage normal commercial relationships with our
customers, suppliers and creditors. If the current situation
deteriorates significantly, our business could be negatively
impacted, including as a result of reduced demand for our
products or supplier or customer disruptions. Any significant
decrease in discretionary consumer spending could have a
material adverse effect on our revenues, results of operations
and financial condition.
The
highly competitive nature of our markets could adversely affect
our ability to grow or maintain revenues.
Each of our segments participates in markets that are highly
competitive. Our products compete against national and regional
products and private label products produced by various
suppliers. Many of our competitors sell their products at prices
lower than ours. Our most price sensitive customers may be more
S-16
likely to trade down to lower price point products in a more
challenging economic environment. We compete primarily on the
basis of product innovation, product quality, product
performance, value, brand strength, supply chain competency,
field sales support, the strength of our relationships with
major retailers and advertising. Some of our competitors have
significant financial resources. The strong competition that we
face in all of our markets may prevent us from achieving our
revenue goals, which may have a material adverse effect on our
financial condition, results of operations or cash flows. Our
inability to continue to develop and grow brands with leading
market positions, maintain our relationships with key retailers
and deliver products on a reliable basis at competitive prices
could have a material adverse effect on us.
In addition, our future success will depend, in part, upon our
ability to improve our existing products and to develop,
manufacture and market new, innovative products to meet evolving
consumer needs. We cannot assure you that we will be successful
in the development, manufacturing and marketing of any new
products or product innovations, or that we will develop and
market in a timely manner innovations to our existing products
which satisfy customer needs or achieve market acceptance. If we
fail to successfully develop, manufacture and market new or
enhanced products or develop product innovations, our ability to
maintain or grow our market share may be adversely affected,
which in turn could materially adversely affect our business,
financial condition and results of operations.
Because
of the concentration of our sales to a small number of retail
customers, the loss of one or more of, or significant reduction
in orders from, our top customers could adversely affect our
financial results.
Global Consumer net sales represented approximately 78% of our
worldwide net sales in fiscal 2009. Our top three North American
retail customers together accounted for 70% of our Global
Consumer segment fiscal 2009 net sales and 42% of our
outstanding accounts receivable as of September 30, 2009.
Home Depot, Lowes and Walmart represented approximately
33%, 19% and 18%, respectively, of our fiscal 2009 Global
Consumer net sales. The loss of, or reduction in orders from,
Home Depot, Lowes, Walmart or any other significant
customer could have a material adverse effect on our business,
financial condition, results of operations or cash flows, as
could customer disputes regarding shipments, fees, merchandise
condition or related matters. Our inability to collect accounts
receivable from one of our major customers, or a significant
deterioration in the financial condition of one of these
customers, including a bankruptcy filing or a liquidation, could
also have a material adverse effect on our financial condition,
results of operations or cash flows.
We do not have long-term sales agreements with, or other
contractual assurances as to future sales to, any of our major
retail customers. In addition, continued consolidation in the
retail industry has resulted in an increasingly concentrated
retail base, and as a result, we are significantly dependent
upon key retailers whose bargaining strength is strong. To the
extent such concentration continues to occur, our net sales and
income from operations may be increasingly sensitive to
deterioration in the financial condition of, or other adverse
developments involving our relationship with, one or more of our
customers. In addition, our business may be negatively affected
by changes in the policies of our retailers, such as inventory
destocking, limitations on access to shelf space, price demands
and other conditions.
Adverse
weather conditions could adversely impact financial
results.
Weather conditions in North America and Europe can have a
significant impact on the timing of sales in the spring selling
season and overall annual sales. An abnormally wet
and/or cold
spring throughout North America or Europe could adversely affect
both fertilizer and pesticide sales and, therefore, our
financial results.
Our
historical seasonality could impair our ability to pay
obligations as they come due, including our operating
expenses.
Because our products are used primarily in the spring and
summer, our business is highly seasonal. For the past three
fiscal years, 70% to 75% of our annual net sales have occurred
in the second and third fiscal quarters combined. Our working
capital needs and borrowings typically peak during the initial
weeks of
S-17
our third fiscal quarter because we are incurring expenditures
in preparation for the spring selling season, while the majority
of our revenue collections occur later in our third fiscal
quarter. If cash on hand is insufficient to pay our obligations
as they come due, including interest payments or operating
expenses, at a time when we are unable to draw on our senior
secured revolving credit facility, this seasonality could have a
material adverse effect on our ability to conduct our business.
Adverse weather conditions could heighten this risk.
Our
significant international operations make us susceptible to
fluctuations in currency exchange rates and to other costs and
risks associated with international regulation.
We currently operate manufacturing, sales and service facilities
outside of the United States, particularly in Canada, France,
the United Kingdom, Germany and the Netherlands. In fiscal 2009,
international net sales, including Canada, accounted for
approximately 19% of our total net sales. Accordingly, we are
subject to risks associated with operating in foreign countries,
including:
|
|
|
|
|
fluctuations in currency exchange rates;
|
|
|
|
limitations on the remittance of dividends and other payments by
foreign subsidiaries;
|
|
|
|
additional costs of compliance with local regulations;
|
|
|
|
historically, in certain countries, higher rates of inflation
than in the United States;
|
|
|
|
changes in the economic conditions or consumer preferences or
demand for our products in these markets;
|
|
|
|
restrictive actions by multi-national governing bodies, foreign
governments or subdivisions thereof;
|
|
|
|
changes in foreign labor laws and regulations affecting our
ability to hire and retain employees;
|
|
|
|
changes in U.S. and foreign laws regarding trade and
investment;
|
|
|
|
less robust protection of our intellectual property under
foreign laws; and
|
|
|
|
difficulty in obtaining distribution and support for our
products.
|
In addition, our operations outside the United States are
subject to the risk of new and different legal and regulatory
requirements in local jurisdictions, potential difficulties in
staffing and managing local operations and potentially adverse
tax consequences. The costs related to our international and
Canadian operations could adversely affect our results of
operations, financial condition or cash flows in the future.
We may
not be able to adequately protect our intellectual property and
other proprietary rights that are material to our
business.
Our ability to compete effectively depends in part on our rights
to service marks, trademarks, trade names and other intellectual
property rights we own or license, particularly our registered
brand names and issued patents. We have not sought to register
every one of our marks either in the United States or in every
country in which they are used. Furthermore, because of the
differences in foreign trademark, patent and other intellectual
property or proprietary rights laws, we may not receive the same
protection in other countries as we would in the United States
with respect to the registered brand names and issued patents we
hold. If we are unable to protect our intellectual property,
proprietary information
and/or brand
names, we could suffer a material adverse effect on our
business, financial condition or results of operations.
Litigation may be necessary to enforce our intellectual property
rights and protect our proprietary information, or to defend
against claims by third parties that our products or services
infringe their intellectual property rights. Any litigation or
claims brought by or against us could result in substantial
costs and diversion of our resources. A successful claim of
trademark, patent or other intellectual property infringement
against us, or any other successful challenge to the use of our
intellectual property, could subject us to damages or
S-18
prevent us from providing certain products or services under our
recognized brand names, which could have a material adverse
effect on our business, financial condition or results of
operations.
We
depend on key personnel and may not be able to retain those
employees or recruit additional qualified
personnel.
We are highly dependent on the continuing efforts of our senior
management team and other key personnel. Our businesses,
financial condition and results of operations could be
materially adversely affected if we lose the services of more
than one of these persons in a short period of time and are
unable to attract and retain qualified replacements.
If
Monsanto Company were to terminate the Marketing Agreement for
consumer Roundup products without being required to pay any
termination fee, we would lose a substantial source of future
earnings and overhead expense absorption.
If we were to commit a serious default under the Marketing
Agreement with Monsanto Company for consumer Roundup products,
Monsanto may have the right to terminate the Marketing
Agreement. If Monsanto were to terminate the Marketing Agreement
for cause, we would not be entitled to any termination fee, and
we would lose all, or a substantial portion, of the significant
source of earnings and overhead expense absorption the Marketing
Agreement provides. Monsanto may also be able to terminate the
Marketing Agreement within a given region, including North
America, without paying us a termination fee if unit volume
sales to consumers in that region decline: (i) over a
cumulative three-fiscal-year period; or (ii) by more than
5% for each of two consecutive years.
Hagedorn
Partnership, L.P. beneficially owns approximately 31% of our
outstanding common shares on a fully diluted basis and can
significantly influence decisions that require the approval of
shareholders, whether or not such decisions are in the best
interests of other shareholders or noteholders.
Hagedorn Partnership, L.P. beneficially owned approximately 31%
of our outstanding common shares on a fully diluted basis as of
November 20, 2009. As a result, it has sufficient voting
power to significantly influence the election of directors and
the approval of other actions requiring the approval of our
shareholders, including the entering into of certain corporate
transactions. Hagedorn Partnership, L.P. may have an interest in
our pursuing transactions that it believes may enhance the value
of its equity investment in us, even though such transactions
may involve increased risks to us or the holders of the notes.
Risks
Relating to Investment in the Notes
Our
substantial indebtedness could limit our flexibility, adversely
affect our financial condition and prevent us from making
payments on the notes.
We have, and after this offering will continue to have, a
substantial amount of debt. As of September 30, 2009, after
giving effect to this offering and the use of proceeds
therefrom, we would have had approximately $815.3 million
of debt outstanding (excluding $35.9 million of letters of
credit outstanding) and approximately $1,417.0 million of
debt would have been available to be borrowed under our senior
secured revolving credit facility. Our inability to meet
restrictive financial and non-financial covenants associated
with that debt, or to generate sufficient cash flow to repay
maturing debt, could adversely affect our financial condition.
For example, our debt level could:
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make it more difficult for us to satisfy our obligations with
respect to the notes;
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make us more vulnerable to general adverse economic and industry
conditions;
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require us to dedicate a substantial portion of cash flows from
operating activities to payments on our indebtedness, which
would reduce the cash flows available to fund working capital,
capital expenditures, advertising, research and development
efforts and other general corporate requirements;
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S-19
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
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limit our ability to borrow additional funds;
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expose us to risks inherent in interest rate fluctuations
because some of our borrowings are at variable rates of
interest, which could result in higher interest expense in the
event of increases in interest rates; and
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place us at a competitive disadvantage compared to our
competitors that have less debt.
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Our ability to make payments and to refinance our indebtedness,
fund planned capital expenditures and acquisitions and pay
dividends will depend on our ability to generate cash in the
future. This, to some extent, is subject to general economic,
financial, competitive, legislative, regulatory and other
factors that are beyond our control.
We cannot assure you that our business will generate sufficient
cash flow from operating activities or that future borrowings
will be available to us under our senior secured credit
facilities in amounts sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs. Our senior
secured credit facilities mature in 2012. We will need to
refinance all or a portion of our indebtedness under our senior
secured credit facilities on or before maturity. We also cannot
assure you that we will be able to refinance our indebtedness or
that we will be able to refinance it on commercially reasonable
terms or terms consistent with the terms currently in place. Any
refinancing of our indebtedness could be at higher interest
rates and may require us to comply with more onerous covenants,
which could restrict our business operations.
Our senior secured credit facilities contain restrictive
covenants and cross-default provisions and require us to
maintain specified financial ratios. Our ability to comply with
those covenants and satisfy those financial ratios can be
affected by events beyond our control. A breach of any of those
financial ratio covenants or other covenants could result in a
default. Upon the occurrence of such an event of default, the
lenders could elect to declare all of the outstanding
indebtedness immediately due and payable and terminate all
commitments to extend further credit. We cannot assure you that
our lenders would waive a default or that we could pay the
indebtedness in full if it were accelerated. See
Description of Other Indebtedness.
Subject to compliance with certain covenants under our senior
secured credit facilities and the indenture governing the notes,
we may incur additional debt in the future. If we incur
additional debt, the risks described above could intensify.
The
notes and the guarantees will be unsecured.
The notes and the guarantees will not be secured by any of our
or our subsidiaries assets. The indenture governing the
notes permits us and our subsidiaries to incur secured debt,
including pursuant to our senior secured credit facilities and
other forms of secured debt. As a result, the notes and the
guarantees will be effectively subordinated to all of our and
the subsidiary guarantors secured obligations to the
extent of the value of the assets securing such obligations. As
of September 30, 2009, after giving effect to this offering
and the use of proceeds therefrom, we would have had total
secured debt of approximately $604.4 million (excluding
$35.9 million of letters of credit outstanding), and
approximately $1,417.0 million of additional secured debt
would have been available to be borrowed under our senior
secured revolving credit facility.
If we or the subsidiary guarantors were to become insolvent or
otherwise fail to make payment on the notes or the guarantees,
holders of any of our or the subsidiary guarantors secured
obligations would be paid first out of the proceeds of the
assets securing such obligations before the holders of the notes
would receive any payments from the remaining proceeds, if any.
You may therefore not be fully repaid if we or the subsidiary
guarantors become insolvent or otherwise fail to make payment on
the notes.
S-20
We may
pursue acquisitions, dispositions, investments, dividends, share
repurchases and/or other corporate transactions that we believe
will maximize equity returns of our shareholders but may involve
risks to holders of the notes.
From time to time, we consider opportunities for acquisitions of
businesses, product lines or other assets, dispositions of all
or part of one or more of our businesses other than our core
Global Consumer business (including our Global Professional
business
and/or
Scotts LawnService) and other strategic transactions.
These transactions may involve risks, such as risks of
integration of acquired businesses and loss of cash flows and
market positions of disposed businesses. In addition, if our
business performs according to our financial plan, subject to
the discretion of our board of directors and to market and other
conditions we may, over time, significantly increase the rate of
dividends on, and the amount of repurchases of, our common
shares. Under the indenture for the notes, we will have
substantial flexibility to effect these transactions, including
an unlimited ability to effect dividends, share repurchases and
investments if our Leverage Ratio (as defined in the
indenture) is less than 2.25 to 1.00 on a pro forma basis. See
Description of the Notes Certain
Covenants Restricted Payments. There can be no
assurance that we will effect any of these transactions, but, if
we do, risks to the holders of the notes may be increased,
possibly materially.
Federal
and state statutes may allow courts, under specific
circumstances, to void the guarantees and require noteholders to
return payments received from subsidiary
guarantors.
Under federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be deemed a
fraudulent transfer if the subsidiary guarantor received less
than a reasonably equivalent value in exchange for giving the
guarantee and:
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was insolvent on the date that it gave the guarantee or became
insolvent as a result of giving the guarantee;
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was engaged in a business or transaction, or was about to engage
in a business or transaction, for which property remaining with
the guarantor constituted an unreasonably small capital; or
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intended to incur, or believed that it would incur, debts that
would be beyond the guarantors ability to pay as those
debts matured.
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A guarantee could also be deemed a fraudulent transfer if it was
given with actual intent to hinder, delay or defraud any entity
to which the subsidiary guarantor was or became, on or after the
date the guarantee was given, indebted.
The measures of insolvency for purposes of the foregoing
considerations will vary depending upon the law applied in any
proceeding with respect to the foregoing. Generally, however, a
subsidiary guarantor would be considered insolvent if:
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the sum of its debts, including contingent liabilities, is
greater than all its assets, at a fair valuation;
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the present fair saleable value of its assets is less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts as they become due.
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We cannot predict:
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what standard a court would apply in order to determine whether
a subsidiary guarantor was insolvent as of the date it issued
the guarantee or whether, regardless of the method of valuation,
a court would determine that the subsidiary guarantor was
insolvent on that date; or
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whether a court would determine that the payments under the
guarantee constituted fraudulent transfers or conveyances on
other grounds.
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S-21
The indenture will contain a savings clause intended
to limit each subsidiary guarantors liability under its
guarantee to the maximum amount that it could incur without
causing the guarantee to be a fraudulent transfer under
applicable law. There can be no assurance that this provision
will be upheld as intended. In a recent case, the
U.S. Bankruptcy Court in the Southern District of Florida
found this kind of provision in that case to be ineffective, and
held the subsidiary guarantees to be fraudulent transfers and
voided them in their entirety.
If a guarantee is deemed to be a fraudulent transfer, it could
be voided altogether, or it could be subordinated to all other
debts of the subsidiary guarantor. In such case, any payment by
the subsidiary guarantor pursuant to its guarantee could be
required to be returned to the subsidiary guarantor or to a fund
for the benefit of the creditors of the subsidiary guarantor. If
a guarantee is voided or held unenforceable for any other
reason, holders of the notes would cease to have a claim against
the subsidiary guarantor based on the guarantee and would be
creditors only of the Company and any subsidiary guarantor whose
guarantee was not similarly voided or otherwise held
unenforceable.
We may
not have sufficient funds to purchase notes upon a change of
control.
If there is a change of control under the terms of the indenture
governing the notes, each holder of notes may require us to
purchase all or a portion of its notes at a purchase price equal
to 101% of the principal amount thereof, plus accrued interest
to the date of purchase. In order to purchase any outstanding
notes, we might have to refinance our outstanding indebtedness,
which we might not be able to do. Even if we were able to
refinance our other indebtedness, any financing might be on
terms unfavorable to us. In addition, our senior secured credit
facilities provide that the occurrence of certain kinds of
change of control events will constitute a default under our
senior secured credit facilities. We cannot assure you that we
will have the financial ability to purchase outstanding notes
upon the occurrence of a change of control. See
Description of the Notes Repurchase at the
Option of Holders Offer to Repurchase upon Change of
Control.
Investors
may find it difficult to trade the notes.
The notes are a new issue of securities, and there is currently
no public market for the notes. We do not intend to apply for
listing of the notes on any securities exchange. Although the
underwriters have informed us that they intend to make a market
in the notes, they are under no obligation to do so and may
discontinue any market-making activities at any time without
notice. Any such market-making will be subject to the
limitations imposed by the Securities Act and the Exchange Act.
In addition, we cannot assure you that you will be able to sell
your notes at a particular time or that the prices that you
receive when you sell will be favorable. We also cannot assure
you as to the level of liquidity of the trading market for the
notes. Future trading prices of the notes will depend on many
factors, including:
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our operating performance, prospects and financial condition or
the operating performance, prospects and financial condition of
companies in our industry generally;
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the interest of securities dealers in making a market for the
notes; and
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the market for similar securities.
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It is possible that the market for the notes will be subject to
disruptions. Any disruptions may have a negative effect on the
holders of the notes, regardless of our prospects and financial
performance.
Changes
in credit ratings issued by nationally recognized statistical
rating organizations could adversely affect our cost of
financing and the market price of the notes.
Credit rating agencies rate the notes based on factors that
include our operating results, actions that we take, their view
of the general outlook for our industry and their view of the
general outlook for the economy. Actions taken by the rating
agencies can include maintaining, upgrading or downgrading the
current rating or placing us on a watch list for possible future
downgrading. Downgrading the credit rating of the
S-22
notes or placing us on a watch list for possible future
downgrading would likely increase our cost of financing, limit
our access to the capital markets and have an adverse effect on
the market price of the notes.
Not
all of our subsidiaries guarantee our obligations under the
notes, and the assets of the non-guarantor subsidiaries may not
be available to make payments on the notes.
Our present and future foreign subsidiaries and certain of our
domestic subsidiaries will not be guarantors of the notes.
Payments on the notes are only required to be made by the
subsidiary guarantors and us. As a result, no payments are
required to be made from the assets of subsidiaries that do not
guarantee the notes, unless those assets are transferred by
dividend or otherwise to us or a subsidiary guarantor. Our
non-guarantor subsidiaries generated approximately 19% of our
total net sales and 10% of our consolidated operating income for
the fiscal year ended September 30, 2009 and held
approximately 26% of our consolidated assets as of
September 30, 2009. As of September 30, 2009, the
notes and the guarantees would have been structurally
subordinated to approximately $222.2 million of
indebtedness of the non-guarantor subsidiaries, all of which was
incurred under our senior secured credit facilities.
In the event of a bankruptcy, liquidation or reorganization of
any of the non-guarantor subsidiaries, holders of their
indebtedness, including their trade creditors and other
obligations, will be entitled to payment of their claims from
the assets of those subsidiaries before any assets are made
available for distribution to us. As a result, the notes are
effectively subordinated to all the liabilities of the
non-guarantor subsidiaries.
S-23
USE OF
PROCEEDS
The net proceeds from this offering, after deducting
underwriting discounts and estimated expenses of the offering,
will be approximately $193.3 million. We intend to use the
net proceeds from this offering to repay borrowings under our
senior secured revolving credit facility. Amounts repaid under
the senior secured revolving credit facility may be
re-borrowed.
As of September 30, 2009, the total outstanding balance
under our senior secured credit facilities was approximately
$786.8 million, including $330.4 million under our
senior secured revolving credit facility. Borrowings under the
senior secured revolving credit facility bear interest at a rate
equal to the sum of a base LIBOR rate, which varies based on
whether we select a one-month or three-month LIBOR period, and a
margin of 1.25%. The average interest rate for the senior
secured revolving credit facility was 1.66% per annum as of
September 30, 2009. The senior secured revolving credit
facility matures on February 7, 2012.
The underwriters and certain of their affiliates may, from time
to time, engage in transactions with and perform services for us
and our affiliates in the ordinary course of their business. In
addition, because we expect that more than 5% of the net
proceeds of this offering may be received by certain of the
underwriters affiliates that are lenders under our senior
secured revolving credit facility, this offering is being
conducted in accordance with the applicable requirements of NASD
Rule 2720 and FINRA Rule 5110 regarding the
underwriting of securities of a company with a member that has a
conflict of interest within the meaning of those rules. As a
result of this conflict of interest, Scotia Capital (USA) Inc.
has agreed to act as the qualified independent underwriter with
respect to this offering. See Underwriting.
S-24
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 2009:
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on an actual basis; and
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on an as adjusted basis to give effect to the sale of the notes
offered hereby.
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You should read this table in conjunction with our consolidated
financial statements and our Managements Discussion
and Analysis of Financial Condition and Results of
Operations incorporated by reference in this prospectus
supplement and the accompanying prospectus.
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As of
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September 30, 2009
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Actual
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As Adjusted(1)
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(Dollars in millions)
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Cash and cash equivalents
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$
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71.6
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$
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71.6
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Long-term debt (including current portion):
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Senior secured credit facilities:
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Revolving credit facility(2)
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$
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330.4
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$
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137.1
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Term loan facility
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456.4
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456.4
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Master accounts receivable purchase agreement(3)
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4.2
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4.2
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Notes due to sellers
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11.0
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11.0
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Foreign bank borrowings and term loans
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0.5
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0.5
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Other debt
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7.6
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7.6
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Notes offered hereby(4)
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198.5
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Total long-term debt
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810.1
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815.3
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Total shareholders equity
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584.5
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584.5
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Total capitalization
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$
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1,394.6
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$
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1,399.8
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(1) |
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As adjusted for the issuance of the notes offered hereby and
application of the net proceeds of the offering to repay
borrowings under our senior secured revolving credit facility. |
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Our senior secured revolving credit facility has a maximum
availability of $1.59 billion. The amount outstanding under
our senior secured revolving credit facility as of
September 30, 2009 excludes $35.9 million of letters
of credit outstanding. As adjusted to give effect to this
offering and the use of proceeds described herein, we would have
been able to borrow up to approximately $1,417.0 million
under our senior secured revolving credit facility as of
September 30, 2009. See Description of Other
Indebtedness Senior Secured Credit Facilities. |
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The master accounts receivable purchase agreement provides for
the discounted sale, on an uncommitted, revolving basis, of
accounts receivable generated by a specified account debtor,
subject to monthly limits, and with aggregate limits not to
exceed $80 million. See Description of Other
Indebtedness Master Accounts Receivable Purchase
Agreement. |
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The $200 million aggregate principal amount of notes
offered hereby will be recorded net of discount of approximately
$1.5 million. |
S-25
DESCRIPTION
OF OTHER INDEBTEDNESS
Senior
Secured Credit Facilities
General
In February 2007, we entered into a senior secured five-year
revolving credit facility which allows us to borrow an aggregate
principal amount of up to $1.59 billion and a senior
secured five-year term loan facility in the principal amount of
$560.0 million. We may increase the revolving credit
and/or term
credit commitments by up to an aggregate of $200.0 million,
subject to receipt of commitments from existing or new lenders.
The senior secured credit facilities mature on February 7,
2012. Up to $65.0 million of the senior secured revolving
credit facility is available for letters of credit.
Security;
Ranking and Guarantees
Our senior secured credit facilities are secured by first
priority security interests in collateral pledged by us and
certain of our direct and indirect subsidiaries which includes
substantially all domestic accounts receivables (exclusive of
any sold receivables), inventory and equipment and
ownership interests in certain subsidiaries.
The obligations under the senior secured credit facilities are
guaranteed by certain of our subsidiaries. The same subsidiaries
that have guaranteed our obligations under the senior secured
credit facilities will guarantee the notes offered for sale
pursuant to this prospectus supplement.
Prepayments
Unless the required lenders otherwise agree, the term loan
facility is subject to mandatory prepayment, in the amount of
the net proceeds received, if (i) any indebtedness (other
than indebtedness permitted under the senior secured credit
facilities) is incurred by us or any of our subsidiaries or
(ii) on any date we or any of our subsidiaries receive net
cash proceeds from any asset sale or recovery event unless we
comply with certain reinvestment provisions or we maintain a
corporate credit rating, in the case of
Standard & Poors Ratings Services
(S&P), or a corporate family
rating, in the case of Moodys Investors Service,
Inc. (Moodys), of (a) at least BB+ by
S&P and at least Ba1 by Moodys or (b) at least
BBB- by S&P or at least Baa3 by Moodys, in each case
with a stable outlook.
Voluntary prepayments under either the term loan facility or the
senior secured revolving credit facility may be made in whole or
in part without premium or penalty upon notice.
Interest
and Fees
Our senior secured credit facilities accrue interest at per
annum rates equal to (i) a LIBOR rate plus a margin ranging
from 0.625% to 1.500% based on a Leverage Ratio (as defined in
our senior secured credit facilities) or (ii) the greater
of (a) the prime rate and (b) the Federal Funds
Effective Rate (as defined in our senior secured credit
facilities) plus 1/2 of 1%; plus a margin ranging from zero
percent to 0.500% based on the Leverage Ratio. Commitment fees
are paid quarterly and are calculated as an amount equal to the
product of a rate per annum ranging from 0.175% to 0.350% based
on the Leverage Ratio and the average daily unused portion of
the senior secured revolving credit facility.
We are required to pay (i) participation fees and fronting
fees in respect of each letter of credit and (ii) other
customary fees in respect of the senior secured revolving credit
facility.
Covenants
The terms of our senior secured credit facilities include
negative covenants setting forth limitations, subject to
negotiated exceptions, on: (i) liens; (ii) contingent
obligations; (iii) fundamental changes;
(iv) acquisitions, investments, loans and advances;
(v) indebtedness; (vi) restrictions on subsidiary
distributions; (vii) transactions with affiliates and
officers; (viii) sales of assets; (ix) sale and
leaseback transactions;
S-26
(x) changing our fiscal year end; (xi) modifications
of certain debt instruments; (xii) negative pledge clauses;
(xiii) entering into new lines of business; and
(xiv) restricted payments (which restricts dividend
payments to $55 million annually based on our current
Leverage Ratio). Our senior secured credit facilities also
provide for customary representations and warranties and
affirmative covenants and further require the maintenance of a
specified Leverage Ratio and Interest Coverage Ratio (as defined
in our credit facilities). As of September 30, 2009, we
were in compliance with the covenants under our senior secured
credit facilities.
Events
of Default
The terms of our senior secured credit facilities include
customary events of default, including, (i) non-payment of
principal when due; (ii) non-payment of interest, fees or
other amounts after a grace period; (iii) failure of any
representation or warranty to be true in all material respects
when made or deemed made; (iv) failure to maintain
financial ratios; (v) violation of any other covenants
subject to a grace period; (vi) defaults under other debt
instruments or contingent obligations in excess of
$75 million, including a default under the notes offered in
this prospectus supplement; (vii) commencement of
bankruptcy or similar proceedings by or on behalf of us or one
of our material subsidiaries; (viii) change of control;
(ix) judgments entered against us or any of our material
subsidiaries involving a liability in excess of
$75 million; (x) failure of any security document to
remain in full force and effect in accordance with its terms;
and (xi) certain ERISA violations.
Master
Accounts Receivable Purchase Agreement
In May 2009, we entered into a master accounts receivable
purchase agreement with a stated termination date of May 1,
2010, or such later date as may be mutually agreed by us and our
lender. This agreement provides for the discounted sale, on an
uncommitted, revolving basis, of accounts receivable generated
by a specified account debtor, subject to monthly limits, and
with aggregate limits not to exceed $80 million. This
agreement provides for an interest rate equal to the
7-day LIBOR
rate plus 225 basis points. We account for the sale of
these receivables as short-term debt and continue to carry these
receivables on our consolidated balance sheet in accordance with
GAAP, primarily as a result of our right to repurchase
receivables sold under this agreement. As of September 30,
2009, $17.0 million represents the pool of receivables that
have been designated as sold under this agreement
and serve as collateral for short-term debt thereunder of
$4.2 million. As of September 30, 2009, we were in
compliance with the terms of this agreement.
S-27
DESCRIPTION
OF THE NOTES
You can find the definitions of certain terms used in this
description under the caption Certain
Definitions. In this description, the words
Company, Issuer,
Scotts, us,
we and our refer only to
The Scotts Miracle-Gro Company and not to any of its
subsidiaries.
The Notes will be issued under a base indenture (the
Base Indenture) and supplemental indenture
(the Supplemental Indenture and together with
the Base Indenture, the Indenture), each to
be dated as of the Issue Date, among the Company, the Guarantors
and U.S. Bank National Association, as trustee (the
Trustee).
The following is a summary of the material provisions of the
Indenture. It does not include all of the provisions of the
Indenture. We urge you to read the Indenture because it defines
your rights. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (the
Trust Indenture Act). The Indenture has
been filed as an exhibit to the registration statement of which
this prospectus supplement is a part.
A registered holder of a Note (each, a
Holder) will be treated as its owner for all
purposes. Only registered Holders will have rights under the
Indenture.
Brief
Description of the Notes and the Guarantees
The
Notes
These Notes will be:
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general unsecured obligations of the Company;
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pari passu in right of payment with all of the
Companys existing and future unsecured, unsubordinated
Indebtedness;
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effectively subordinated to all of the Companys existing
and future secured Indebtedness, including the Credit Agreement,
to the extent of the value of the assets securing such
Indebtedness;
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senior in right of payment to any of the Companys future
Indebtedness that is, by its terms, expressly subordinated in
right of payment to the Notes; and
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structurally subordinated to all liabilities of the
Companys Subsidiaries that are not Guarantors.
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The
Subsidiary Guarantees
As of the Issue Date, the Notes will be guaranteed by all of the
Restricted Subsidiaries of the Company that are guarantors under
the Credit Agreement.
The Guarantees of the Notes will be:
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general unsecured obligations of each Guarantor;
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pari passu in right of payment with all existing and
future unsecured, unsubordinated Indebtedness of each Guarantor;
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senior in right of payment to any future Indebtedness of each
Guarantor that is, by its terms, expressly subordinated in right
of payment to the Subsidiary Guarantee of such
Guarantor; and
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effectively subordinated to any secured Indebtedness of each
Guarantor (including each Guarantors guarantee of the
Credit Agreement) to the extent of the value of the assets
securing such Indebtedness.
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The obligations of each Guarantor under its Subsidiary Guarantee
will be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect
of
S-28
the obligations of such other Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor
that makes a payment for distribution under its Subsidiary
Guarantee is entitled to a contribution from each other
Guarantor in a pro rata amount based on adjusted net
assets of each Guarantor. See Risk Factors
Risks Relating to Investment in the Notes Federal
and state statutes may allow courts, under specific
circumstances, to void the guarantees and require noteholders to
return payments received from subsidiary guarantors.
As of September 30, 2009, after giving effect to this
offering and the use of proceeds therefrom, the Company and the
Guarantors would have had total secured Indebtedness of
approximately $604.4 million (excluding letters of credit
of $35.9 million), and $1,417.0 million of additional
secured Indebtedness would have been available to be borrowed
under the revolving portion of the Credit Agreement. The
Indenture permits us and the Guarantors to incur additional
Indebtedness, including secured Indebtedness. As of the date
hereof, all of our subsidiaries, including our Foreign
Subsidiaries, are Restricted Subsidiaries. However,
under the circumstances described below under the caption
Certain Covenants Restricted
Payments, we are permitted to designate certain of our
subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries are not subject to many of the
restrictive covenants in the Indenture and will not guarantee
these Notes. As of the Issue Date, all of our Subsidiaries,
except for our Foreign Subsidiaries and Scotts Global Services,
Inc., an Ohio corporation; SMGM LLC, an Ohio limited liability
company; SMG Brands, Inc., a Delaware corporation; and Scotts
Global Investments, Inc., a Delaware corporation, will guarantee
the Notes. In the event of a bankruptcy, liquidation or
reorganization of any of these non-guarantor subsidiaries, these
non-guarantor subsidiaries will pay the holders of their debt
and their trade creditors before they will be able to distribute
any of their assets to us. As of September 30, 2009, the
non-guarantor subsidiaries had total Indebtedness of
approximately $222.2 million, all of which was incurred
under the Credit Agreement. The non-guarantor subsidiaries
generated approximately 19% of our total net sales and 10% of
our consolidated operating income for the fiscal year ended
September 30, 2009 and held approximately 26% of our
consolidated assets as of September 30, 2009.
The Subsidiary Guarantee of a Guarantor will be released:
(1) upon any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by
way of merger or consolidation), in accordance with the
Indenture, to any Person other than the Company or any
Restricted Subsidiary;
(2) if such Guarantor merges with and into the Company,
with the Company surviving such merger;
(3) if such Guarantor is designated an Unrestricted
Subsidiary in accordance with the Indenture or otherwise ceases
to be a Restricted Subsidiary (including by way of liquidation
or dissolution) in a transaction permitted by the Indenture;
(4) if we exercise our Legal Defeasance option or Covenant
Defeasance option as described under Legal
Defeasance and Covenant Defeasance or if our obligations
under the Indenture are discharged in accordance with the terms
of the Indenture as described under
Satisfaction and Discharge; or
(5) if such Guarantor ceases to be a Wholly Owned
Restricted Subsidiary and such Guarantor is not otherwise
required to provide a Subsidiary Guarantee of the Notes pursuant
to the provisions described under Certain
Covenants Additional Subsidiary Guarantees.
Principal,
Maturity and Interest
The Base Indenture does not limit the maximum aggregate
principal amount of Notes or other debt securities that the
Company may issue thereunder. The Company will issue an
aggregate principal amount of $200 million of Notes in this
offering pursuant to a supplemental indenture. The Notes are a
series of senior debt securities that the Company may issue
under the Base Indenture. From time to time after this offering,
S-29
the Company may issue additional Notes (the Additional
Notes) having identical terms and conditions as the
Notes being issued in this offering except for issue date, issue
price and first interest payment date. The Notes and any
Additional Notes subsequently issued would be treated as a
single series for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemption and offers
to purchase. Any offering of Additional Notes under the
Indenture is subject to the covenant described below under the
caption Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock.
The Notes will be issued only in denominations of $2,000 and
integral multiples of $1,000 in excess thereof. The Notes will
mature on January 15, 2018.
Interest on the Notes will accrue at the rate of 7.25% per annum
from the Issue Date. Interest is payable semi-annually in
arrears on January 15 and July 15, commencing on
July 15, 2010. The Company will make each interest payment
to the Holders of record of the Notes on the immediately
preceding January 1 and July 1.
Interest on the Notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis
of a 360-day
year comprised of twelve
30-day
months.
Methods
of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company,
the Company will make all principal, premium and interest
payments on the Notes owned by such Holder in accordance with
those instructions. All other payments on these Notes will be
made at the office or agency of the Paying Agent and Registrar
within the City and State of New York unless the Company elects
to make interest payments by check mailed to the Holders at
their respective addresses set forth in the register of Holders.
We will pay principal of, premium, if any, and interest on, the
Notes in global form registered in the name of The Depository
Trust Company or its nominee in immediately available funds
to The Depository Trust Company or its nominee, as the case
may be, as the registered holder of such global Notes.
Paying
Agent and Registrar for the Notes
The Trustee is currently the Paying Agent and Registrar. The
Company may change the Paying Agent or Registrar without prior
notice to the Holders of the Notes, and the Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
Optional
Redemption
On or after January 15, 2014, the Company may redeem all or
a part of the Notes upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued
and unpaid interest to the applicable redemption date, if
redeemed during the twelve-month period beginning on
January 15 of the years indicated below:
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Redemption Year
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Price
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2014
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103.625
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2015
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101.813
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2016 and thereafter
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100.000
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Prior to January 15, 2013, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal
amount of Notes issued under the Indenture with the Net Cash
Proceeds of one or more Equity Offerings at a redemption price
of 107.250% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date);
provided that:
(1) at least 65% of the aggregate principal amount of Notes
issued under the Indenture remains outstanding after each such
redemption; and
(2) the redemption occurs within 60 days after the
closing of such Equity Offering.
S-30
In addition, at any time prior to January 15, 2014, the
Company may redeem all or a part of the Notes upon not less than
30 nor more than 60 days notice, at a redemption price
equal to 100% of the principal amount thereof plus the
Applicable Premium plus accrued and unpaid interest, if any, to
the redemption date.
Applicable Premium means, with respect to a
Note at any redemption date, the greater of (i) 1.0% of the
principal amount of such Note and (ii) the excess of
(A) the present value at such time of (1) the
redemption price of such Note at January 15, 2014 (such
redemption price being set forth in the table above) plus
(2) all required interest payments due on such Note
(excluding accrued and unpaid interest to such redemption date)
through January 15, 2014, computed using a discount rate
equal to the Treasury Rate plus 50 basis points, over
(B) the principal amount of such Note.
Treasury Rate means the yield to maturity at
the time of computation of United States Treasury securities
with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) which
has become publicly available at least two Business Days prior
to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source or similar
market data)) most nearly equal to the period from the
redemption date to January 15, 2014; provided,
however, that if the period from the redemption date to
January 15, 2014 is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year)
from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the
period from the redemption date to January 15, 2014 is less
than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant
maturity of one year shall be used.
If an optional redemption date is on or after an interest record
date and on or before the related interest payment date, the
accrued and unpaid interest, if any, will be paid to the Person
in whose name the Note is registered at the close of business on
such record date, and no additional interest will be payable to
Holders whose Notes will be subject to redemption by the Company.
Selection
and Notice of Redemption
If less than all of the Notes are to be redeemed at any time,
the Trustee will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the
requirements of the principal national securities exchange on
which the Notes are listed; or
(2) if the Notes are not so listed, on a pro rata
basis subject to adjustment for minimum denominations.
No Notes of $2,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address.
Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of
redemption that relates to that Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the original
Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions
of them called for redemption.
Mandatory
Redemption
The Company is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
S-31
Repurchase
at the Option of Holders
Offer
to Repurchase upon Change of Control
If a Change of Control occurs, each Holder of Notes will have
the right to require the Company to repurchase all or any part
(equal to $2,000 or integral multiples of $1,000 in excess
thereof) of that Holders Notes pursuant to the
Change of Control Offer. In the Change of Control
Offer, the Company will offer a Change of Control
Payment in cash equal to 101% of the aggregate principal
amount of Notes repurchased plus accrued and unpaid interest and
Additional Interest thereon, if any, to the date of purchase.
Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering
to repurchase Notes on the Change of Control Payment
Date specified in such notice, pursuant to the procedures
required by the Indenture and described in such notice. The
Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the
extent lawful:
(1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions
thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an officers certificate
stating the aggregate principal amount of Notes or portions
thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note
will be in a principal amount of $2,000 or integral multiples of
$1,000 in excess thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make
a Change of Control Offer following a Change of Control will be
applicable regardless of whether or not any other provisions of
the Indenture are applicable. Except as described above with
respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
If a Change of Control Offer is made, there can be no assurance
that the Company will have available funds sufficient to pay for
all or any of the Notes that might be delivered by Holders
seeking to accept the Change of Control Offer. A Change of
Control will constitute an event of default under the Credit
Agreement and may constitute an event of default under other
Credit Facilities or Receivables Financings. In addition, we
cannot assure you that in the event of a Change of Control the
Company will be able to obtain the consents necessary to
consummate a Change of Control Offer from the lenders under
agreements governing outstanding Indebtedness which may prohibit
the offer.
The Company will not be required to make a Change of Control
Offer if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change
of Control Offer made by the Company and purchases all Notes
validly tendered and not withdrawn under such Change of Control
Offer.
The definition of Change of Control includes a
phrase relating to the sale, lease, transfer, conveyance or
other disposition of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole.
Although there is a limited body of case law interpreting the
phrase substantially all, there is no precise
established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of
S-32
Notes to require the Company to repurchase such Notes as a
result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of the Company and
its Subsidiaries taken as a whole to another Person or group may
be uncertain.
Offer
to Repurchase by Application of Excess Proceeds of Asset
Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of, as approved
in good faith by the Companys Board of Directors; and
(2) at least 75% of the consideration therefor received by
the Company or such Restricted Subsidiary is in the form of cash
or Cash Equivalents. For purposes of this provision only (and
specifically not for the purposes of the definition of Net
Proceeds), each of the following shall be deemed to be
cash:
(i) any liabilities (as shown on the Companys or such
Restricted Subsidiarys most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated
to the Notes or any Subsidiary Guarantee) that are assumed by
the transferee of any such assets;
(ii) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such
transferee that within 90 days are converted by the Company
or such Restricted Subsidiary into cash (to the extent of the
cash received in that conversion); and
(iii) the fair market value of (x) any assets (other
than securities or current assets) received by the Company or
any Restricted Subsidiary that will be used or useful in a
Related Business, (y) Equity Interests in a Person that is
a Restricted Subsidiary or in a Person engaged in a Related
Business that shall become a Restricted Subsidiary immediately
upon the acquisition of such Equity Interests by the Company or
the applicable Restricted Subsidiary or (z) a combination
of (x) and (y); provided that the determination of
the fair market value of assets or Equity Interests in excess of
$50.0 million received in any transaction or series of
related transactions shall be evidenced by an officers
certificate delivered to the Trustee.
Within a period of 360 days (commencing after the Issue
Date) before or after the receipt of any Net Proceeds of any
Asset Sale (provided that if during such
360-day
period after the receipt of any such Net Proceeds the Company
(or the applicable Restricted Subsidiary) enters into a
definitive binding agreement committing it to apply such Net
Proceeds in accordance with the requirements of clause (B),
(D) or (E) of this paragraph after such
360th day, such
360-day
period will be extended with respect to the amount of Net
Proceeds so committed for a period not to exceed 120 days
until such Net Proceeds are required to be applied in accordance
with such agreement (or, if earlier, until termination of such
agreement)), the Company or such Restricted Subsidiary, at its
option, may apply an amount equal to the Net Proceeds from such
Asset Sale:
(A) to repay, prepay, redeem or repurchase Indebtedness
(other than securities) under Credit Facilities or Indebtedness
of a Restricted Subsidiary that is not a Guarantor (other than
Indebtedness of such Restricted Subsidiary owed to the Company
or any of its Restricted Subsidiaries) and, in the case of any
such Indebtedness under any revolving credit facility, effect a
permanent reduction in the availability under such revolving
credit facility (or effect a permanent reduction in the
availability under such revolving credit facility regardless of
the fact that no prepayment is required in order to do so (in
which case no prepayment shall be required));
S-33
(B) to acquire Equity Interests in a Person that is a
Restricted Subsidiary or in a Person engaged in a Related
Business that shall become a Restricted Subsidiary immediately
upon the acquisition of such Equity Interests by the Company or
the applicable Restricted Subsidiary;
(C) to make capital expenditures;
(D) to acquire other assets (other than securities or
current assets) that will be used or useful in a Related
Business;
(E) to make Investments in Joint Ventures pursuant to
clauses (13) and (14) of the definition of
Permitted Investments; or
(F) a combination of prepayment and investment permitted by
the foregoing clauses (A), (B), (C), (D) and (E).
Pending the final application of such Net Proceeds, the Company
or any Restricted Subsidiary may temporarily reduce borrowings
under the Credit Facilities or any other revolving credit
facility or Receivables Financings, if any, or otherwise invest
such Net Proceeds in Cash Equivalents, in each case in a manner
not prohibited by the Indenture. Subject to the last sentence of
this paragraph, on the 361st day (as extended pursuant to
the provisions in the preceding paragraph) after an Asset Sale
or such earlier date, if any, as the Board of Directors of the
Company or of such Restricted Subsidiary determines not to apply
the Net Proceeds relating to such Asset Sale as set forth in
clause (A), (B), (C), (D), (E) or (F) of the second
preceding sentence (each, a Net Proceeds Offer Trigger
Date), such aggregate amount of Net Proceeds which
have not been applied (or committed to be applied pursuant to a
definitive agreement as described above) on or before such Net
Proceeds Offer Trigger Date as permitted in clauses (A), (B),
(C), (D), (E) or (F) of the second preceding sentence
(each a Net Proceeds Offer Amount) shall be
applied by the Company or such Restricted Subsidiary to make an
offer to purchase (the Net Proceeds Offer) on
a date (the Net Proceeds Offer Payment Date)
not less than 30 nor more than 60 days following the
applicable Net Proceeds Offer Trigger Date, from all Holders
(and, if required by the terms of any other Indebtedness of the
Company ranking pari passu with the Notes in right of
payment and which has similar provisions requiring the Company
either to make an offer to repurchase or to otherwise
repurchase, redeem or repay such Indebtedness with the proceeds
from Asset Sales (the Pari Passu
Indebtedness), from the holders of such Pari Passu
Indebtedness) on a pro rata basis (in proportion to the
respective principal amounts or accreted value, as the case may
be, of the Notes and any such Pari Passu Indebtedness) an
aggregate principal amount of Notes (plus, if applicable, an
aggregate principal amount or accreted value, as the case may
be, of Pari Passu Indebtedness) equal to the Net Proceeds Offer
Amount at a price equal to 100% of the principal amount of the
Notes (or 100% of the principal amount or accreted value, as the
case may be, of such Pari Passu Indebtedness), plus accrued and
unpaid interest thereon, if any, to the Net Proceeds Offer
Payment Date; provided, however, that if at any
time any non-cash consideration received by the Company or any
Restricted Subsidiary, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any
such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Proceeds thereof shall be applied in
accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net
Proceeds Offer Amount equal to or in excess of
$50.0 million resulting from one or more Asset Sales (at
which time the entire unutilized Net Proceeds Offer Amount, and
not just the amount in excess of $50.0 million, shall be
applied as required pursuant to this paragraph, and in which
case the Net Proceeds Offer Trigger Date shall be deemed to be
the earliest date that the Net Proceeds Offer Amount is equal to
or in excess of $50.0 million).
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following
the Net Proceeds Offer Trigger Date, with a copy to the Trustee,
and shall comply with the procedures set forth in the Indenture.
Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in denominations
of $2,000 or integral multiples of $1,000 in excess thereof in
exchange for cash. To the extent that the aggregate principal
amount of Notes (plus, if applicable, the aggregate principal
amount or accreted value, as the case may be, of Pari Passu
Indebtedness) validly tendered by the Holders thereof and not
withdrawn exceeds the Net Proceeds Offer Amount, Notes of
tendering Holders (and, if applicable, Pari Passu Indebtedness
tendered by the holders thereof) will be
S-34
purchased on a pro rata basis (based on the principal
amount of the Notes and, if applicable, the principal amount or
accreted value, as the case may be, of any such Pari Passu
Indebtedness tendered and not withdrawn). To the extent that the
aggregate amount of the Notes (plus, if applicable, the
aggregate principal amount or accreted value, as the case may
be, of any Pari Passu Indebtedness) tendered pursuant to a Net
Proceeds Offer is less than the Net Proceeds Offer Amount, the
Company may use such excess Net Proceeds Offer Amount for
general corporate purposes or for any other purpose not
prohibited by the Indenture. Upon completion of any such Net
Proceeds Offer, the Net Proceeds Offer Amount shall be reset at
zero. A Net Proceeds Offer shall remain open for a period of 20
Business Days or such longer period as may be required by law.
The Company or the applicable Restricted Subsidiary, as the case
may be, will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of Notes
pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the Indenture, the
Company or such Restricted Subsidiary shall comply with the
applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the Asset
Sale provisions of the Indenture by virtue thereof.
Certain
Covenants
Covenant
Suspension
If on any date following the Issue Date the Notes have an
Investment Grade Rating from both Rating Agencies and no Default
or Event of Default has occurred and is continuing under the
Indenture, then beginning on that day and subject to the
provisions of the following paragraph, the provisions
specifically listed under the following captions in this
prospectus supplement will be suspended:
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Repurchase at the Option of
Holders Offer to Repurchase by Application of Excess
Proceeds of Asset Sales,
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Restricted Payments,
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Incurrence of Indebtedness and Issuance of
Preferred Stock,
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Limitations on Layering Indebtedness,
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clause (a)(ii) of Certain
Covenants Merger, Consolidation or Sale of
Assets,
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Dividend and Other Payment Restrictions
Affecting Subsidiaries and
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Transactions with Affiliates
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(collectively, the Suspended Covenants). The
period during which covenants are suspended pursuant to this
section is called the Suspension Period.
In the event that the Company and the Restricted Subsidiaries
are not subject to the Suspended Covenants for any period of
time as a result of the second preceding sentence and,
subsequently, one of the Rating Agencies withdraws its ratings
or downgrades the rating assigned to the Notes so that the Notes
no longer have Investment Grade Ratings from both Rating
Agencies or a Default or Event of Default occurs and is
continuing, then the Company and the Restricted Subsidiaries
will from such time and thereafter again be subject to the
Suspended Covenants and compliance with the Suspended Covenants
with respect to Restricted Payments made after the time of such
withdrawal, Default or Event of Default will be calculated in
accordance with the terms of the covenant described below under
the caption Restricted Payments and
Incurrence of Indebtedness and Issuance of
Preferred Stock as though such covenant had been in effect
during the entire period of time from the Issue Date.
Notwithstanding the foregoing and any other provision of the
Indenture, the Notes or the Guarantees, no Default or Event of
Default shall be deemed to exist under the Indenture, the Notes
or the Guarantees with respect to the Suspended Covenants based
on, and none of the Company or any of the Subsidiaries shall
bear any liability with respect to the Suspended Covenants for,
(a) any actions taken or events occurring during a
Suspension Period (including without limitation any agreements,
Liens, preferred
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stock, obligations (including Indebtedness), or of any other
facts or circumstances or obligations that were incurred or
otherwise came into existence during a Suspension Period) or
(b) any actions required to be taken at any time pursuant
to any contractual obligation entered into during a Suspension
Period, regardless of whether such actions or events would have
been permitted if the applicable Suspended Covenants remained in
effect during such period.
Restricted
Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment
or distribution on account of the Companys Equity
Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the
Company) or to the direct or indirect holders of the
Companys Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company);
(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the
Company, in each case held by Persons other than the Company or
a Restricted Subsidiary of the Company;
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes or the Subsidiary
Guarantees, except a payment of interest or principal at the
Stated Maturity thereof; or
(4) make any Restricted Investment;
(all such payments and other actions set forth in
clauses (1) through (4) above being collectively
referred to as Restricted Payments),
unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock;
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the date of the Indenture
(excluding Restricted Payments permitted by clause (2), (3),
(4), (5) or (6) of the next succeeding paragraph), is
less than the sum, without duplication, of:
(i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) commencing on the
first day of the fiscal quarter in which the Issue Date occurs
to and ending on the last day of the fiscal quarter ended
immediately prior to the date of such calculation for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit); plus
(ii) 100% of the aggregate net proceeds (including the fair
market value of property other than cash) received by the
Company since the date of the Indenture as a contribution to its
common equity capital or from the issue or sale of Equity
Interests of the Company (other than Disqualified Stock) or from
the issue or sale of Disqualified Stock or debt securities of
the Company that have been converted into or exchanged for such
Equity Interests (other
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than Equity Interests (or Disqualified Stock or debt securities)
sold to a Subsidiary of the Company); plus
(iii) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of
(x) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and
(y) the initial amount of such Restricted Investment;
plus
(iv) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of such Subsidiary.
The preceding provision will not prohibit:
(1) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration
such payment would have complied with the provisions of the
Indenture;
(2) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness of the
Company or any of its Restricted Subsidiaries or any Equity
Interests of the Company or any of its Restricted Subsidiaries
in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, Equity Interests of the Company
(other than Disqualified Stock); provided that the amount
of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph;
(3) the redemption, repurchase, retirement, defeasance or
other acquisition of subordinated Indebtedness or Disqualified
Stock of the Company or any of its Restricted Subsidiaries with
the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness;
(4) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of
the Companys (or any of its Restricted Subsidiaries)
management pursuant to any management equity subscription
agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed
$7.5 million in any twelve-month period;
(5) Restricted Payments in an amount not to exceed
$100.0 million; and
(6) Permitted Additional Restricted Payments;
provided that in the case of clause (4), (5) or (6),
no Default shall have occurred and be continuing.
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of
the asset(s) or securities proposed to be transferred or issued
by the Company or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment. The fair market value of
any assets or securities that are required to be valued by this
covenant shall be approved in good faith by the Board of
Directors whose resolution with respect thereto shall be
delivered to the Trustee. Not later than the date of making any
Restricted Payment other than payments pursuant to clause (2),
(3), (4) or (5) of the preceding paragraph, the
Company shall deliver to the Trustee an officers
certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required
by this Restricted Payments covenant were computed.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary in accordance with the
definition of Unrestricted Subsidiary if the
designation would not cause a Default. All outstanding
Investments owned by the Company and its Restricted Subsidiaries
in the designated Unrestricted Subsidiary will be treated as an
Investment made at the time of the designation and will reduce
the amount available for Restricted Payments under the first
paragraph of this covenant or Permitted Investments, as
applicable. All such outstanding Investments will be treated as
Restricted Investments equal to the fair market value of such
Investments at the time of the designation. The designation will
not be permitted if such Restricted Payment would not be
permitted at that time and if such Restricted Subsidiary does
not otherwise
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meet the definition of an Unrestricted Subsidiary. The Board of
Directors may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary in accordance with the definition of
Unrestricted Subsidiary.
Incurrence
of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to
(collectively, incur) any Indebtedness
(including Acquired Debt), and the Company will not issue any
Disqualified Stock and will not permit any of its Restricted
Subsidiaries that is not a Guarantor to issue any shares of
preferred stock; provided, however, that the
Company and any of the Guarantors may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock, and the
Guarantors may issue preferred stock, if the Fixed Charge
Coverage Ratio for the Companys most recently ended four
full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock
or preferred stock is issued would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom) as if the additional
Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness
(collectively, Permitted Debt):
(1) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness and letters of credit under Credit
Facilities in an aggregate amount (with letters of credit being
deemed to have an amount equal to the maximum potential
liability of the Company and its Restricted Subsidiaries
thereunder) not to exceed $2.25 billion, less the
sum of (i) the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted
Subsidiaries to repay Indebtedness under Credit Facilities
pursuant to the covenant described above under the caption
Repurchase at the Option of
Holders Offer to Repurchase by Application of Excess
Proceeds of Asset Sales and (ii) the amount of
Indebtedness in excess of $150.0 million incurred pursuant
to clause (10) below of this paragraph;
(2) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes (excluding any Additional
Notes) and Subsidiary Guarantees of all Notes;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations,
in each case, incurred for the purpose of financing all or any
part of the purchase price or cost of construction or
improvement of assets used in the business of the Company or
such Restricted Subsidiary, or in respect of a Sale and
Leaseback Transaction, in an aggregate principal amount, and all
Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4), not to exceed
$50.0 million at any time outstanding;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance
or replace, Indebtedness incurred under clause (2) or
(3) above or this clause (5) or pursuant to the first
paragraph of this covenant;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness owed to the Company or any of its
Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such
Indebtedness, and such Indebtedness is held by a Restricted
Subsidiary that is not a Guarantor, such Indebtedness must be
expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Notes, in the case of the
Company, or the Subsidiary Guarantee of such Guarantor, in the
case of a Guarantor; and
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(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof
and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) Indebtedness under Hedging Obligations entered into for
bona fide hedging purposes of the Company or any
Restricted Subsidiary and not for the purpose of speculation;
provided that in the case of Hedging Obligations relating
to interest rates, (a) such Hedging Obligations relate to
payment obligations on Indebtedness otherwise permitted to be
incurred by this covenant and (b) the notional principal
amount of such Hedging Obligations at the time incurred does not
exceed the principal amount of the Indebtedness to which such
Hedging Obligations relate;
(8) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary of the Company that was permitted to be incurred by
another provision of this covenant and could have been incurred
(in compliance with this covenant) by the Person so guaranteeing
such Indebtedness;
(9) the incurrence by any of the Companys Foreign
Subsidiaries of Indebtedness in an aggregate principal amount,
including all Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (9),
not to exceed (x) $75.0 million at any time
outstanding plus (y) $65.0 million at any time
outstanding; provided that any Indebtedness under this
subclause (y) shall be supported by a letter of credit
incurred under one or more Credit Facilities pursuant to
clause (1) of this paragraph;
(10) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to a Receivables Financing;
(11) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, however, that such
Indebtedness is extinguished within five Business Days of
incurrence;
(12) Indebtedness of the Company or any of its Restricted
Subsidiaries in respect of security for workers
compensation claims, payment obligations in connection with
self-insurance, performance bonds, surety bonds or similar
requirements in the ordinary course of business;
(13) indemnification, adjustment of purchase price,
earn-out or similar obligations, in each case, incurred or
assumed in connection with the acquisition or disposition of any
business or assets of the Company or any Restricted Subsidiary
or Equity Interests of a Restricted Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Equity Interests for
the purpose of financing or in contemplation of any such
acquisition; provided that (a) any amount of such
obligations included on the face of the balance sheet of the
Company or any Restricted Subsidiary shall not be permitted
under this clause (13) and (b) in the case of a
disposition, the maximum aggregate liability in respect of all
such obligations outstanding under this clause (13) shall
at no time exceed the gross proceeds actually received by the
Company and the Restricted Subsidiaries in connection with such
disposition; and
(14) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding, including all Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this
clause (14), not to exceed $100.0 million.
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of proposed
Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1)
through (14) above, or is entitled to be
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incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify such item of Indebtedness
on the date of its incurrence (or later reclassify such
Indebtedness in whole or in part) in any manner that complies
with this covenant. In addition, the accrual of interest,
accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares
of the same class of Disqualified Stock will not be treated as
an incurrence of Indebtedness; provided, in each such
case, that the amount thereof is included in Fixed Charges of
the Company as accrued. Notwithstanding the foregoing, any
Indebtedness outstanding pursuant to the Credit Agreement on the
date of the Indenture will be deemed to have been incurred
pursuant to clause (1) of the definition of Permitted
Debt.
Notwithstanding the foregoing, the maximum amount of
Indebtedness that may be incurred pursuant to this covenant
shall not be deemed to be exceeded with respect to any
outstanding Indebtedness due solely to the result of
fluctuations in the exchange rates of currencies.
For purposes of determining compliance with any U.S. dollar
denominated restriction on the incurrence of Indebtedness where
the Indebtedness incurred is denominated in a different
currency, the amount of such Indebtedness will be the
U.S. Dollar Equivalent determined on the date of the
incurrence of such Indebtedness; provided,
however, that if any such Indebtedness denominated in a
different currency is subject to a Currency Protection Agreement
with respect to U.S. dollars covering all principal,
premium, if any, and interest payable on such Indebtedness, the
amount of such Indebtedness expressed in U.S. dollars will
be as provided in such Currency Protection Agreement. The
principal amount of any Permitted Refinancing Indebtedness
incurred in the same currency as the Indebtedness being
refinanced will be the U.S. Dollar Equivalent of the
Indebtedness refinanced, except to the extent that (1) such
U.S. Dollar Equivalent was determined based on a Currency
Protection Agreement, in which case the Permitted Refinancing
Indebtedness will be determined in accordance with the preceding
sentence, and (2) the principal amount of the Permitted
Refinancing Indebtedness exceeds the principal amount of the
Indebtedness being refinanced, in which case the
U.S. Dollar Equivalent of such excess, as appropriate, will
be determined on the date such Permitted Refinancing Debt is
incurred.
Limitations
on Layering Indebtedness
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness
that is or purports to be by its terms (or by the terms of any
agreement governing such Indebtedness) subordinated in right of
payment to any other Indebtedness of the Company or of such
Restricted Subsidiary, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly
subordinated in the right of payment to the Notes or the
Subsidiary Guarantee of such Restricted Subsidiary, to the same
extent and in the same manner as such Indebtedness is
subordinated in right of payment to such other Indebtedness of
the Company or such Restricted Subsidiary, as the case may be.
For purposes of the foregoing, no Indebtedness will be deemed to
be subordinated in right of payment to any other Indebtedness of
the Company or any Restricted Subsidiary solely by virtue of
being unsecured or secured by a junior priority lien or by
virtue of the fact that the holders of such Indebtedness have
entered into intercreditor agreements or other arrangements
giving one or more of such holders priority over the other
holders in the collateral held by them, including intercreditor
agreements that contain customary provisions requiring turnover
by holders of junior prior liens of proceeds of collateral in
the event that the security interests in favor of the holders of
the senior priority in such intended collateral are not
perfected or invalidated and similar customary provisions
protecting the holders of senior priority liens.
Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (1) assign or
convey any right to receive income on any asset now owned or
hereafter acquired or (2) create, incur, assume or suffer
to exist any Lien of any kind securing Indebtedness or trade
payables on any asset now
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owned or hereafter acquired or on any income or profits
therefrom except, in each case, Permitted Liens, unless the
Notes and the Guarantees, as applicable, are
(1) in the case of any Lien securing an obligation that
ranks pari passu with the Notes or a Subsidiary
Guarantee, effective provision is made to secure the Notes or
such Subsidiary Guarantee, as the case may be, at least equally
and ratably with or prior to such obligation with a Lien on the
same assets of the Company or such Restricted Subsidiary, as the
case may be; and
(2) in the case of any Lien securing an obligation that is
subordinated in right of payment to the Notes or a Subsidiary
Guarantee, effective provision is made to secure the Notes or
such Subsidiary Guarantee, as the case may be, with a Lien on
the same assets of the Company or such Restricted Subsidiary, as
the case may be, that is prior to the Lien securing such
subordinated obligation,
in each
case, for so long as such Obligation is secured by such Lien.
Dividend
and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its
Capital Stock to the Company or any of the Companys
Restricted Subsidiaries, or with respect to any other interest
or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of the Companys
Restricted Subsidiaries;
(2) make loans or advances to the Company or any of the
Companys Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company
or any of the Companys Restricted Subsidiaries.
However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
(1) Existing Indebtedness and the Credit Agreement as in
effect on the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
are not materially more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than
those contained in such Existing Indebtedness or the Credit
Agreement, as in effect on the date of the Indenture;
(2) the Indenture, the Notes and the Guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be
incurred;
(5) customary non-assignment provisions in leases,
licenses, contracts and other agreements entered into in the
ordinary course of business and consistent with past practices;
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(6) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the
property so acquired of the nature described in clause (3)
of the preceding paragraph;
(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by such
Restricted Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are not materially more
restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced;
(9) any agreement creating a Lien securing Indebtedness
otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption
Liens, to the extent limiting the right
of the Company or any of its Restricted Subsidiaries to dispose
of the assets subject to such Lien;
(10) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course
of business;
(11) customary provisions applicable to Foreign
Subsidiaries under Indebtedness of Foreign Subsidiaries
permitted to be incurred under the Indenture and in
support agreements and Guarantees of any such
Indebtedness;
(12) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business;
(13) customary restrictions under Receivables Financings
permitted to be incurred under the Indenture; and
(14) any operating lease or Capital Lease Obligation,
insofar as the provisions thereof limit the grant of a security
interest in, or other assignment of, the related leasehold
interest to any other Person.
Merger,
Consolidation or Sale of Assets
(a) The Company will not, directly or indirectly, in a
single transaction or series of related transactions,
consolidate or merge with or into any Person or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or
substantially all of the Companys assets (determined on a
consolidated basis) for the Company and its Restricted
Subsidiaries, whether as an entirety or substantially as an
entirety, to any Person unless:
(i) either:
(1) the Company shall be the surviving or continuing
corporation or
(2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person
which acquires by sale, assignment, transfer, lease, conveyance
or other disposition the properties and assets of the Company
and its Restricted Subsidiaries as an entirety or substantially
as an entirety (the Surviving Entity)
(x) shall be a corporation organized and validly existing
under the laws of the United States, any State thereof or the
District of Columbia and
(y) shall expressly assume, by supplemental indenture (in
form and substance reasonably satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual
payment of the principal of and premium, if any, and interest on
all of the Notes and the performance of every covenant of the
Notes and the Indenture on the part of the Company to be
performed or observed;
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(ii) immediately after giving pro forma effect to such
transaction or series of transactions and the assumption
contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness and Acquired Debt, in each case, incurred or
anticipated to be incurred in connection with or in respect of
such transaction), the Company or such Surviving Entity, as the
case may be, shall be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Debt) pursuant to the
covenant described under Incurrence of
Indebtedness and Issuance of Preferred Stock;
provided, however, that this clause (ii)
shall not apply during any Suspension Period;
(iii) immediately after giving effect to such transaction
or series of transactions and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Debt, in each case,
incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of such transaction), no Default
or Event of Default shall have occurred and be
continuing; and
(iv) the Company or such Surviving Entity, as the case may
be, shall have delivered to the Trustee an officers
certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture
is required in connection with such transaction, such
supplemental indenture, complies with the applicable provisions
of the Indenture and that all conditions precedent in the
Indenture relating to such transaction have been satisfied.
Notwithstanding the foregoing, the merger of the Company with an
Affiliate incorporated solely for the purpose of reincorporating
the Company in another jurisdiction shall be permitted without
regard to clause (ii) of the immediately preceding
paragraph. For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or
series of transactions) of all or substantially all of the
properties or assets of one or more Restricted Subsidiaries of
the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company,
shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company.
The Indenture provides that upon any consolidation or merger of
the Company or any sale, assignment, transfer, lease, conveyance
or other disposition of all or substantially all of the assets
of the Company in accordance with the foregoing in which the
Company is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company is merged
or to which such sale, assignment, transfer, lease, conveyance
or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under the Indenture and the Notes with the same effect
as if such Surviving Entity had been named as such;
provided, however, that the Company shall not be
released from its obligations under the Indenture or the Notes
in the case of a lease.
(b) Each Guarantor will not, and the Company will not cause
or permit any Guarantor to, directly or indirectly, in a single
transaction or series of related transactions, consolidate or
merge with or into any Person other than the Company or any
other Guarantor unless:
(i) if the Guarantor was a corporation or limited liability
company under the laws of the United States, any State thereof
or the District of Columbia, the entity formed by or surviving
any such consolidation or merger (if other than the Guarantor)
is a corporation or limited liability company organized and
existing under the laws of the United States, any State thereof
or the District of Columbia;
(ii) such entity assumes by supplemental indenture all of
the obligations of the Guarantor on its Guarantee;
(iii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be
continuing; and
(iv) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a pro forma basis,
the Company could satisfy the provisions of clause (a)(ii) of
this covenant.
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Notwithstanding the foregoing, the requirements of the
immediately preceding paragraph will not apply to any
transaction pursuant to which such Guarantor is permitted to be
released from its Subsidiary Guarantee in accordance with the
provisions described under the last paragraph of Brief
Description of the Notes and the Guarantees The
Subsidiary Guarantees.
Transactions
with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets
from, or enter into or make or amend any transaction, contract,
agreement, loan or guarantee with, or for the benefit of, any
Affiliate of the Company or any of its Restricted Subsidiaries
(each, an Affiliate Transaction), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction at such time by the Company or such Restricted
Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $25.0 million, a resolution of the Board of
Directors set forth in an officers certificate certifying
that such Affiliate Transaction complies with this covenant and
that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $50.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1) transactions between or among the Company
and/or its
Restricted Subsidiaries and transactions between or among
Restricted Subsidiaries;
(2) Restricted Payments that are permitted by the
provisions of the Indenture described above under the caption
Restricted Payments;
(3) customary transactions in connection with a Receivables
Financing or an industrial revenue bond financing;
(4) reasonable fees and compensation paid to (including
issuances and grant of Equity Interests of the Company,
employment agreements and stock option and ownership plans for
the benefit of), and indemnity and insurance provided on behalf
of, officers, directors, employees or consultants of the Company
or any Restricted Subsidiary in the ordinary course of business
as approved in good faith by the Companys Board of
Directors or senior management;
(5) (x) any agreement in effect on the Issue Date and
disclosed in this prospectus supplement (including by
incorporation by reference), as in effect on the Issue Date or
as thereafter amended or replaced in any manner, that, taken as
a whole, is not more disadvantageous to the Holders or the
Company in any material respect than such agreement as it was in
effect on the Issue Date or (y) any transaction pursuant to
any agreement referred to in the immediately preceding clause
(x); or
(6) loans or advances to employees and officers of the
Company and its Restricted Subsidiaries permitted by
clause (9) of the definition of Permitted
Investments.
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Additional
Subsidiary Guarantees
If, after the date of the Indenture, (a) any Restricted
Subsidiary of the Company (including any newly formed, newly
acquired or newly redesignated Restricted Subsidiary) guarantees
any Indebtedness of the Company, (b) any Domestic
Restricted Subsidiary of the Company (including any newly
formed, newly acquired or newly redesignated Restricted
Subsidiary) becomes a borrower or guarantor under any Credit
Facility or (c) the Company otherwise elects to have any
Restricted Subsidiary become a Guarantor, then, in the case of
clauses (a) and (b) within 10 Business Days of the
event under such clause occurring and in the case of
clause (c) at the Companys election, the Company
shall cause such Restricted Subsidiary to:
(i) execute and deliver to the Trustee (a) a
supplemental indenture in form and substance satisfactory to the
Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Companys obligations
under the Notes and the Indenture and (b) a notation of
guarantee in respect of its Subsidiary Guarantee; and
(ii) deliver to the Trustee one or more Opinions of Counsel
that such supplemental indenture (a) has been duly
authorized, executed and delivered by such Restricted Subsidiary
and (b) constitutes a valid and legally binding obligation
of such Restricted Subsidiary in accordance with its terms.
Limitation
on Sale and Leaseback Transactions
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any Sale and Leaseback
Transaction unless:
(1) the Company or such Restricted Subsidiary would be
entitled to:
(a) incur Indebtedness in an amount equal to the
Attributable Indebtedness with respect to such Sale and
Leaseback Transaction pursuant to the covenant described under
Incurrence of Indebtedness and Issuance of
Preferred Stock; and
(b) create a Lien on such property securing such
Attributable Indebtedness without also securing the notes or the
applicable Guarantee pursuant to the covenant described under
Liens; and
(2) such Sale and Leaseback Transaction is effected in
compliance with the covenant described under
Repurchase at the Option of
Holders Offer to Repurchase by Application of Excess
Proceeds of Asset Sales.
Payments
for Consent
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid and is paid to
all Holders of the Notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or amendment.
Reports
Whether or not required by the SEC, so long as any Notes are
outstanding, the Company will furnish to the Holders of Notes,
within the time periods specified in the SECs rules and
regulations for a company subject to reporting under
Section 13(a) or 15(d) of the Exchange Act:
(1) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on
Forms 10-Q
and 10-K if
the Company were required to file such Forms, including a
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report on the annual financial
statements by the Companys certified independent
accountants; and
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(2) all current reports that would be required to be filed
with the SEC on
Form 8-K
if the Company were required to file such reports.
In addition, whether or not required by the SEC, the Company
will file a copy of all of the information and reports referred
to in clauses (1) and (2) above with the SEC for
public availability within the time periods specified in the
SECs rules and regulations for a company subject to
reporting under Section 13(a) or 15(d) of the Exchange Act
(unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective
investors upon request. Notwithstanding the foregoing, to the
extent the Company files the information and reports referred to
in clauses (1) and (2) above with the SEC and such
information is publicly available on the Internet, the Company
shall be deemed to be in compliance with its obligations to
furnish such information to the Holders of the Notes and to make
such information available to securities analysts and
prospective investors.
Events of
Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of
interest on the Notes;
(2) default in payment when due of the principal of or
premium, if any, on the Notes (including default in payment when
due in connection with the purchase of Notes tendered pursuant
to a Change of Control Offer or Net Proceeds Offer on the date
specified for such payment in the applicable offer to purchase);
(3) failure by the Company to comply with its obligations
under Certain Covenants Merger,
Consolidation or Sale of Assets;
(4) a default by the Company in the observance or
performance of its obligations under Certain
Covenants Reports which default continues for
a period of 90 days;
(5) a default in the observance or performance of any other
covenant or agreement contained in the Indenture which default
continues for a period of 60 days after the Company
receives written notice specifying the default (and demanding
that such default be remedied) from the Trustee or the Holders
(with a copy to the Trustee) of at least 25% of the outstanding
principal amount of the Notes;
(6) the failure to pay at final stated maturity (giving
effect to any applicable grace periods and any extensions
thereof) the principal amount of any Indebtedness of the Company
or any Significant Subsidiary of the Company, or any other
default resulting in the acceleration of the final stated
maturity of any such Indebtedness, if the aggregate principal
amount of such Indebtedness, together with the principal amount
of any other such Indebtedness in default for failure to pay
principal at final maturity or which has been accelerated,
aggregates $75.0 million or more at any time; provided
that if any such default is cured or waived or any
acceleration rescinded or such Indebtedness is repaid within a
period of ten (10) days from the continuation of such
default beyond any applicable grace period or the occurrence of
such acceleration, as the case may be, such Event of Default
under the Indenture and any consequential acceleration of the
Notes shall automatically be rescinded so long as such
rescission does not conflict with any judgment or decree;
(7) one or more judgments in an aggregate amount in excess
of $75.0 million (to the extent not covered by independent
third party insurance as to which the insurer has not disclaimed
coverage) shall have been rendered against the Company or any of
its Significant Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days
after such judgment or judgments become final and nonappealable;
(8) except as permitted by the Indenture, any Subsidiary
Guarantee of any Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any
Guarantor that is a Significant Subsidiary, or any Person acting
on behalf of any such Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; or
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(9) certain events of bankruptcy or insolvency with respect
to the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary.
If an Event of Default (other than an Event of Default specified
in clause (9) above with respect to the Company) shall have
occurred and be continuing under the Indenture, the Trustee, by
written notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding by
written notice to the Company and the Trustee, may declare all
amounts owing under the Notes to be due and payable. Upon such
declaration of acceleration, the aggregate principal of and
accrued and unpaid interest on the outstanding Notes shall
immediately become due; provided, however, that
after such acceleration, but before a judgment or decree based
on acceleration, the Holders of a majority in aggregate
principal amount of such outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal
and interest, have been cured or waived as provided in the
Indenture.
If an Event of Default specified in clause (9) above occurs
and is continuing with respect to the Company, then all unpaid
principal of, and premium, if any, and accrued and unpaid
interest on all of the outstanding Notes shall ipso facto become
and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
The Indenture will provide that, at any time after a declaration
of acceleration with respect to the Notes as described in the
two preceding paragraphs, the Holders of a majority in principal
amount of the Notes may rescind and cancel such declaration and
its consequences:
(1) if the rescission would not conflict with any judgment
or decree;
(2) if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has
become due solely because of the acceleration;
(3) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such
declaration of acceleration, has been paid; and
(4) if we have paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and
advances.
No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
The Holders of a majority in principal amount of the Notes may
waive any existing Default or Event of Default under the
Indenture, and its consequences, except a default in the payment
of the principal of or interest on any Notes.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee indemnity satisfactory to
it. Subject to all provisions of the Indenture and applicable
law, the Holders of a majority in aggregate principal amount of
the then outstanding Notes 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. No single Holder will have any right
to institute any proceeding with respect to the Indenture or any
remedy thereunder, unless such Holder has notified the Trustee
of a continuing Event of Default and the Holders of at least 25%
in aggregate principal amount of the outstanding Notes have made
written request, and offered such reasonable indemnity as the
Trustee may require, to the Trustee to institute such
proceeding, the Trustee has failed to institute such proceeding
within 60 days after receipt of such notice and the
Trustee, within such
60-day
period, has not received directions inconsistent with such
written request by Holders of a majority in aggregate principal
amount of the outstanding Notes. Such limitations will not
apply, however, to a suit instituted by the Holder of a Note for
the enforcement of the payment of the principal of, premium, if
any, or interest on such Note on or after the respective due
dates therefor.
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Under the Indenture, we will be required to provide an
officers certificate to the Trustee promptly upon any such
officer obtaining knowledge of any Default or Event of Default
that has occurred and, if applicable, describe such Default or
Event of Default and the status thereof; provided that
such officers shall provide such certification at least annually
whether or not they know of any Default or Event of Default.
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of
the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or the Guarantors under the
Notes, the Indenture, the Subsidiary Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. The waiver may
not be effective to waive liabilities under the federal
securities laws.
Legal
Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding Notes and all obligations of the Guarantors
discharged with respect to their Subsidiary Guarantees
(Legal Defeasance) except for:
(1) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due from the trust
referred to below;
(2) the Companys obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of
the Trustee, and the Companys obligations in connection
therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors
released with respect to certain covenants that are described in
the Indenture (Covenant Defeasance) and
thereafter any omission to comply with those covenants shall not
constitute a Default or Event of Default with respect to the
Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under
Events of Default will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in
U.S. dollars, U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient
(without consideration of any reinvestment of interest), in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the Stated Maturity or on
the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the date of the
Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same
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manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and
be continuing either: (a) on the date of such deposit
(other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit); or
(b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under the Indenture or any material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound (other
than any such default under the Indenture resulting solely from
the borrowing of funds to be applied to such deposit);
(6) the Company must have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights
generally;
(7) the Company must deliver to the Trustee an
officers certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the
Company or others;
(8) the Company must deliver to the Trustee an
officers certificate and an Opinion of Counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied
with; and
(9) certain other customary conditions precedent are
satisfied.
Satisfaction
and Discharge
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of
transfer or exchange of the Notes, as expressly provided for in
the Indenture) as to all outstanding Notes when either:
(a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company as provided in the
Indenture) have been delivered to the Registrar for
cancellation, and
(i) the Company has paid all sums payable under the
Indenture by the Company, and
(ii) the Company has delivered to the Trustee an
officers certificate and an Opinion of Counsel stating
that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been
complied with; or
(b) the Company shall have given notice of redemption of
all of the Notes, all of the Notes shall have otherwise become
due and payable or all of the Notes will become due and payable,
or may be called for redemption, within one year, and
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(i) the Company has irrevocably deposited or caused to be
deposited with the Trustee or another trustee funds, in trust
solely for the benefit of the Holders, U.S. legal tender,
U.S. Government Obligations or a combination thereof, in
such amounts as will be sufficient (without consideration of any
reinvestment of interest) to pay and discharge the entire
indebtedness (including all principal and accrued interest) on
the Notes not theretofore delivered to the Trustee for
cancellation, together with irrevocable instructions from the
Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be;
(ii) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in a
breach or violation of or default under any other instrument to
which the Company is a party or by which it is bound;
(iii) the Company has paid all other sums payable under the
Indenture; and
(iv) the Company has delivered to the Trustee an
officers certificate and an Opinion of Counsel stating
that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been
complied with.
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, the Notes and the Subsidiary Guarantees of the Notes
may be amended or supplemented with the consent of the Holders
of a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for,
Notes) and, subject to certain exceptions, any past default or
compliance with any provisions may be waived with the consent of
the Holders of a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer
for, Notes).
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a
non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver, including the
waiver of Defaults or Events of Default, or to a rescission and
cancellation of a declaration of acceleration of the Notes;
(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted
interest, on any Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on
which any Notes may be subject to redemption, or reduce the
redemption price therefor;
(4) make any Notes payable in money other than that stated
in the Notes;
(5) make any change in the provisions of the Indenture
protecting the right of each Holder to receive payment of
principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment;
(6) change the price payable by the Company for Notes
repurchased pursuant to the provisions described above under
Offer to Repurchase upon Change of
Control and Offer to Repurchase by
Application of Excess Proceeds of Asset Sales or after the
occurrence of a Change of Control, modify or change in any
material respect the obligation of the Company to make and
consummate a Change of Control Offer or modify any of the
provisions or definitions with respect thereto;
(7) waive a default in the payment of principal of or
interest on any Note; provided that this clause (7)
shall not limit the right of the Holders of a majority in
aggregate principal amount of the
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outstanding Notes to rescind and cancel a declaration of
acceleration of the Notes following delivery of an acceleration
notice as described above under Events of
Default and Remedies;
(8) release any Guarantor that is a Significant Subsidiary
from any of its obligations under its Subsidiary Guarantee or
the Indenture, except as permitted by the Indenture;
(9) make any change in the preceding amendment and waiver
provisions; or
(10) contractually subordinate the Notes or the Subsidiary
Guarantees to any other Indebtedness.
Notwithstanding the preceding, without the consent of any Holder
of Notes, the Company and the Trustee may amend or supplement
the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(3) to provide for the assumption of the Companys
obligations to Holders of Notes in the case of a merger or
consolidation or sale of all or substantially all of the
Companys assets;
(4) to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not
adversely affect in any material respect the legal rights under
the Indenture of any such Holder;
(5) to add any Person as a Guarantor;
(6) to comply with any requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the
Trust Indenture Act;
(7) to remove a Guarantor which, in accordance with the
terms of the Indenture, ceases to be liable in respect of its
Subsidiary Guarantee;
(8) to evidence and provide for the acceptance of
appointment under the Indenture by a successor Trustee;
(9) to secure all of the Notes;
(10) to add to the covenants of the Company or any
Guarantor for the benefit of the Holders or to surrender any
right or power conferred upon the Company or any
Guarantor; and
(11) to conform the Indenture or the Notes to this
Description of the Notes.
The consent of the Holders is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the
proposed amendment. A consent to any amendment or waiver under
the Indenture by any Holder of Notes given in connection with a
tender of such Holders Notes will not be rendered invalid
by such tender. After an amendment under the Indenture becomes
effective, the Company is required to mail to the Holders a
notice briefly describing such amendment. However, the failure
to give such notice to all of the Holders, or any defect in the
notice, will not impair or affect the validity of the amendment.
Concerning
the Trustee
The Indenture provides that, except during the continuance of an
Event of Default, the Trustee will perform only such duties as
are specifically set forth in the Indenture. During the
existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it by the Indenture, and use the
same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the
conduct of his or her own affairs. Subject to such provisions,
the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
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The Indenture and the provisions of the Trust Indenture Act
contain certain limitations on the rights of the Trustee, should
it come a creditor of the Company, to obtain payments of claims
in certain cases or to realize on certain property received in
respect of any such claim as security or otherwise. Subject to
the Trust Indenture Act, the Trustee will be permitted to
engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the
Trust Indenture Act, it must eliminate such conflict within
90 days, apply to the SEC for permission to continue or
resign.
Certain
Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all
such terms, as well as any other capitalized terms used herein
for which no definition is provided.
Acquired Debt means, with respect to any
specified Person:
(1) Indebtedness of any other Person existing at the time
such other Person is merged with or into or became a Subsidiary
of such specified Person, whether or not such Indebtedness is
incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Subsidiary of, such
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
Affiliate of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, control, as
used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or
otherwise. For purposes of this definition, the terms
controlling, controlled by and
under common control with shall have correlative
meanings.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any
assets or rights, including by means of a Sale and Leaseback
Transaction, but other than sales of inventory in the ordinary
course of business consistent with past practices; provided
that the sale, conveyance or other disposition of all or
substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption
Change of Control
and/or the
provisions described above under the caption
Merger, Consolidation or Sale of Assets
and not by the provisions of the Offer to Repurchase by
Application of Excess Proceeds of Asset Sales
covenant; and
(2) the issuance of Equity Interests by any of the
Companys Restricted Subsidiaries or the sale of Equity
Interests in any of its Subsidiaries.
Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales:
(1) any single transaction or series of related
transactions that: (a) involves assets having an aggregate
fair market value of less than $15.0 million; or
(b) results in aggregate net proceeds to the Company and
its Subsidiaries of less than $15.0 million;
(2) a transfer of assets (a) between or among the
Company and its Wholly Owned Restricted Subsidiaries,
(b) by a Restricted Subsidiary to the Company or any of its
Wholly Owned Restricted Subsidiaries or (c) by the Company
or any of its Wholly Owned Restricted Subsidiaries to any
Restricted Subsidiary of the Company that is not a Wholly Owned
Restricted Subsidiary if, in the case of this clause (c), the
Company or the Wholly Owned Restricted Subsidiary, as the case
may be, either retains title to or ownership of the assets being
transferred or receives consideration at the time of such
transfer at least equal to the fair market value of the
transferred assets;
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(3) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to a Wholly Owned Restricted
Subsidiary;
(4) the sale, transfer or discount of any receivables
pursuant to a Receivables Financing that is otherwise permitted
by the Indenture;
(5) any Permitted Investment or any Restricted Payment that
is permitted by the covenant described above under the caption
Certain Covenants Restricted Payments;
(6) a disposition of inventory in the ordinary course of
business or a disposition of obsolete equipment or equipment
that is no longer useful in the conduct of the business of the
Company and its Restricted Subsidiaries and that is disposed of
in the ordinary course of business;
(7) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the
Company governed by, and made in accordance with,
Certain Covenants Merger,
Consolidation or Sale of Assets;
(8) the grant of Liens permitted by the covenant described
under Certain Covenants
Liens above;
(9) the surrender or waiver of contractual rights or the
settlement, release or surrender of contract, tort or other
claims of any kind; and
(10) any restructuring, regardless of whether accomplished
by liquidation, contribution, distribution, merger or any other
technique, whereby the ownership of Foreign Subsidiaries is
changed, so long as each such Foreign Subsidiary that is a
Restricted Subsidiary of the Company prior to such restructuring
remains, directly or indirectly, a Restricted Subsidiary of the
Company after such restructuring.
Attributable Indebtedness, when used with
respect to any Sale and Leaseback Transaction, means, as at the
time of determination, the present value (discounted at a rate
borne by the Notes, compounded on a semi-annual basis) of the
total obligations of the lessee for rental payments during the
remaining term of the lease included in any such Sale and
Leaseback Transaction.
Average Net Indebtedness means the average of
the Net Indebtedness of the Company at the end of each of the
four fiscal quarters comprising the Reference Period for which
the Leverage Ratio is being calculated.
Beneficial Owner has the meaning assigned to
such term in
Rule 13d-3
and
Rule 13d-5
under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as
such term is used in Section 13(d)(3) of the Exchange Act),
such person shall be deemed to have beneficial
ownership of all securities that such person has the
right to acquire, whether such right is currently exercisable or
is exercisable only upon the occurrence of a subsequent
condition.
Board of Directors means, as to any Person,
the board of directors of such Person or any duly authorized
committee thereof.
Board Resolution means, with respect to any
Person, a copy of a resolution certified by the Secretary or an
Assistant Secretary of such Person to have been duly adopted by
the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to
the Trustee.
Business Day means a day other than a
Saturday, Sunday or other day on which banking institutions in
New York are authorized or required by law to close.
Capital Lease Obligation means, at the time
any determination thereof is to be made, the amount of the
liability in respect of a capital lease that would at that time
be required to be capitalized on a balance sheet in accordance
with GAAP.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
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(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
(4) any other ownership interest that confers on a Person
the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
Cash Equivalents means:
(a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or
issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one
year from the date of acquisition;
(b) certificates of deposit, time deposits, eurodollar time
deposits or overnight bank deposits having maturities of one
year or less from the date of acquisition issued by any
commercial bank organized under the laws of the United States or
any state thereof having combined capital and surplus of not
less than $300,000,000;
(c) commercial paper of an issuer rated at least
A-1 by
S&P or
P-1 by
Moodys, or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating
agencies cease publishing ratings of commercial paper issuers
generally, and maturing within one year from the date of
acquisition;
(d) repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days, with
respect to securities issued or fully guaranteed or insured by
the United States government;
(e) securities with maturities of one year or less from the
date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth
or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moodys;
(f) securities with maturities of one year or less from the
date of acquisition backed by standby letters of credit issued
by any commercial bank satisfying the requirements of
clause (b) of this definition;
(g) money market mutual or similar funds that invest
exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition; or
(h) money market funds that (i) comply with the
criteria set forth in SEC
Rule 2a-7
under the Investment Company Act of 1940, as amended,
(ii) are rated AAA by S&P and Aaa by Moodys and
(iii) have portfolio assets of at least $5,000,000,000.
Change of Control means the occurrence of any
of the following:
(1) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially
all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any person (as such term is used
in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that any person (as defined above), other than the
Principals and their Related Parties, becomes the Beneficial
Owner, directly or indirectly, of 50% or more of the Voting
Stock of the Company, measured by voting power rather than
number of shares; or
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(4) the consolidation or merger of the Company with or into
any Person, or the consolidation or merger of any Person with or
into the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other
property, excluding any such transaction where the Voting Stock
of the Company outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting
Stock of such surviving or transferee Person (immediately after
giving effect to such issuance).
Common Stock means with respect to any
Person, any and all shares, interests or other participations
in, and other equivalents (however designated and whether voting
or nonvoting) of such Persons common stock whether or not
outstanding on the Issue Date, and includes, without limitation,
all series and classes of such common stock.
Consolidated Cash Flow means, with respect to
any Person for any period, the Consolidated Net Income of such
Person for such period plus, without duplication:
(1) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing
such Consolidated Net Income; plus
(2) consolidated net interest expense of such Person and
its Restricted Subsidiaries for such period whether paid or
accrued and whether or not capitalized (including, without
limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred
payment obligations, the interest component of all payments
associated with Capital Lease Obligations and Attributable
Indebtedness, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers
acceptance financings, and net payments, if any, pursuant to
Hedging Obligations but excluding amortization of debt issuance
costs), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of
goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to
the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period and any non-cash charge,
expense or loss relating to write-offs, write-downs or reserves
with respect to accounts receivable or inventory) of such Person
and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income; plus
(or minus)
(4) for purposes of calculating the Fixed Charge Coverage
Ratio only, any non-recurring expenses or losses (or income of
gains); minus
(5) non-cash items increasing such Consolidated Net Income
for such period, other than items that were accrued in the
ordinary course of business,
in each case, on a consolidated basis for such Person and its
Restricted Subsidiaries and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Restricted Subsidiary of the
Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent that a
corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its
stockholders (other than restrictions in effect on the Issue
Date and other than restrictions that are created or exist in
compliance with the covenant under the caption
Certain Covenants Dividend and
Other Payment Restrictions Affecting Subsidiaries).
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Consolidated Net Income means, with respect
to any specified Person for any period, the aggregate of the Net
Income of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with
GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is
accounted for by the equity method of accounting or is not a
Restricted Subsidiary shall be included only to the extent of
the amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders (other than
restrictions in effect on the Issue Date and other than
restrictions that are created or exist in compliance with the
covenant under the caption Certain
Covenants Dividend and Other Payment Restrictions
Affecting Subsidiaries);
(3) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the
specified Person or one of its Subsidiaries; and
(4) the cumulative effect of a change in accounting
principles shall be excluded.
Consolidated Total Assets of the Company as
of any date means all amounts that would, in accordance with
GAAP, be set forth opposite the caption total assets
(or any like caption) on the consolidated balance sheet of the
Company and its Restricted Subsidiaries on the last day of the
fiscal quarter immediately preceding such date for which
internal financial statements are available at the time of
calculation, after giving pro forma effect to all transactions
occurring subsequent to the end of such fiscal quarter and on or
prior to such date of calculation which gave or gives rise to
the need to calculate Consolidated Total Assets.
Credit Agreement means that certain Amended
and Restated Credit Agreement, dated as of February 7,
2007, by and among the Company, the subsidiary borrowers parties
thereto and the banks and other financial institutions from time
to time parties thereto as agents and lenders, and any related
notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced
from time to time.
Credit Facility means, with respect to the
Company or any of its Restricted Subsidiaries:
(1) the Credit Agreement; and
(2) one or more debt facilities (which may be outstanding
at the same time) or other financing arrangements (including,
without limitation, commercial paper facilities or indentures)
providing for revolving credit loans, term loans, letters of
credit or other long-term indebtedness, including any notes,
mortgages, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and, in each case,
any amendments, supplements, modifications, extensions,
renewals, restatements or refundings thereof and any indentures
or credit facilities or commercial paper facilities that
replace, refund or refinance any part of the loans, notes, other
credit facilities or commitments thereunder, including any such
replacement, refunding or refinancing facility or indenture that
increases the amount permitted to be borrowed thereunder or
alters the maturity thereof or adds Restricted Subsidiaries as
additional borrowers or guarantors thereunder and whether by the
same or any other agent, lender or group of lenders.
Currency Protection Agreement means any
currency protection agreement entered into with one or more
financial institutions in the ordinary course of business that
is designed to protect the Person or entity entering into the
agreement against fluctuations in currency exchange rates with
respect to Indebtedness incurred and not for purposes of
speculation.
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Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Disqualified Stock means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each case
at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the
Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the
Company to repurchase such Capital Stock upon the occurrence of
a change of control or an asset sale shall not constitute
Disqualified Stock.
Domestic Restricted Subsidiary means, with
respect to the Company, any Restricted Subsidiary that was
formed under the laws of the United States of America or any
State thereof.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
Equity Offering means a public or private
sale for cash by the Company of its Common Stock (other than
Disqualified Stock), or options, warrants or rights with respect
to its Common Stock, other than public offerings with respect to
the Companys Common Stock, or options, warrants or rights,
registered on
Form S-4
or S-8.
Exclusive Agency and Marketing Agreement
means the Amended and Restated Exclusive Agency and Marketing
Agreement between the Company and Monsanto Company, dated as of
September 30, 1998 (as amended as of March 10, 2005
and March 28, 2008), as the same may be amended, modified,
restated, extended, renewed or replaced from time to time.
Existing Indebtedness means Indebtedness of
the Company and its Restricted Subsidiaries (other than
Indebtedness under the Credit Agreement and the Receivables
Purchase Agreement) in existence on the date of the Indenture,
until such amounts are repaid.
fair market value means, with respect to any
asset or property, the price which could be negotiated in an
arms-length, free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction.
Fixed Charge Coverage Ratio means, with
respect to any specified Person for any period (for purposes of
this definition, the Reference Period), the
ratio of Consolidated Cash Flow of such Person for the Reference
Period to the Fixed Charges of such Person for the Reference
Period. In the event that the specified Person or any of its
Restricted Subsidiaries incurs, assumes, Guarantees, redeems or
otherwise repays any Indebtedness (other than the incurrence or
repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to any revolving credit
arrangement) or issues or redeems preferred stock, in each case,
after the end of the Reference Period and on or prior to the
date of the event for which the calculation of the Fixed Charge
Coverage Ratio is made (for purposes of this definition, the
Calculation Date), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee, redemption or other
repayment of Indebtedness, or such issuance or redemption of
preferred stock and all other such incurrences, assumptions,
Guarantees, redemptions, repayments or issuances that occurred
after the first day of the Reference Period and on or prior to
the Calculation Date, in each case, as if the same had occurred
at the beginning of the Reference Period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
(1) acquisitions, dispositions or Investments outside the
ordinary course of business that have been made by the specified
Person or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing
transactions, after the first day of the Reference Period and on
or prior to the Calculation Date shall be deemed to have
occurred on the first day of the Reference Period and
Consolidated Cash Flow for the Reference Period shall be
calculated
S-57
without giving effect to clause (3) of the proviso set
forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, shall be
excluded; and
(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date.
Fixed Charges means, with respect to any
Person for any period, the sum, without duplication, of:
(1) the consolidated net interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of original
issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease
Obligations and Attributable Indebtedness, commissions,
discounts and other fees and charges incurred in respect of
letter of credit or bankers acceptance financings, and net
payments, if any, pursuant to Hedging Obligations, but excluding
amortization of debt issuance costs and other non-cash
amortization; plus
(2) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period;
plus
(3) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus
(4) the product of (a) all dividend payments, whether
or not in cash, on any series of preferred stock of such Person
or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests
of the Company (other than Disqualified Stock) or to the Company
or a Restricted Subsidiary of the Company, times (b) a
fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal,
in each case, on a consolidated basis and in accordance with
GAAP.
Foreign Subsidiary means, with respect to the
Company, any Subsidiary that was not formed under the laws of
the United States of America or any state thereof.
GAAP means generally accepted accounting
principles in the United States of America as in effect on the
Issue Date.
Guarantee means a guarantee other than by
endorsement of negotiable instruments for collection in the
ordinary course of business, direct or indirect, in any manner
including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
Guarantors means:
(1) each Restricted Subsidiary of the Company on the date
of the Indenture, except for our Foreign Subsidiaries and Scotts
Global Services, Inc., an Ohio corporation; SMGM LLC, an Ohio
limited liability company; SMG Brands, Inc., a Delaware
corporation; and Scotts Global Investments, Inc., a Delaware
corporation; and
(2) any other Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of the
Indenture;
and their respective successors and assigns, in each case, until
such Person is released from its Subsidiary Guarantee in
accordance with the terms of the Indenture.
S-58
Hedging Obligations of any Person means the
obligations of such Person under swap, cap, collar, forward
purchase or similar agreements or arrangements dealing with
interest rates, currency exchange rates or commodity prices,
either generally or under specific contingencies.
Indebtedness means at any time (without
duplication), with respect to any Person, whether recourse is to
all or a portion of the assets of such Person, or non-recourse,
the following:
(i) all indebtedness of such Person for money borrowed or
for the deferred purchase price of property, excluding any trade
payables or other current liabilities incurred in the ordinary
course of business;
(ii) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments;
(iii) all unpaid reimbursement obligations of such Person
with respect to letters of credit, bankers acceptances or
similar facilities issued for the account of such Person (other
than to the extent secured by cash or Cash Equivalents);
(iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect
to property or assets acquired by such Person (even if the
rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of
such property or assets);
(v) all Capital Lease Obligations of such Person (but
excluding obligations under operating leases);
(vi) the maximum fixed redemption or repurchase price of
Disqualified Stock in such Person at the time of determination;
(vii) any Hedging Obligations of such Person at the time of
determination;
(viii) any Attributable Indebtedness; and
(ix) all obligations of the types referred to in
clauses (i) through (viii) of this definition of
another Person and all dividends and other distributions of
another Person, the payment of which, in either case,
(A) such Person has Guaranteed or (B) is secured by
(or the holder of such Indebtedness or the recipient of such
dividends or other distributions has an existing right, whether
contingent or otherwise, to be secured by) any Lien upon the
property or other assets of such Person, even though such Person
has not assumed or become liable for the payment of such
Indebtedness, dividends or other distributions.
For purposes of the foregoing:
(a) the maximum fixed repurchase price of any Disqualified
Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified
Stock as if such Disqualified Stock was repurchased on any date
on which Indebtedness shall be required to be determined
pursuant to this Indenture; provided, however,
that, if such Disqualified Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of
such Disqualified Stock;
(b) the amount outstanding at any time of any Indebtedness
issued with original issue discount is the principal amount of
such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as
determined in conformity with GAAP, but such Indebtedness shall
be deemed incurred only as of the date of original issuance
thereof;
(c) the amount of any Indebtedness described in clause
(ix)(A) above shall be the maximum liability under any such
Guarantee;
(d) the amount of any Indebtedness described in clause
(ix)(B) above shall be the lesser of (I) the maximum amount
of the obligations so secured and (II) the fair market
value of such property or other assets; and
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(e) interest, fees, premium, and expenses and additional
payments, if any, will not constitute Indebtedness.
Notwithstanding the foregoing, in connection with the purchase
or sale by the Company or any Restricted Subsidiary of any
assets or business, the term Indebtedness will
exclude (x) customary indemnification obligations and
(y) post-closing payment adjustments to which the other
party may become entitled to the extent such payment is
determined by a final closing balance sheet or such payment is
otherwise contingent; provided, however, that,
such amount would not be required to be reflected on the face of
a balance sheet prepared in accordance with GAAP.
Investment Grade Rating means, a debt rating
of the Notes of BBB− or higher by S&P and Baa3 or
higher by Moodys or the equivalent of such ratings by
S&P and Moodys or in the event S&P or
Moodys shall cease rating the Notes and the Company shall
select any other Rating Agency, the equivalent of such ratings
by such other Rating Agency.
Investments means, with respect to any
Person, all investments by such Person in other Persons
(including Affiliates) in the forms of direct or indirect loans
(including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions
for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be
classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, such Person
is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the
covenant described above under the caption Certain
Covenants Restricted Payments.
Issue Date means the date of first issuance
of the Notes under the Indenture.
Joint Venture means any joint venture which
is, directly or indirectly, engaged primarily in a Related
Business, and the Equity Interests of which are owned by the
Company
and/or any
of its Restricted Subsidiaries
and/or one
or more Persons other than the Company
and/or any
of its Affiliates.
Leverage Ratio means, with respect to any
specified Person as of any date, the ratio of (i) Average
Net Indebtedness of such Person on such date to
(ii) Consolidated Cash Flow of such Person for the period
of four consecutive fiscal quarters ending on such date (for
purposes of this definition and the definition of Average Net
Indebtedness, the Reference Period). In the
event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees, redeems or otherwise
repays any Indebtedness (other than the incurrence or repayment
of Indebtedness in the ordinary course of business for working
capital purposes pursuant to any revolving credit arrangement),
or issues or redeems preferred stock, or makes any Specified
Payment, in each case, after the end of the Reference Period and
on or prior to the date of the event for which the calculation
of the Leverage Ratio is made (for purposes of this definition,
the Calculation Date), then the Leverage
Ratio shall be calculated giving pro forma effect to
(x) such incurrence, assumption, Guarantee, redemption or
other repayment of Indebtedness, or (y) such issuance or
redemption of preferred stock, or (z) such Specified
Payment (including the incurrence of Indebtedness (without
duplication of any incurrence included pursuant to the foregoing
clause (x)) or the use of cash to fund such Specified Payment)
and (I) all other such incurrences, assumptions,
Guarantees, redemptions, repayments or issuances that occurred
after the first day of the Reference Period and on or prior to
the Calculation Date and (II) all other Specified Payments
that occurred after the end of the Reference Period and on or
prior to the Calculation Date, in each case, as if the same had
occurred at the beginning of the Reference Period.
In addition, for purposes of calculating the Leverage Ratio:
(1) acquisitions, dispositions or Investments outside the
ordinary course of business that have been made by the specified
Person or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing
transactions, after the first day of the Reference
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Period and on or prior to the Calculation Date shall be deemed
to have occurred on the first day of the Reference Period and
Consolidated Cash Flow for such Reference Period shall be
calculated without giving effect to clause (3) of the
proviso set forth in the definition of Consolidated Net
Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, shall be
excluded;
(3) the Indebtedness attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date; and
(4) in giving pro forma effect to a Specified Payment, to
the extent that the Specified Payment would have exceeded the
amount of cash and Cash Equivalents of such Person and its
Restricted Subsidiaries that would have been available to fund
such Specified Payment as of any date that Net Indebtedness is
calculated, the amount of such excess shall be deemed to have
been funded by additional Indebtedness.
Lien means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
Moodys means Moodys Investors
Service, Inc. or any successor rating agency.
Net Cash Proceeds with respect to any
issuance or sale of Capital Stock, means the cash proceeds of
such issuance or sale net of attorneys fees,
accountants fees, underwriters or placement
agents fees, listing fees, discounts or commissions and
brokerage, consultant and other fees and charges actually
incurred in connection with such issuance or sale and net of
taxes paid or payable as a result of such issuance or sale
(after taking into account any available tax credit or
deductions and any tax sharing arrangements).
Net Income means, with respect to any Person,
the net income (loss) attributable to such Person and its
Restricted Subsidiaries, determined in accordance with GAAP and
before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any extraordinary gain or loss, together with any
related provision for taxes on such extraordinary gain or
loss; and
(2) any non-cash expenses attributable to grants or
exercises of employee stock options.
Net Indebtedness means, in respect of any
Person at any date, (a) the aggregate outstanding principal
amount of all Indebtedness for borrowed money of such Person and
its Restricted Subsidiaries at such date, plus
(b) all other items which would properly be included as
indebtedness, determined in accordance with GAAP, on a
consolidated balance sheet of such Person and its Restricted
Subsidiaries at such date, minus (c) unrestricted
cash and Cash Equivalents set forth on the consolidated balance
sheet of such Person and its Restricted Subsidiaries as at such
date.
Net Proceeds means the aggregate cash
proceeds received by the Company or any of its Restricted
Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition
of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale, including,
without limitation, legal, accounting and investment banking
fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result
thereof, in each case after taking into account any available
tax credits or deductions and any tax sharing arrangements and
amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject
of such Asset Sale.
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Non-Recourse Debt means Indebtedness:
(1) as to which neither the Company nor any of its
Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or
(c) constitutes the lender;
(2) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action
against an Unrestricted Subsidiary) would permit upon notice,
lapse of time or both any holder of any other Indebtedness
(other than the Notes) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to
its Stated Maturity; and
(3) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of
the Company or any of its Restricted Subsidiaries.
Obligations means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
Opinion of Counsel means a written opinion
from legal counsel, who may be internal counsel for the Company,
or who is otherwise reasonably acceptable to the Trustee,
complying with certain provisions in the Indenture.
Permitted Additional Restricted Payment means
additional Restricted Payments made by the Company, if before
and after giving pro forma effect to such Restricted Payment,
the Leverage Ratio of the Company as of the end of the most
recently ended fiscal quarter for which internal financial
statements are available is less than 2.25:1.00.
Permitted Investments means:
(1) any Investment in the Company or in a Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets
to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company;
(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the
caption Repurchase at the Option of Holders
Offer to Repurchase by Application of Excess Proceeds of Asset
Sales;
(5) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of
the Company;
(6) investments in accounts or notes receivable acquired in
the ordinary course of business;
(7) [intentionally omitted;]
(8) any payment by the Company or any of its Restricted
Subsidiaries pursuant to the Exclusive Agency and Marketing
Agreement;
(9) loans and advances to employees and officers of the
Company and its Restricted Subsidiaries in the ordinary course
of business for bona fide business purposes not in excess of
$5.0 million at any one time outstanding;
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(10) Investments in securities received in settlement of
obligations of trade creditors or customers in the ordinary
course of business or in satisfaction of judgments or pursuant
to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of trade creditors or customers; and
Investments made in settlement or exchange for extensions of
trade credit (including trade receivables) by the Company and
its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be;
(11) workers compensation, utility, lease and similar
deposits and prepaid expenses in the ordinary course of business
and endorsements of negotiable instruments and documents in the
ordinary course of business;
(12) reclassification of any Investment initially made in
the form of equity as a loan or advance, and reclassification of
any Investment initially made in the form of a loan or advance
as equity; provided in each case that the amount of such
Investment is not increased thereby;
(13) other Investments in any Person having an aggregate
fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to
this clause (13) that are at any time outstanding, not to
exceed $100.0 million; and
(14) Investments in Joint Ventures having an aggregate fair
market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when
taken together with all other Investments made pursuant to this
clause (14) that are at any time outstanding, not to exceed
the greater of (x) $150.0 million and (y) 7.5% of
Consolidated Total Assets.
Permitted Liens means:
(1) Liens securing Indebtedness under Credit Facilities
incurred pursuant to clause (1) of the second paragraph
under Certain Covenants Incurrence
of Indebtedness and Issuance of Preferred Stock;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the Company
or any Subsidiary of the Company; provided that such
Liens were not entered into in contemplation of such merger or
consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or
the Subsidiary;
(4) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company;
provided that such Liens were not entered into in
contemplation of such acquisition;
(5) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock covering only the assets financed with
such Indebtedness and additions and improvements thereon;
(6) Liens existing on the date of the Indenture;
(7) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested
in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(8) Liens securing Indebtedness or trade payables and any
related obligations; provided that the aggregate amount
of Indebtedness and trade payables secured by this
clause (8) shall not exceed $50.0 million at any one
time outstanding;
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(9) Liens securing Attributable Indebtedness under Sale and
Leaseback Transactions incurred in compliance with the covenant
described under Certain Covenants
Limitation on Sale and Leaseback Transactions; provided
that the aggregate amount of Attributable Indebtedness
secured by this clause (9) shall not exceed
$75.0 million at any one time outstanding;
(10) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business; Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties
in connection with the importation of goods; and any other Liens
imposed by operation of law which do not materially affect the
Companys ability to perform its obligations under the
Notes and the Indenture;
(11) Liens incurred or deposits made in the ordinary course
of business in connection with workers compensation,
unemployment insurance and other types of social security or
similar obligations, including any Lien securing letters of
credit issued in the ordinary course of business consistent with
past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and
return-of-money
bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(12) judgment Liens not giving rise to an Event of Default
so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated
or the period within which such proceedings may be initiated
shall not have expired;
(13) easements,
rights-of-way,
zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Company or any
of its Restricted Subsidiaries;
(14) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating;
provided that such Liens do not extend to any property or
assets which is not leased property subject to such lease;
(15) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Persons
obligations in respect of bankers acceptances issued or
created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(16) Liens securing reimbursement obligations with respect
to letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds
thereof;
(17) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off;
(18) leases or subleases granted to others not interfering
in any material respect with the business of the Company or its
Restricted Subsidiaries;
(19) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of
business;
(20) rights of banks to set off deposits against debts owed
to said bank; and
(21) Liens on accounts receivable originated by the Company
and its Restricted Subsidiaries, any related assets and proceeds
thereof that are sold, conveyed or otherwise transferred
pursuant to a Receivables Financing permitted pursuant to clause
(10) of the second paragraph of the covenant described under
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock.
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During any Suspension Period, the relevant clauses of the
covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock shall be deemed to be in effect solely for
purposes of determining the amount available under
clauses (1) and (5) above.
Permitted Refinancing Indebtedness means any
Indebtedness of the Company or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness)
(such other Indebtedness, Refinanced
Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus
accrued interest on, the Refinanced Indebtedness (plus the
amount of reasonable expenses incurred in connection therewith
including premiums paid, if any, to the holders thereof);
(2) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of the
Refinanced Indebtedness, and the portion, if any, of the
Permitted Refinancing Indebtedness that is scheduled to mature
on or prior to the maturity date of the Notes has a Weighted
Average Life to Maturity at the time such Permitted Refinancing
Indebtedness is incurred that is equal to or greater than the
Weighted Average Life to Maturity of the portion of the
Refinanced Indebtedness that is scheduled to mature on or prior
to the maturity date of the Notes;
(3) if the Refinanced Indebtedness is subordinated in right
of payment to the Notes, such Permitted Refinancing Indebtedness
is subordinated in right of payment to, the Notes on terms at
least as favorable to the Holders of Notes as those contained in
the documentation governing the Refinanced Indebtedness;
(4) such Indebtedness shall not be incurred by a Restricted
Subsidiary that is not a Guarantor to refinance debt of the
Company or a Guarantor; and
(5) the proceeds of the Permitted Refinancing Indebtedness
shall be used substantially concurrently with the incurrence
thereof to redeem or refinance the Refinanced Indebtedness,
unless, in the case of a redemption or refinancing, the
Refinanced Indebtedness is not then due and is not redeemable or
prepayable at the option of the obligor thereof or is redeemable
or prepayable only with notice, in which case such proceeds
shall be held in a segregated account of the obligor of the
Refinanced Indebtedness until the Refinanced Indebtedness
becomes due or redeemable or prepayable or such notice period
lapses and then shall be used to refinance the Refinanced
Indebtedness; provided that in any event the Refinanced
Indebtedness shall be redeemed or refinanced within six months
of the incurrence of the Refinancing Indebtedness.
Person means any individual, corporation,
limited liability company, partnership, joint venture,
association, joint-stock company, trust, estate or
unincorporated organization or government or any agency or
political subdivision thereof or any other entity (including any
subdivision or ongoing business of any such entity, or
substantially all of the assets of any such entity, subdivision
or business).
Principals means the Hagedorn Partnership,
L.P. and the general partners of the Hagedorn Partnership, L.P.
on the Issue Date and, in the case of such individuals, their
respective executors, administrators and heirs and their
families and trusts for their benefit.
Rating Agency means each of S&P and
Moodys, or if S&P or Moodys or both shall not
make a rating on the Notes publicly available (for reasons
outside the control of the Company), a statistical rating agency
or agencies, as the case may be, nationally recognized in the
United States and selected by the Company (as certified by a
resolution of the Board of Directors) which shall be substituted
for S&Ps or Moodys, or both, as the case may be.
Receivables Financing means, with respect to
the Company or any of its Restricted Subsidiaries, any
discounting, factoring or securitization arrangement (including,
for the avoidance of doubt, the Receivables Purchase Agreement)
pursuant to which the Company or any Restricted Subsidiary
sells, conveys or otherwise transfers to a Restricted Subsidiary
or any other Person, or grants a security interest in, any
accounts receivable originated by the Company or such Restricted
Subsidiary, as the case may be, together with any related
assets,
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or pursuant to which ownership interests in, or notes,
commercial paper, certificates or other debt instruments may be
secured by such accounts receivable and related assets.
Receivables Purchase Agreement means the
Master Accounts Receivable Purchase Agreement dated as of
May 1, 2009, by and among The Scotts Company LLC, as
seller, the Company, as guarantor, and Calyon New York Branch,
as purchaser, as amended, modified, renewed, refunded, replaced
or refinanced from time to time.
Related Business means the business conducted
(or proposed to be conducted) by the Company and its
Subsidiaries as of the Issue Date and any and all businesses
that in the good faith judgment of the Board of Directors of the
Company are reasonably related thereto.
Related Party with respect to any Principal
means any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of
which consist of such Principal.
Restricted Investment means an Investment
other than a Permitted Investment.
Restricted Subsidiary of a Person means any
Subsidiary of the referent Person that is not an Unrestricted
Subsidiary.
S&P means Standard &
Poors Rating Services, a division of McGraw Hill, Inc., a
New York corporation, or any successor rating agency.
Sale and Leaseback Transactions means with
respect to any Person an arrangement with any bank, insurance
company or other lender or investor or to which such lender or
investor is a party, providing for the leasing by such Person of
any asset of such Person which has been or is being sold or
transferred by such Person to such lender or investor or to any
Person to whom funds have been or are to be advanced by such
lender or investor on the security of such asset.
Significant Subsidiary means (1) any
Subsidiary that would be a significant subsidiary as
defined in Article 1,
Rule 1-02
of
Regulation S-X,
promulgated pursuant to the Exchange Act, as such Regulation is
in effect on the date hereof and (2) any Restricted
Subsidiary that when aggregated with all other Restricted
Subsidiaries that are not otherwise Significant Subsidiaries
would constitute a Significant Subsidiary under clause (1)
of this definition.
Specified Payments means Permitted
Investments pursuant to clauses (13) and (14) of the
definition of Permitted Investments and Restricted
Payments pursuant to the first paragraph and clauses (5)
and (6) of the second paragraph of the covenant under
Certain Covenants Restricted
Payments, in each case, to the extent made in cash.
Stated Maturity means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such
interest or principal prior to the date originally scheduled for
the payment thereof.
Subsidiary means, with respect to any Person:
(1) any corporation, association or other business entity
(other than a partnership) of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person (or a combination
thereof); and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
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Unrestricted Subsidiary means any Subsidiary
of the Company that is designated by the Board of Directors as
an Unrestricted Subsidiary pursuant to a Board Resolution, but
only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the
Company;
(3) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity
Interests or (b) to maintain or preserve such Persons
financial condition or to cause such Person to achieve any
specified of operating results; and
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an
Unrestricted Subsidiary shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an officers
certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described
above under the caption Certain
Covenants Restricted Payments. If, at any
time, any Unrestricted Subsidiary would fail to meet the
preceding requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes
of the Indenture and any Indebtedness of such Subsidiary shall
be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant
described under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock, the Company shall be in default of such
covenant. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be
deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of
such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted under the
covenant described under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock, calculated on a pro forma basis as if
such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
If a Guarantor is designated as an Unrestricted Subsidiary, the
Subsidiary Guarantee of that Guarantor shall be released. If an
Unrestricted Subsidiary becomes a Restricted Subsidiary, such
Restricted Subsidiary shall become a Guarantor in accordance
with the terms of the Indenture.
Notwithstanding the foregoing, no Subsidiary of the Company
shall be designated an Unrestricted Subsidiary during any
Suspension Period.
U.S. Dollar Equivalent means, with
respect to any monetary amount in a currency other than
U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign
currency involved in such computation into U.S. dollars at
the spot rate for the purpose of U.S. dollars with the
applicable foreign currency as published in The Wall Street
Journal in the Exchange Rates column under the
heading Currency Trading on the date two Business
Days prior to such determination.
U.S. Government Obligations means direct
non-callable obligations of, or guaranteed by, the United States
of America for the payment of which guarantee or obligations the
full faith and credit of the United States is pledged.
Voting Stock of any Person as of any date
means the Capital Stock of such Person that is at the time
entitled to vote in the election of the Board of Directors of
such Person.
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Weighted Average Life to Maturity means, when
applied to any Indebtedness at any date, the number of years
obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making
of such payment; by
(2) the then outstanding principal amount of such
Indebtedness.
Wholly Owned Restricted Subsidiary of any
Person means a Restricted Subsidiary of such Person all of the
outstanding Capital Stock or other ownership interests of which
(other than directors qualifying shares) shall at the time
be owned by such Person
and/or by
one or more Wholly Owned Restricted Subsidiaries of such Person.
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BOOK-ENTRY,
DELIVERY AND FORM
The notes initially will be represented by one or more permanent
global certificates in definitive, fully registered form (the
Global Notes). The Global Notes will be deposited
upon issuance with The Depository Trust Company, New York,
New York (DTC), and registered in the name of a
nominee of DTC in the form of a global certificate.
The
Global Notes
DTC has advised us that pursuant to procedures established by it
(i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal
amount at maturity of the individual beneficial interests
represented by such Global Notes to the respective accounts of
persons who have accounts with such depositary and
(ii) ownership of beneficial interests in the Global Notes
will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee
(with respect to interests of participants) and the records of
participants (with respect to interests of persons other than
participants). Ownership of beneficial interests in the Global
Notes will be limited to persons who have accounts with DTC
(participants) or persons who hold interests through
participants. Holders may hold their interests in the Global
Notes directly through DTC if they are participants in such
system, or indirectly through organizations that are
participants in such system.
So long as DTC, or its nominee, is the registered owner or
holder of the notes, DTC or such nominee, as the case may be,
will be considered the sole owner or holder of the notes
represented by such Global Notes for all purposes under the
indenture governing the notes. No beneficial owner of an
interest in the Global Notes will be able to transfer that
interest except in accordance with DTCs procedures, in
addition to those provided for under the indenture with respect
to the notes.
Payments of the principal of, premium, if any, and interest
(including additional interest) on, the Global Notes will be
made to DTC or its nominee, as the case may be, as the
registered owner of the Global Notes. None of the Company, the
trustee or any paying agent under the indenture governing the
notes will have any responsibility or liability for any aspect
of the records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to
such beneficial ownership interest.
DTC has advised us that its present practice is, upon receipt of
any payment of principal, premium, if any, and interest
(including additional interest) on the Global Notes, to credit
immediately participants accounts with payments in amounts
proportionate to their respective beneficial interests in the
principal amount of the Global Notes as shown on the records of
DTC. Payments by participants to owners of beneficial interests
in the Global Notes held through such participants will be
governed by standing instructions and customary practice, as is
now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the
ordinary way through DTCs
same-day
funds system in accordance with DTC rules and will be settled in
same-day
funds. If a holder requires physical delivery of a certificated
security for any reason, including to sell notes to persons in
states which require physical delivery of the notes, or to
pledge such securities, such holder must transfer its interest
in a Global Note in accordance with the normal procedures of DTC
and with the procedures set forth in the indenture governing the
notes.
DTC has advised us that it will take any action permitted to be
taken by a holder of notes, including the presentation of notes
for exchange as described below, only at the direction of one or
more participants to whose account the DTC interests in the
Global Notes are credited and only in respect of such portion of
the aggregate principal amount of notes as to which such
participant or participants has or have given such direction.
However, if there is an event of default under the indenture
governing the notes, DTC will exchange the Global Notes for
certificated securities, which it will distribute to its
participants.
DTC has advised us as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a
member of the Federal Reserve System, a clearing
corporation within the meaning
S-69
of the Uniform Commercial Code and a Clearing Agency
registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of
securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a
participant, either directly or indirectly (indirect
participants).
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among
participants of DTC, it is under no obligation to perform such
procedures, and such procedures may be discontinued at any time.
Neither we nor the trustee will have any responsibility for the
performance by DTC or its participants or indirect participants
of their respective obligations under the rules and procedures
governing their operations.
Clearstream. Clearstream is incorporated under
the laws of Luxembourg as a professional depositary. Clearstream
holds securities for its participating organizations
(Clearstream Participants) and facilitates the
clearance and settlement of securities transactions between
Clearstream Participants through electronic book-entry changes
in accounts of Clearstream Participants, thereby eliminating the
need for physical movement of certificates. Clearstream provides
Clearstream Participants with, among other things, services for
safekeeping, administration, clearance and establishment of
internationally traded securities and securities lending and
borrowing. Clearstream interfaces with domestic markets in
several countries. As a professional depositary, Clearstream is
subject to regulation by the Luxembourg Monetary Institute.
Clearstream Participants are recognized financial institutions
around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and
certain other organizations, and may include the underwriters.
Indirect access to Clearstream is also available to others, such
as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Clearstream
Participant either directly or indirectly.
Distributions with respect to notes held beneficially through
Clearstream will be credited to cash accounts of Clearstream
Participants in accordance with its rules and procedures to the
extent received by DTC for Clearstream.
Euroclear. Euroclear was created in 1968 to
hold securities for participants of Euroclear (Euroclear
Participants) and to clear and settle transactions between
Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the
need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear
includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several
markets in several countries. Euroclear is operated by Euroclear
Bank S.A./N.V. (the Euroclear Operator), under
contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the Cooperative). All
operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on
behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers
and other professional financial intermediaries and may include
the underwriters. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is regulated and examined by the Belgian
Banking Commission.
Links have been established among DTC, Clearstream and Euroclear
to facilitate the initial issuance of the notes sold outside of
the United States and cross-market transfers of the notes
associated with secondary market trading.
Although DTC, Clearstream and Euroclear have agreed to the
procedures provided below in order to facilitate transfers, they
are under no obligation to perform these procedures, and these
procedures may be modified or discontinued at any time.
S-70
Clearstream and Euroclear will record the ownership interests of
their participants in much the same way as DTC, and DTC will
record the total ownership of each of the U.S. agents of
Clearstream and Euroclear, as participants in DTC. When notes
are to be transferred from the account of a DTC participant to
the account of a Clearstream participant or a Euroclear
participant, the purchaser must send instructions to Clearstream
or Euroclear through a participant at least one day prior to
settlement. Clearstream or Euroclear, as the case may be, will
instruct its U.S. agent to receive notes against payment.
After settlement, Clearstream or Euroclear will credit its
participants account. Credit for the notes will appear on
the next day (European time).
Because settlement is taking place during New York business
hours, DTC participants will be able to employ their usual
procedures for sending notes to the relevant U.S. agent
acting for the benefit of Clearstream or Euroclear participants.
The sale proceeds will be available to the DTC seller on the
settlement date. As a result, to the DTC participant, a
cross-market transaction will settle no differently than a trade
between two DTC participants.
When a Clearstream or Euroclear participant wishes to transfer
notes to a DTC participant, the seller will be required to send
instructions to Clearstream or Euroclear through a participant
at least one business day prior to settlement. In these cases,
Clearstream or Euroclear will instruct its U.S. agent to
transfer these notes against payment for them. The payment will
then be reflected in the account of the Clearstream or Euroclear
participant the following day, with the proceeds back valued to
the value date, which would be the preceding day, when
settlement occurs in New York. If settlement is not completed on
the intended value date, that is, the trade fails, proceeds
credited to the Clearstream or Euroclear participants
account will instead be valued as of the actual settlement date.
You should be aware that you will only be able to make and
receive deliveries, payments and other communications involving
the notes through Clearstream and Euroclear on the days when
those clearing systems are open for business. Those systems may
not be open for business on days when banks, brokers and other
institutions are open for business in the United States. In
addition, because of time zone differences there may be problems
with completing transactions involving Clearstream and Euroclear
on the same business day as in the United States.
Certificated
Securities
A Global Note is exchangeable for certificated securities if:
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DTC (i) notifies us that it is unwilling or unable to
continue as depositary for the Global Notes or (ii) has
ceased to be a Clearing Agency registered under the Exchange Act
and, in either case, a successor depositary is not appointed by
us within 120 days; or
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we, at our option, notify the trustee in writing that we elect
to cause the issuance of the notes in certificated form.
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In addition, beneficial interests in a Global Note may be
exchanged for certificated securities upon prior written notice
given to the trustee by or on behalf of DTC in accordance with
the indenture governing the notes. In all cases, certificated
securities delivered in exchange for any Global Note or
beneficial interests in Global Notes will be registered in the
names, and issued in any approved denominations, requested by or
on behalf of the depositary (in accordance with its customary
procedures).
S-71
CERTAIN
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain U.S. federal
income tax consequences related to the purchase, ownership and
disposition of the notes by holders who purchase notes for cash
in this original issuance at their issue price
(i.e., the first price at which a substantial amount of the
notes are sold to the public, excluding sales to bond houses,
brokers, or similar persons or organizations acting in the
capacity of underwriters). This discussion is based upon the
Internal Revenue Code of 1986, as amended (Code),
regulations of the Treasury Department (Treasury
regulations), Internal Revenue Service (IRS)
rulings and pronouncements, and judicial decisions now in
effect, all of which are subject to change (possibly on a
retroactive basis). We have not sought, and will not seek, any
rulings from the IRS regarding the matters discussed below.
There can be no assurance that the IRS will not take positions
concerning the tax consequences of the purchase, ownership or
disposition of the notes which are different from those
discussed below.
This discussion is a summary for general information only and
does not consider all aspects of U.S. federal income
taxation that may be relevant to the purchase, ownership and
disposition of the notes. In addition, this discussion is
limited to the U.S. federal income tax consequences to
initial holders who hold the notes as capital assets (generally,
property held for investment). It does not describe any tax
consequences arising out of the tax laws of any state, local or
foreign jurisdiction, any estate or gift tax consequences, or
the U.S. federal income tax consequences to investors
subject to special treatment under the U.S. federal income
tax laws, such as:
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dealers in securities or foreign currency;
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tax-exempt entities;
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banks;
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thrifts;
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regulated investment companies;
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real estate investment trusts;
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traders in securities that have elected the mark-to-market
method of accounting for their securities;
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insurance companies;
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persons that hold notes as part of a straddle, a
hedge or a conversion transaction or
other risk reduction transaction;
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persons subject to the alternative minimum tax;
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United States expatriates;
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U.S. holders (defined below) that have a functional
currency other than the U.S. dollar;
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pass-through entities (e.g., partnerships and entities or
arrangements treated as partnerships for U.S. federal
income tax purposes) or investors who hold the notes through
pass-through entities;
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passive foreign investment companies; and
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controlled foreign corporations.
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If any entity or arrangement that is treated as a partnership
for U.S. federal income tax purposes is a beneficial owner
of notes, the U.S. federal income tax treatment of a
partner in the partnership generally will depend on the status
of the partner and the activities of the partnership. If you are
a partner in a partnership that is considering purchasing notes,
you should consult with your tax advisor.
In certain circumstances (see the discussion of
Optional Redemption and
Repurchase at the Option of
Holders Offer to Repurchase upon Change of
Control under Description of the Notes), we
S-72
may pay amounts on the notes that are in excess of the stated
interest and principal of the notes. Certain debt instruments
that provide for one or more contingent payments are subject to
Treasury regulations governing contingent payment debt
instruments. A payment is not treated as a contingent payment
under these Treasury regulations if, as of the issue date of the
debt instrument, the likelihood that such payment will be made
is remote or such contingency is considered
incidental. We intend to take the position that the
possibility that any such excess payment will be made is remote
and/or
incidental so that such possibility will not cause the notes to
be treated as contingent payment debt instruments. Our
determination that these contingencies are remote
and/or
incidental is binding on you unless you disclose your contrary
position to the IRS in the manner that is required by applicable
Treasury regulations. Our determination is not, however, binding
on the IRS. It is possible that the IRS might take a different
position from that described above, in which case the timing,
character and amount of taxable income in respect of the notes
may be materially and adversely different from that described in
this section. The remainder of this discussion assumes that the
notes are not contingent payment debt instruments.
U.S.
holders
As used in this discussion, a U.S. holder is a
beneficial owner of notes that, for U.S. federal income tax
purposes, is:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust, if (i) a United States court is able to exercise
primary supervision over administration of the trust and one or
more United States persons (as defined under the Code) have the
authority to control all substantial decisions of the trust or
(ii) the trust has a valid election in effect under
applicable Treasury regulations to be treated as a United States
person.
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Taxation
of interest
Interest on the notes generally will be taxable to you as
ordinary income:
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when it accrues, if you use the accrual method of accounting for
U.S. federal income tax purposes; or
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when you receive it, if you use the cash method of accounting
for U.S. federal income tax purposes.
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Sale
or other disposition of notes
Upon the sale, exchange, redemption, retirement or other taxable
disposition of a note, you generally will recognize capital gain
or loss equal to the difference, if any, between:
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the amount of cash proceeds and the fair market value of any
property received on such disposition (less any amount
attributable to accrued and unpaid stated interest, which
generally will be taxable as ordinary income to the extent not
previously included in gross income); and
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your adjusted tax basis in the note.
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Your adjusted tax basis in a note generally will equal the cost
of the note to you. Your gain or loss that is recognized on the
sale or other disposition of the note generally will be capital
gain or loss. This capital gain or loss generally will be
long-term capital gain or loss if, at the time of the sale or
other disposition, you have held the note for more than one
year. If you are a non-corporate U.S. holder, your
long-term capital gain generally will be subject to a maximum
tax rate of 15%, which maximum tax rate currently is scheduled
to
S-73
increase to 20% for sales or other dispositions occurring during
taxable years beginning on or after January 1, 2011. The
deductibility of capital losses is subject to limitations.
Information
reporting and backup withholding
Information reporting generally will apply to payments of
interest on, or the proceeds of a sale or other disposition
(including a retirement or redemption) of, notes held by you,
unless you are an exempt recipient such as a corporation. Backup
withholding generally will apply to such payments unless you
provide us or the appropriate intermediary with a correct
taxpayer identification number, and comply with certain
certification procedures, or you otherwise establish an
exemption from backup withholding. Backup withholding is not an
additional tax. Any amount withheld under the backup withholding
rules is allowable as a credit against your U.S. federal
income tax liability, if any, and a refund may be obtained if
the amount withheld exceeds your actual U.S. federal income
tax liability and you timely provide the required information to
the IRS.
Non-U.S.
holders
You are a
non-U.S. holder
for purposes of this discussion if you are a beneficial owner of
notes and you are, for U.S. federal income tax purposes, an
individual, corporation, estate or trust that is not a
U.S. holder.
U.S.
federal income tax and withholding tax on payments on the
notes
Subject to the discussion of backup withholding below, you
generally will not be subject to U.S. federal income tax or
withholding tax on payments of interest on a note, provided that:
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an actual or constructive owner of 10% or more of the total
combined voting power of all classes of our voting stock within
the meaning of the Code and applicable Treasury regulations;
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a controlled foreign corporation related (directly or
indirectly) to us; or
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a bank receiving interest as described in
Section 881(c)(3)(A) of the Code;
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such interest payments are not effectively connected with the
conduct by you of a trade or business within the United
States; and
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you provide a properly completed IRS
Form W-8BEN
(or substitute IRS
Form W-8BEN
or the appropriate successor form), signed under penalties of
perjury, which provides your name and address and certifies that
you are not a United States person (as defined under the Code),
to:
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us or our paying agent; or
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a securities clearing organization, bank or other financial
institution that holds customers securities in the
ordinary course of its trade or business and that holds your
notes on your behalf and that certifies to us or our paying
agent, under penalties of perjury, that it, or the bank or
financial institution between it and you, has received from you
your properly completely IRS Form
W-8BEN (or
substitute IRS
Form W-8BEN
or the appropriate successor form) and provides us or our paying
agent with a copy of such form.
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Special rules may apply to
non-U.S. holders
who hold notes through qualified intermediaries
within the meaning of U.S. federal income tax laws.
Payments of interest on a note that are effectively connected
with your conduct of a trade or business in the United States
and, if you are entitled to benefits under an applicable income
tax treaty, that are attributable to a permanent establishment
or a fixed base maintained by you in the United States,
generally will be subject to U.S. federal income tax on a
net basis at the regular graduated rates and in the manner
S-74
applicable to payments to a U.S. holder. If you are a
corporate
non-U.S. holder,
you also may be subject to a branch profits tax at a rate of 30%
(or such lower rate as may be available under an applicable
income tax treaty) on your effectively connected earnings and
profits attributable to such interest. If interest is
effectively connected income, payments of such interest will not
be subject to U.S. withholding tax so long as you provide
us or our paying agent with a properly completed IRS
Form W-8ECI
(or other applicable form), signed under penalties of perjury,
on or before the date of the payment of such interest.
A
non-U.S. holder
that does not qualify for an exemption from U.S. federal
income tax or withholding tax under the preceding paragraphs
generally will be subject to withholding of U.S. federal
income tax at the rate of 30% (or such lower rate as may be
available under an applicable income tax treaty) on payments of
interest on a note.
NON-U.S. HOLDERS
SHOULD CONSULT WITH THEIR TAX ADVISORS ABOUT ANY APPLICABLE
INCOME TAX TREATIES, WHICH MAY PROVIDE FOR AN
EXEMPTION FROM OR A REDUCTION OF U.S. FEDERAL INCOME
TAX OR WITHHOLDING TAX, EXEMPTION FROM OR REDUCTION OF THE
BRANCH PROFITS TAX, OR OTHER RULES DIFFERENT FROM THOSE
DESCRIBED ABOVE.
Sale
or other disposition of notes
Subject to the discussion of backup withholding below, any gain
realized by you on the sale, exchange, redemption, retirement or
other disposition of a note generally will not be subject to
U.S. federal income tax or withholding tax, unless:
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such gain is effectively connected with your conduct of a trade
or business in the United States; or
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you are an individual who is present in the United States for
183 days or more in the taxable year of the sale or other
disposition and certain other conditions are satisfied.
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If the first bullet point applies, you generally will be subject
to U.S. federal income tax with respect to such gain in the
same manner as U.S. holders, as described above, unless an
applicable income tax treaty provides otherwise. In addition, if
you are a corporation, you also may be subject to the branch
profits tax described above on your effectively connected
earnings and profits attributable to such gain. If the second
bullet point applies, you generally will be subject to
U.S. federal income tax at a rate of 30% (or such lower
rate as may be available under an applicable income tax treaty)
on the amount by which your capital gains from U.S. sources
exceed certain capital losses allocable to U.S. sources.
Information
reporting and backup withholding
Payments to you of interest on a note, and amounts withheld from
such payments, if any, generally will be required to be reported
to the IRS and to you. Backup withholding generally will not
apply to payments of interest on a note if you duly provide
certification as to your foreign status, or you otherwise
establish an exemption, provided that neither we nor our paying
agent has actual knowledge or reason to know that you are a
United States person (as defined under the Code).
Payment of the gross proceeds from a sale or other disposition
(including a retirement or redemption) of a note by you effected
by the U.S. office of a U.S. or
non-U.S. broker
generally will be subject to information reporting requirements
and backup withholding unless you properly certify, under
penalties of perjury, as to your foreign status and certain
other conditions are met, or you otherwise establish an
exemption. Payment of the gross proceeds from a sale or other
disposition of a note by you outside the United States effected
by a
non-U.S. office
of a
non-U.S. broker
generally will not be subject to information reporting and
backup withholding. Payment of the gross proceeds from a sale or
other disposition of a note by you generally will be subject to
information reporting, but not backup withholding, if such sale
or other disposition is effected by a
non-U.S. office
of a broker that is a United States person (as defined under the
Code) or a foreign person with specified connections to the
United States, unless you properly certify, under penalties of
S-75
perjury, as to your foreign status and certain other conditions
are met, or you otherwise establish an exemption.
Backup withholding is not an additional tax. Any amount withheld
under the backup withholding rules is allowable as a credit
against your U.S. federal income tax liability, if any, and
a refund may be obtained if the amount withheld exceeds your
actual U.S. federal income tax liability and you timely
provide the required information to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME
TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT
TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT WITH ITS
OWN TAX ADVISOR REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING
OF OUR NOTES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE
IN APPLICABLE LAWS.
S-76
UNDERWRITING
We are offering the notes described in this prospectus
supplement through the underwriters. Banc of America Securities
LLC is the representative of the underwriters. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
severally agreed to purchase, the aggregate principal amount of
notes listed next to its name in the following table:
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Principal Amount
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Underwriter
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of Notes
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Banc of America Securities LLC
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$
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82,000,000
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J.P. Morgan Securities Inc.
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66,000,000
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BMO Capital Markets Corp.
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9,000,000
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BNP Paribas Securities Corp.
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9,000,000
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Rabo Securities USA, Inc.
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9,000,000
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Scotia Capital (USA) Inc.
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9,000,000
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Calyon Securities (USA) Inc.
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4,000,000
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Fifth Third Securities, Inc.
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4,000,000
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PNC Capital Markets LLC
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4,000,000
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RBS Securities Inc.
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4,000,000
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Total
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$
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200,000,000
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The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the notes if they buy any of them. The underwriters will sell
the notes to the public when and if the underwriters buy the
notes from us.
The underwriters have advised us that they propose initially to
offer the notes to the public at the public offering price set
forth on the cover of this prospectus supplement. After the
public offering of the notes, the public offering price and
other selling terms may be changed.
We estimate that our share of the total expenses of the
offering, excluding underwriting discounts, will be
approximately $1.0 million.
The following table shows the underwriting discounts and
commissions to be paid to the underwriters in connection with
this offering (expressed as a percentage of the principal amount
of the notes):
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Paid by Us
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Per note
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2.125
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%
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We have agreed to indemnify the underwriters against, or
contribute to payments that the underwriters may be required to
make in respect of, certain liabilities, including liabilities
under the Securities Act.
The notes are a new issue of securities with no established
trading market. The notes will not be listed on any securities
exchange or on any automated dealer quotation system. The
underwriters may make a market in the notes after completion of
the offering, but will not be obligated to do so and may
discontinue any market-making activities at any time without
notice. No assurance can be given as to the liquidity of the
trading market for the notes or that an active public market for
the notes will develop. If an active public market for the notes
does not develop, the market price and liquidity of the notes
may be adversely affected.
In connection with the offering of the notes, certain of the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the notes.
Specifically, the underwriters may overallot in connection with
the offering, creating a short position. In addition, the
underwriters may bid for, and purchase, the notes in the open
market to cover short positions or to stabilize the price of the
notes. Any of these activities may stabilize or maintain the
market price of the notes above independent market levels, but
no representation is made hereby of the magnitude of any effect
that the transactions described above may have on the market
price of the notes. The underwriters will not be required to
engage in these activities, and may engage in these activities,
and may end any of these activities, at any time without notice.
S-77
Conflicts
of Interest
In the ordinary course of business, the underwriters and their
affiliates have provided and may in the future provide
commercial banking, financial advisory or investment banking
services for us and our subsidiaries for which they have
received or will receive customary compensation. Certain of the
underwriters and their affiliates may, from time to time in the
future, engage in transactions with and perform services for us
and our affiliates in the ordinary course of their business.
Affiliates of certain of the underwriters are lenders or agents
under our senior secured revolving credit facility. As
described under Use of Proceeds, we intend to use
the net proceeds from this offering to repay borrowings under
our senior secured revolving credit facility (without reducing
the commitments under the senior secured revolving credit
facility) and, therefore, any affiliates of the underwriters
that are lenders under our senior secured revolving credit
facility will receive a portion of the net proceeds from this
offering. Those underwriters whose affiliates will receive
at least 5% of the total net proceeds (not including
underwriting compensation) from this offering are considered by
FINRA to have a conflict of interest with us in regards to this
offering. As a result, this offering is being conducted in
accordance with the applicable requirements of NASD
Rule 2720 and FINRA Rule 5110 regarding the
underwriting of securities of a company with a member that has a
conflict of interest within the meaning of those rules. NASD
Rule 2720(a)(2) requires that under these circumstances a
qualified independent underwriter participate in the preparation
of the prospectus and exercise the usual standards of due
diligence in respect thereto. Scotia Capital (USA) Inc. has
agreed to act as the qualified independent underwriter with
respect to this offering. We have agreed to indemnify Scotia
Capital (USA) Inc. in its capacity as qualified independent
underwriter against certain liabilities under the Securities
Act. No underwriter having a conflict of interest under NASD
Rule 2720 will confirm sales to any account over which the
underwriter exercises discretionary authority without the
specific written approval of the accountholder.
In addition, from time to time, certain of the underwriters and
their affiliates may effect transactions for their own account
or the accounts of their customers, and hold on behalf of
themselves or their customers, long or short positions in our
debt or equity securities or loans.
S-78
LEGAL
MATTERS
Certain legal matters in connection with this offering will be
passed upon for us by Vorys, Sater, Seymour and Pease LLP,
Columbus, Ohio. The validity of the notes and the guarantees
will be passed upon for us by Katten Muchin Rosenman LLP, New
York, New York. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Cahill
Gordon & Reindel
llp, New York, New
York.
EXPERTS
The consolidated financial statements and related consolidated
financial statement schedules as of September 30, 2009 and
2008, and for each of the three years in the period ended
September 30, 2009 incorporated in this prospectus
supplement by reference from our Current Report on
Form 8-K
dated January 11, 2010, and the effectiveness of our
internal control over financial reporting have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports incorporated
by reference herein (which reports (1) express an
unqualified opinion on the consolidated financial statements and
related consolidated financial statement schedules and include
an explanatory paragraph referring to the adoption of new
guidance regarding employers accounting for defined
benefit pension and postretirement plans on September 30,
2007 and (2) express an unqualified opinion on the
effectiveness of internal control over financial reporting).
Such financial statements and financial statement schedules have
been so incorporated in reliance upon the reports of such firm
given upon their authority as experts in auditing and accounting.
S-79
PROSPECTUS
The Scotts Miracle-Gro
Company
Debt Securities
Common Shares
Preferred Shares
Warrants
Purchase Contracts
Purchase Units
Guarantees of Debt
Securities
We may offer from time to time, in one or more offerings, debt
securities, common shares, preferred shares, warrants, purchase
contracts and purchase units or any combination thereof. The
debt securities may be either senior debt securities or
subordinated debt securities. This prospectus also covers
guarantees, if any, of our payment obligations under the debt
securities, which may be given from time to time by one or more
of our subsidiaries, on terms to be determined at the time of
the offering.
This prospectus describes the general terms of the securities we
may offer and the general manner in which we may offer the
securities. Each time we offer securities, we will provide a
prospectus supplement that will describe the specific terms of
the securities offered and the specific manner in which we will
offer the securities.
This prospectus may not be used to consummate a sale of any
securities unless accompanied by a prospectus supplement. The
prospectus supplement may also add, update or change information
contained in this prospectus. You should read this prospectus,
the applicable prospectus supplement and the additional
information described under the heading Where You Can
Find More Information carefully before you make your
investment decision.
Our common shares are listed on the New York Stock Exchange, or
NYSE, under the symbol SMG. On January 8, 2010,
the last reported sale price of our common shares was $39.70.
Unless we state otherwise in the applicable prospectus
supplement, we will not list any of the securities on any
securities exchange.
We may sell the securities directly to purchasers or to or
through underwriters, dealers or agents. The applicable
prospectus supplement will provide the names of any
underwriters, dealers or agents, the specific terms of the plan
of distribution, any over-allotment option and any applicable
underwriting discounts and commissions.
Investing in our securities involves risk. See Risk
Factors on page 2 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is January 11, 2010.
TABLE OF
CONTENTS
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ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or the SEC,
utilizing a shelf registration process. Under this
shelf registration process, we may sell any combination of the
securities described in this prospectus in one or more offerings
from time to time. This prospectus describes the general terms
of the securities we may offer and the general manner in which
we may offer the securities. Each time we offer securities, we
will provide a prospectus supplement that will describe the
specific terms of the securities offered and the specific manner
in which we will offer the securities. The prospectus supplement
may also add, update or change information contained in this
prospectus. If there is any inconsistency between the
information in this prospectus and the applicable prospectus
supplement, you should rely on the information in the prospectus
supplement. You should read this prospectus and the applicable
prospectus supplement and any free writing prospectus prepared
by or on behalf of us, together with the information described
under the heading Where You Can Find More
Information, before deciding whether to invest in any
of the securities offered.
You should rely only on the information contained or
incorporated by reference in this prospectus and any prospectus
supplement or free writing prospectus. We have not authorized
anyone to provide you with different or additional information.
If anyone provides you with different, additional or
inconsistent information, you should not rely on it. This
prospectus is not an offer to sell these securities, and it is
not soliciting an offer to buy these securities, in any state
where the offer or sale is not permitted. You should not assume
that the information contained in this prospectus or any
prospectus supplement or free writing prospectus is accurate as
of any date other than the date on the cover of the applicable
document or that any information we have incorporated by
reference is accurate as of any date other than the date of the
document incorporated by reference. Our business, financial
condition, results of operations and prospects may have changed
since those dates.
Unless the context otherwise requires, references to
Scotts, the Company, we,
our and us and similar terms mean The
Scotts Miracle-Gro Company and its subsidiaries.
FORWARD-LOOKING
STATEMENTS
This prospectus and the documents incorporated by reference
herein may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act, with respect to our financial condition, results of
operations, cash flows, plans, objectives, strategies, targets,
prospects and business. Forward-looking statements reflect our
current expectations, estimates or projections concerning future
results or events. These statements are generally identified by
the use of forward-looking words or phrases such as
believe, strategy, expect,
anticipate, may, could,
intend, intent, belief,
estimate, plan, foresee,
likely, will, should or
other similar words or phrases. Forward-looking statements are
not guarantees of performance and are inherently subject to
known and unknown risks, uncertainties and assumptions that are
difficult to predict and could cause our actual results and
future events to differ materially from those expressed in or
implied by the forward-looking statements. We cannot assure you
that any of our expectations, estimates or projections will be
achieved and you should not place undue reliance on
forward-looking statements.
The forward-looking statements included or incorporated by
reference in this prospectus are only made as of the date of
this prospectus or the respective document incorporated by
reference herein, as applicable. Except as required by law, we
undertake no obligation to publicly update any forward-looking
statement to reflect subsequent events or circumstances. See
Where You Can Find More Information.
Numerous factors could cause our actual results and events to
differ materially from those expressed or implied by
forward-looking statements, including, without limitation:
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the ongoing governmental investigations regarding our compliance
with the Federal Insecticide, Fungicide, and Rodenticide Act of
1947, as amended;
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compliance with environmental and other public health
regulations;
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increases in the prices of certain raw materials;
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risks related to the current economic crisis;
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the highly competitive nature of our markets;
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the concentration of our sales to a small number of retail
customers;
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adverse weather conditions;
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our historical seasonality;
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the amount of our debt;
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our significant international operations;
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our inability to adequately protect our intellectual property
and other proprietary rights;
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dependence on key personnel;
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termination of the marketing agreement with Monsanto Company for
consumer
Roundup®
products;
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Hagedorn Partnership, L.P. beneficially owns approximately 31%
of our outstanding common shares on a fully diluted
basis; and
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any other risk factors set forth or incorporated by reference
below under the heading Risk Factors.
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The list of factors above is illustrative, but by no means
exhaustive. All forward-looking statements should be evaluated
with the understanding of their inherent uncertainty. All
subsequent written and oral forward-looking statements
concerning the matters addressed in this prospectus and
attributable to us or any person acting on our behalf are
qualified by these cautionary statements.
RISK
FACTORS
Our business is subject to uncertainties and risks. Before you
decide to invest in our securities, you should carefully
consider and evaluate all of the information included and
incorporated by reference in this prospectus, including the risk
factors incorporated by reference from our most recent Annual
Report on
Form 10-K,
as updated by our Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and other filings we make with the SEC, and the risk factors
contained under the Risk Factors heading in any
applicable prospectus supplement. It is possible that our
business, financial condition, liquidity or results of
operations could be materially adversely affected by any of
these risks.
THE
SCOTTS MIRACLE-GRO COMPANY
We trace our roots to two businesses launched by entrepreneurs.
In 1868, Civil War veteran O.M. Scott started a seed business in
Marysville, Ohio, based on the conviction that farmers
shall have clean, weed-free fields. Beginning in 1907, The
Scotts Company expanded its reach by selling grass seed to
consumers and eventually exited the agricultural market. By
1988 through innovation and acquisition
The Scotts Company had become a leading marketer of lawn
fertilizer, grass seed and growing media products within the
United States.
Separately, Horace Hagedorn and his partner Otto Stern launched
Sterns Miracle-Gro Products, Inc. in 1951 in New York.
Their easy-to-use plant food quickly revolutionized the
gardening category. Through innovative marketing,
Miracle-Gro®
eventually became the leading plant food product in the
gardening industry. In 1995, The Scotts Company and Sterns
Miracle-Gro Products, Inc. merged, marking the start of a
significant evolution for us.
In the late 1990s, we launched both a geographic and a category
expansion. We acquired companies with industry-leading brands in
France, Germany and the United Kingdom. In fiscal 1999, we
acquired the
Ortho®
brand in the United States and exclusive rights for the
marketing and distribution of consumer
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Roundup® * brand
products within the United States and other specified countries,
thereby adding industry-leading weed, insect and disease control
products to our portfolio. We expanded into the lawn care
service industry with the launch of Scotts
LawnService®
in 1998. Since fiscal 2001, we have invested nearly
$125 million in acquisitions of local and regional lawn
care businesses to provide a platform for rapid expansion
throughout the United States. Most recently, we entered the
North American wild bird food category in fiscal 2006 with the
acquisition of Gutwein & Co., Inc. and its Morning
Song®
brand of bird food.
As we celebrate more than 100 years of selling products to
consumers, we own the leading brands in nearly every category of
the lawn and garden industry. A list of some of our North
American leading consumer brands is as follows:
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Category
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Brands
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Lawns
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Scotts®;
Turf
Builder®
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Gardens
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Miracle-Gro®;
Osmocote®;
LiquaFeed®;
Organic
Choice®
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Growing Media
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Miracle-Gro®;
Scotts®;
Hyponex®;
Earthgro®;
SuperSoil®
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Grass Seed
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Scotts®;
Turf
Builder®
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Controls
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Ortho®;
Home Defense
Max®;
Weed-B-Gon
Max®;
Roundup®*
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Wild Bird Food
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Morning
Song®;
Scotts Songbird
Selections®
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Roundup®
is a registered trademark of Monsanto Technology LLC, an
affiliate of Monsanto Company. |
In addition, we have the following significant brands in Europe:
Miracle-Gro®
plant fertilizers,
Weedol®
and
Pathclear®
herbicides,
EverGreen®
lawn fertilizers and
Levington®
growing media in the United Kingdom;
KB®
and
Fertiligène®
in France;
Celaflor®,
Nexa
Lotte®
and
Substral®
in Germany and Austria; and
ASEF®,
KB®
and
Substral®
in Belgium, the Netherlands and Luxembourg.
Roundup®
is also a significant brand in the United Kingdom, France,
Germany and other European markets.
Our principal executive offices are located at 14111 Scottslawn
Road, Marysville, Ohio 43041, and our telephone number is
(937) 644-0011.
We maintain a website at www.scotts.com where general
information about us is available. The information on our
website is not a part of this prospectus or any applicable
prospectus supplement.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges for the periods indicated:
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For the Fiscal Year Ended September 30,
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2009
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2008
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2007
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2006
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2005
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Ratio of earnings to fixed charges(1)
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3.7
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1.2
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2.9
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4.5
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3.6
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Earnings consist of income before income taxes, fixed charges,
amortization of capitalized interest, adjustments for minority
interests in consolidated subsidiaries and distributed earnings
of equity method investees less interest capitalized. Fixed
charges consist of interest on borrowings, amortization of
deferred financing costs, capitalized interest, the proportion
deemed representative of the interest factor within rent expense
and interest on deposits. We did not have any preferred shares
outstanding during the periods indicated. |
USE OF
PROCEEDS
Unless we state otherwise in the applicable prospectus
supplement, we intend to use the net proceeds from the sale of
the securities for general corporate purposes. General corporate
purposes may include working capital additions, repayment of
indebtedness, repurchase of our common shares, capital
expenditures, acquisitions and other strategic investments.
3
DESCRIPTION
OF DEBT SECURITIES AND GUARANTEES OF DEBT SECURITIES
The following description discusses the general terms and
provisions of the debt securities that we may offer under this
prospectus and any related guarantees. The debt securities may
be issued as senior debt securities or subordinated debt
securities. The indebtedness represented by the senior debt
securities will rank equally with all of our other unsecured and
unsubordinated debt. The indebtedness represented by the
subordinated debt securities will rank junior and be subordinate
in right of payment to the prior payment in full of our senior
debt, to the extent and in the manner set forth in the
applicable prospectus supplement for the securities.
The senior debt securities and the subordinated debt securities
will be issued under separate indentures between us and one or
more U.S. banking institutions. The trustee for each series
of our debt securities will be identified in the applicable
prospectus supplement. We may refer to the indenture covering
the senior debt securities as the senior indenture
and the indenture covering the subordinated debt securities as
the subordinated indenture. Together the senior
indenture and the subordinated indenture are called
indentures.
The forms of the indentures are filed as exhibits to the
registration statement of which this prospectus is a part. The
indentures are subject to and governed by the
Trust Indenture Act of 1939, or the Trust Indenture
Act, and may be supplemented or amended from time to time
following their execution. Prior to issuing any debt securities,
we will be required to select a trustee for the applicable
indenture or indentures, qualify the trustee or trustees under
the Trust Indenture Act and execute the applicable
indenture or indentures.
The form of each indenture gives us broad authority to set the
particular terms of each series of debt securities, including
the right to modify certain of the terms contained in the
indenture. The particular terms of a series of debt securities
and the extent, if any, to which the particular terms of the
issue modify the terms of the applicable form of indenture will
be described in the prospectus supplement relating to such
series of debt securities.
The following summary describes selected provisions of the
indentures. This summary does not describe every aspect of the
debt securities, the guarantees or the applicable indenture and
is subject to, and qualified in its entirety by reference to,
all the provisions of the applicable indenture, including the
terms defined in the applicable indenture. We urge you to read
the applicable indenture in its entirety. This summary is also
subject to, and qualified in its entirety by reference to, the
description of the particular debt securities and guarantees in
the applicable prospectus supplement.
General
The indentures provide that we will be able to issue an
unlimited aggregate principal amount of debt securities under
each indenture, in one or more series, and in any currency or
currency units. We are not required to issue all debt securities
of one series at the same time and, unless otherwise provided,
we may reopen a series, without the consent of the holders of
the debt securities of that series, for issuances of additional
debt securities of that series.
Prior to the issuance of each series of debt securities, the
terms of the particular securities will be specified in a
supplemental indenture or in one or more officers
certificates pursuant to a board resolution. We will describe in
the applicable prospectus supplement the terms of the debt
securities being offered, including:
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the title, and the price at which we will sell, the offered debt
securities;
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whether the offered debt securities are senior debt securities
or subordinated debt securities;
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the aggregate principal amount of the offered debt securities;
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the date or dates on which principal will be payable or how to
determine such date or dates;
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the rate or rates or method of determination of interest;
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the date from which interest will accrue;
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the dates on which interest will be payable and any record dates
for the interest payable on the interest payment dates;
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the place of payment on the offered debt securities;
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any obligation or option we have to redeem, purchase or repay
the offered debt securities, or any option of the registered
holder to require us to redeem or repurchase offered debt
securities, and the terms and conditions upon which the offered
debt securities will be redeemed, purchased or repaid;
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the currency or currencies, including composite currencies or
currency units, in which payment of the principal of (or
premium, if any) or interest, if any, on any of the offered debt
securities will be payable if other than the currency of the
United States;
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any index, formula or other method used to determine the amount
of principal, premium, if any, or interest;
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the terms and conditions upon which payment on the offered debt
securities may change;
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whether the offered debt securities are defeasible;
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any addition to or change in the events of default;
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any addition to or change in the covenants in the applicable
indenture;
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whether the offered debt securities will be guaranteed;
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the terms of any right to convert the offered debt securities
into common shares; and
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any other terms of the offered debt securities not inconsistent
with the provisions of the applicable indenture.
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If the offered debt securities are denominated in whole or in
part in any currency other than U.S. dollars, if the
principal of (and premium, if any) or interest, if any, on the
offered debt securities are to be payable in a currency or
currencies other than that in which the debt securities are to
be payable, or if any index is used to determine the amount of
payments of principal of (and premium, if any) or interest on
any series of the debt securities, material federal income tax,
accounting and other considerations applicable thereto will be
described in the applicable prospectus supplement.
If so provided in the applicable prospectus supplement, we may
issue our debt securities at a discount below their principal
amount and pay less than the entire principal amount of our debt
securities upon declaration of acceleration of their maturity.
The applicable prospectus supplement will describe all material
federal income tax and other considerations applicable to any
such original issue discount securities.
The general provisions of the form indentures do not contain any
provisions that would limit our ability or the ability of our
subsidiaries to incur indebtedness or that would afford holders
of our debt securities protection in the event of a highly
leveraged or similar transaction involving us or any of our
subsidiaries. Please refer to the applicable prospectus
supplement for information with respect to any deletions from,
modifications of or additions to, the events of default
described below that are applicable to the offered debt
securities or any covenants or other provisions providing event
risk or similar protection.
Payment
Unless we state otherwise in the applicable prospectus
supplement, we will pay interest on a debt security on each
interest payment date to the person in whose name the debt
security is registered as of the close of business on the
regular record date relating to the interest payment date.
Unless we state otherwise in the applicable prospectus
supplement, we will pay principal of and any premium on the debt
securities at stated maturity, upon redemption or otherwise,
upon presentation of the debt securities at the office of the
applicable trustee, as our paying agent, or at other designated
places. Any other paying agent initially designated for the debt
securities of a particular series will be identified in the
applicable prospectus supplement.
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Form,
Transfers and Exchanges
The debt securities of each series will be issued only in fully
registered form, without interest coupons. Unless we state
otherwise in the applicable prospectus supplement, the debt
securities will be issued in denominations of $2,000 each or
integral multiples of $1,000 in excess thereof.
Subject to the terms of the applicable indenture and the
limitations applicable to global securities, you may exchange or
transfer debt securities at the corporate trust office of the
trustee or at any other office or agency maintained by us for
that purpose, without the payment of any service charge, except
for any tax or governmental charge.
Global
Securities
The debt securities of any series may be issued, in whole or in
part, by one or more global certificates that will be deposited
with the depositary identified in the applicable prospectus
supplement.
No global security may be exchanged in whole or in part for the
debt securities registered in the name of any person other than
the depositary for that global security or any nominee of that
depositary except in the following circumstances or as otherwise
provided in the applicable prospectus supplement. The depositary
may discontinue providing its services as depositary with
respect to the securities at any time by giving reasonable
notice to us or the applicable trustee. Under such
circumstances, in the event that a successor depositary is not
obtained, certificates are required to be printed and delivered.
In addition, we may decide to discontinue use of the system of
book-entry-only transfers through a depositary. In that event,
certificates will be printed and delivered to the depositary.
Unless otherwise stated in any prospectus supplement, The
Depository Trust Company, or DTC, will act as depositary.
Beneficial interests in global certificates will be shown on,
and transfers of global certificates will be effected only
through records maintained by DTC and its participants.
Events of
Default
Unless otherwise specified in the applicable prospectus
supplement, an event of default occurs with respect to debt
securities of any series if:
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we default for 30 days in the payment when due of interest
upon any debt security of such series;
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we default in the payment when due of the principal of or
premium, if any, on any debt security of such series at its
maturity;
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we default in the deposit of any sinking fund payment, when and
as due by the terms of any debt security of such series;
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we default in the observance or performance of any other
covenant or agreement contained in the applicable indenture
which default continues for a period of 60 days after we
receive written notice specifying the default (and demanding
that such default be remedied) from the applicable trustee or
the holders (with a copy to the applicable trustee) of at least
25% of the outstanding principal amount of the debt securities
of such series;
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certain events of bankruptcy, insolvency, receivership or
reorganization with respect to us occur; or
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any other event of default provided with respect to debt
securities of such series occurs.
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No event of default with respect to a series of debt securities
necessarily constitutes an event of default with respect to the
debt securities of any other series issued under the indentures.
Each indenture requires us to provide an officers
certificate to the applicable trustee promptly upon any such
officer obtaining knowledge of any default or event of default
that has occurred and, if applicable, describe such default or
event of default and the status thereof. Each indenture requires
us to file annually with the applicable trustee an
officers certificate as to our compliance with all
conditions and covenants under the applicable indenture. Each
indenture provides that the applicable trustee may withhold
notice to the
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holders of a series of debt securities of any default, except
payment defaults on those debt securities, if it considers such
withholding to be in the interest of the holders of that series
of debt securities.
If an event of default occurs and is continuing with respect to
any series of debt securities, then either the applicable
trustee or the holders of not less than 25% in principal amount
of the outstanding debt securities of that series may declare
the principal amount, or, if any debt securities of that series
are original issue discount securities, that portion of the
principal amount of those original issue discount securities as
may be specified in the terms of those original issue discount
securities, of all of the debt securities of that series to be
due and payable immediately, by a notice in writing to us, and
to the applicable trustee if given by the holders, and upon any
such declaration that principal amount, or specified amount,
plus accrued and unpaid interest, and premium, if any, will
become immediately due and payable. Upon payment of that amount
in the currency in which the debt securities are denominated
(except as otherwise provided in the applicable indenture or the
applicable prospectus supplement), all of our obligations in
respect of the payment of principal of the debt securities of
that series will terminate.
After a declaration of acceleration has been made and before the
trustee has obtained a judgment or decree for payment of the
money due on any series of debt securities, the holders of not
less than a majority in aggregate principal amount of the
outstanding debt securities of that series, by written notice to
us and the applicable trustee, may rescind and annul the
declaration and its consequences, subject to any terms or
conditions specified in the applicable prospectus supplement.
If an event of default results from bankruptcy, insolvency or
reorganization, the principal amount of all the debt securities
of a series, or that portion of the principal amount of such
debt securities as may be specified in the applicable prospectus
supplement, will automatically become immediately due and
payable.
Subject to the provisions of each indenture relating to the
duties of the applicable trustee, in case an event of default
with respect to our debt securities of a particular series
occurs and is continuing, the applicable trustee will be under
no obligation to exercise any of its rights or powers under that
indenture at the request, order or direction of any of the
holders of debt securities of that series, unless the holders
have offered to the applicable trustee reasonable security or
indemnity against the costs, expenses and liabilities which
might be incurred by it in complying with such request or
direction. Subject to the provisions for the indemnification of
the applicable trustee, the holders of a majority in principal
amount of the outstanding debt securities of that series will
have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
applicable trustee under the applicable indenture, or exercising
any trust or power conferred on the applicable trustee with
respect to the debt securities of that series.
Merger or
Consolidation
Each indenture provides that we may not consolidate with or
merge or wind up into any other entity, whether or not we are
the surviving entity, and that we may not sell, assign, convey,
transfer or lease our properties and assets substantially as an
entirety to any person, unless:
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the entity formed by the consolidation or into which we are
merged, or the person which acquires us or which leases our
properties and assets substantially as an entirety, is an entity
organized and existing under the laws of the United States or
any State or territory of the United States or the District of
Columbia, and expressly assumes, by supplemental indenture, the
due and punctual payment of the principal of (and premium, if
any) and interest on all the outstanding debt securities and the
performance of all of our covenants under the applicable
indenture;
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immediately after giving effect to such transaction, no event of
default under the applicable indenture, and no event which after
notice or lapse of time or both would become an event of
default, has happened and is continuing; and
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all other conditions specified in the applicable prospectus
supplement are met.
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7
Modification
or Waiver
Without prior notice to or the consent of any holders, we and
the applicable trustee may modify the applicable indenture for
any of the following purposes:
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to cure any ambiguity, defect or inconsistency;
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to provide for uncertificated debt securities of a particular
series in addition to or in place of certificated debt
securities of such series;
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to provide for the assumption of our obligations to holders of
debt securities in the case of a merger or consolidation or sale
of all or substantially all of our assets;
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to make any change that would provide any additional rights or
benefits to the holders of debt securities or that does not
adversely affect in any material respect the legal rights under
the applicable indenture of any such holder;
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to add any person as a guarantor;
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to comply with any requirements of the SEC in order to effect or
maintain the qualification of the applicable indenture under the
Trust Indenture Act;
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to remove a guarantor which, in accordance with the terms of the
applicable indenture, ceases to be liable in respect of its
guarantee;
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to evidence and provide for the acceptance of appointment under
the applicable indenture by a successor trustee;
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to secure all of the debt securities of a particular series;
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to add to the covenants of us or any guarantor for the benefit
of the holders or to surrender any right or power conferred upon
us or any guarantor; or
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to establish the form or terms of debt securities of any series
as permitted by the terms of such indenture.
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We and the applicable trustee may, with some exceptions, amend
or modify either indenture with the consent of the holders of at
least a majority in aggregate principal amount of the
outstanding debt securities of all series affected by the
amendment or modification. However, no amendment or modification
may, without the consent of the holder of each outstanding debt
security affected thereby:
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reduce the principal amount of debt securities of such a series
whose holders must consent to an amendment, supplement or
waiver, including the waiver of defaults or events of default,
or to a rescission and cancellation of a declaration of
acceleration of the debt securities;
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reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on
the debt securities of such a series;
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reduce the principal of or change or have the effect of changing
the fixed maturity of such debt securities, or change the date
on which such debt securities may be subject to redemption, or
reduce the redemption price therefor;
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make such debt securities payable in money other than that
stated in such debt securities;
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make any change in the provisions of the applicable indenture
protecting the right of each holder to receive payment of
principal of and interest on such debt securities on or after
the due date thereof or to bring suit to enforce such payment;
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waive a default in the payment of principal of or interest on
any such debt securities; provided that this clause shall
not limit the right of the holders of a majority in aggregate
principal amount of the outstanding debt securities of such
series to rescind and cancel a declaration of acceleration of
such debt securities following delivery of an acceleration
notice as described under Events of
Default;
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make any change in the provisions of the applicable indenture
described in this Modification or Waiver section;
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contractually subordinate such debt securities (or any related
guarantees) to any other indebtedness;
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conflict with the required provisions of the
Trust Indenture Act; or
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modify any of the foregoing provisions of the applicable
indenture, except to increase any such percentage or to provide
that certain other provisions of the applicable indenture cannot
be modified or waived without the consent of the holder of each
outstanding debt security of each series affected thereby.
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A modification which changes or eliminates any provision of an
indenture expressly included solely for the benefit of holders
of debt securities of one or more particular series or modifies
the holders rights will be deemed not to affect the rights
under the indenture of the registered holders of debt securities
of any other series.
Each of the indentures provides that the holders of not less
than a majority in aggregate principal amount of the then
outstanding debt securities of any series, by notice to the
relevant trustee, may on behalf of the holders of the debt
securities of that series waive any default or event of default
and its consequences under the applicable indenture, except:
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a continuing default or event of default in the payment of the
principal of (and premium, if any) or interest on any such debt
security held by a non-consenting holder; or
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a default in respect of a covenant or provision of the indenture
which cannot be modified or amended without the consent of the
holder of each outstanding debt security of each series affected.
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Legal
Defeasance and Covenant Defeasance
The applicable indenture with respect to the debt securities of
any series may be discharged, subject to the terms and
conditions as specified in the applicable prospectus supplement,
when either:
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all the debt securities of such series theretofore authenticated
and delivered (except lost, stolen or destroyed debt securities
of such series which have been replaced or paid and debt
securities of such series for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by us and thereafter repaid to us as provided in the
applicable indenture) have been delivered to the registrar for
cancellation, and
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we have paid all sums payable under the applicable indenture by
us, and
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we have delivered to the applicable trustee an officers
certificate and an opinion of counsel stating that all
conditions precedent under the applicable indenture relating to
the satisfaction and discharge of such indenture have been
complied with; or
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we shall have given notice of redemption of all of the debt
securities of such series, all of the debt securities of such
series shall have otherwise become due and payable or all of the
debt securities of such series will become due and payable, or
may be called for redemption, within one year, and
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we have irrevocably deposited or caused to be deposited with the
applicable trustee or another trustee funds, in trust solely for
the benefit of the holders of debt securities of such series,
U.S. legal tender, U.S. government obligations or a
combination thereof, in such amounts as will be sufficient
(without consideration of any reinvestment of interest) to pay
and discharge the entire indebtedness (including all principal
and accrued interest) on the debt securities of such series not
theretofore delivered to the applicable trustee for
cancellation, together with irrevocable instructions from us
directing the applicable trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may be;
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no default or event of default shall have occurred and be
continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in a
breach or violation of or default under any other instrument to
which we are a party or by which we are bound;
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we have paid all other sums payable under the applicable
indenture; and
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we have delivered to the applicable trustee an officers
certificate and an opinion of counsel stating that all
conditions precedent under the applicable indenture relating to
the satisfaction and discharge of the applicable indenture have
been complied with.
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In addition, each series of debt securities may provide
additional or different terms or conditions for the discharge or
defeasance of some or all of our obligations as may be specified
in the applicable prospectus supplement.
If provision is made for the defeasance of debt securities of a
series, and if the debt securities of that series are registered
securities and denominated and payable only in
U.S. dollars, then the provisions of each indenture
relating to defeasance will be applicable except as otherwise
specified in the applicable prospectus supplement for debt
securities of that series. Defeasance provisions, if any, for
debt securities denominated in a foreign currency or currencies
may be specified in the applicable prospectus supplement.
We may, at our option and at any time, elect to have all of our
obligations discharged with respect to the outstanding debt
securities of a series and all obligations of any guarantors
discharged with respect to their guarantees (Legal
Defeasance) except for:
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the rights of holders of such outstanding debt securities to
receive payments in respect of the principal of, premium, if
any, and interest on such debt securities when such payments are
due from the trust referred to below;
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our obligations with respect to such debt securities concerning
issuing temporary debt securities, registration of debt
securities, mutilated, destroyed, lost or stolen debt securities
and the maintenance of an office or agency for payment and money
for security payments held in trust;
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the rights, powers, trusts, duties and immunities of the
applicable trustee, and our obligations in connection
therewith; and
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the Legal Defeasance provisions of the applicable indenture.
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In addition, we may, at our option and at any time, elect to
have our obligations and the obligations of any guarantors
released with respect to certain covenants that are described in
the applicable indenture (Covenant Defeasance) and
thereafter any omission to comply with those covenants shall not
constitute a default or event of default with respect to the
outstanding debt securities of a series. In the event Covenant
Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events)
described under Events of Default will
no longer constitute an event of default with respect to such
debt securities.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
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we must irrevocably deposit with the applicable trustee, in
trust, for the benefit of the holders of such debt securities,
cash in U.S. dollars, U.S. government obligations, or
a combination thereof, in such amounts as will be sufficient
(without consideration of any reinvestment of interest), in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and
interest on the outstanding debt securities on the stated
maturity or on the applicable redemption date, as the case may
be, and we must specify whether such debt securities are being
defeased to maturity or to a particular redemption date;
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in the case of Legal Defeasance, we must have delivered to the
applicable trustee an opinion of counsel reasonably acceptable
to such trustee confirming that (1) we have received from,
or there has been published by, the Internal Revenue Service a
ruling or (2) since the date of the applicable indenture,
there has been a change in the applicable federal income tax
law, in either case to the effect that, and
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based thereon such opinion of counsel shall confirm that, the
holders of such outstanding debt securities will not recognize
income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had
not occurred;
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in the case of Covenant Defeasance, we must have delivered to
the applicable trustee an opinion of counsel reasonably
acceptable to such trustee confirming that the holders of such
outstanding debt securities will not recognize income, gain or
loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
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no default or event of default shall have occurred and be
continuing either (1) on the date of such deposit (other
than a default or event of default resulting from the borrowing
of funds to be applied to such deposit) or (2) insofar as
events of default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day
after the date of deposit;
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such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under the
applicable indenture or any material agreement or instrument to
which we or any of our subsidiaries is a party or by which we or
any of our subsidiaries is bound (other than any such default
under the applicable indenture resulting solely from the
borrowing of funds to be applied to such deposit);
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we must have delivered to the applicable trustee an opinion of
counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors rights generally;
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we must deliver to the applicable trustee an officers
certificate stating that the deposit was not made by us with the
intent of preferring the holders of such debt securities over
our other creditors with the intent of defeating, hindering,
delaying or defrauding our creditors or others;
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we must deliver to the applicable trustee an officers
certificate and an opinion of counsel, each stating that all
conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; and
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certain other customary conditions precedent are satisfied.
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Senior
Debt Securities
The senior debt securities will be unsecured senior obligations
and will rank equally with all other senior unsecured and
unsubordinated debt. The senior debt securities will, however,
be subordinated in right of payment to all of our secured
indebtedness to the extent of the value of the assets securing
that indebtedness. Except as provided in the senior indenture or
specified in any authorizing resolution or supplemental
indenture relating to a series of senior debt securities to be
issued, no senior indenture will limit the amount of additional
indebtedness that may rank equally with the senior debt
securities or the amount of indebtedness, secured or otherwise,
that may be incurred or preferred shares that may be issued by
any of our subsidiaries.
Subordination
If our assets are distributed upon our dissolution, winding up,
liquidation or reorganization, the payment of the principal of
(and premium, if any) and interest on any subordinated debt
securities will be subordinated in right of payment, to the
extent provided in the subordinated indenture and the applicable
prospectus supplement, to the prior payment in full of all
senior indebtedness, including senior debt securities. However,
our obligation to pay the principal of (and premium, if any) or
interest on the subordinated debt securities will not otherwise
be affected. Unless otherwise stated in the applicable
prospectus supplement, payment on account of principal (or
premium, if any), sinking funds or interest on the subordinated
debt securities may not be made at any time when there is a
default in the payment of the principal, premium, if any,
sinking funds, interest or certain other obligations on senior
indebtedness. In addition, the prospectus supplement for any
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series of subordinated debt securities may provide that payments
of the principal of (or premium, if any) or interest on the
subordinated debt securities may be delayed or not paid under
specified circumstances and periods. If, while we are in default
on senior indebtedness, any payment is received by the trustee
under the subordinated indenture or the holders of any of the
subordinated debt securities before we have paid all senior
indebtedness in full, the payment or distribution must be paid
over to the holders of the unpaid senior indebtedness or applied
to the repayment of the unpaid senior indebtedness. Subject to
paying the senior indebtedness in full, the holders of the
subordinated debt securities will be subrogated to the rights of
the holders of the senior indebtedness to the extent that
payments are made to the holders of senior indebtedness out of
the distributive share of the subordinated debt securities.
Due to the subordination, if our assets are distributed upon
insolvency, some or all of our general creditors may recover
more, ratably, than holders of subordinated debt securities. The
subordinated indenture or applicable supplemental indenture may
state that its subordination provisions will not apply to money
and securities held in trust under the satisfaction and
discharge and the legal defeasance provisions of the
subordinated indenture.
If this prospectus is being delivered in connection with the
offering of a series of subordinated debt securities, the
applicable prospectus supplement or the information incorporated
by reference in it will specify the approximate amount of senior
indebtedness outstanding as of a recent date and any limitations
on the issuance of additional senior indebtedness (or that there
is not such limitation). Senior indebtedness with respect to any
series of subordinated debt securities will have the meaning
specified in the applicable prospectus supplement for that
series.
Conversion
Rights
The terms and conditions of any debt securities being offered
that are convertible into our common shares will be described in
the applicable prospectus supplement. These terms will include
the conversion price, the conversion period, provisions as to
whether conversion will be mandatory or at the option of the
holder or us, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the
event that the debt securities are redeemed.
Corporate
Existence
Subject to the terms of the applicable indenture, we will do or
cause to be done all things necessary to preserve and keep in
full force and effect our corporate existence, charter and
statutory rights and franchises; provided, however, that we will
not be required to preserve any right or franchise if we
determine that the preservation thereof is no longer desirable
in the conduct of our business.
Guarantees
of Debt Securities
Any debt securities may be guaranteed by one or more of our
direct or indirect subsidiaries. Each prospectus supplement will
describe any guarantees of debt securities for the benefit of
the series of debt securities to which it relates.
Governing
Law
The indentures and our debt securities and any guarantees of our
debt securities will be governed by, and construed in accordance
with, the law of the State of New York.
DESCRIPTION
OF CAPITAL STOCK
The following summary describes the material features of our
capital stock. This summary does not describe every aspect of
our capital stock and is subject to, and qualified in its
entirety by reference to, all the provisions of our amended
articles of incorporation and code of regulations, each of which
is filed as an exhibit to the registration statement of which
this prospectus is a part, and the applicable provisions of Ohio
law.
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Authorized
Capital Stock
Our authorized capital stock consists of 100,000,000 common
shares, without par value, and 195,000 preferred shares, without
par value. As of January 4, 2010, there were
(1) 66,240,081 common shares issued and outstanding, and
(2) no preferred shares issued and outstanding.
Common
Shares
Holders of our common shares are entitled to:
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one vote for each share held;
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receive dividends when and if declared by our board of directors
from funds legally available therefor, subject to the rights of
holders of our preferred shares, if any, and any restrictions
contained in our long-term indebtedness; and
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share ratably in our net assets, legally available to our
shareholders in the event of our liquidation, dissolution or
winding up, after provision for distribution to the holders of
any preferred shares and to the payment in full of all amounts
required to be paid to creditors or provision for such payment.
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Holders of our common shares have no preemptive, subscription,
redemption, conversion or cumulative voting rights. Our
outstanding common shares are, and any common shares that we
issue pursuant to this prospectus and a prospectus supplement
will be, when issued, fully paid and nonassessable.
Preferred
Shares
Under our amended articles of incorporation, our board of
directors is authorized to issue, without any further vote or
action by our shareholders, subject to certain limitations
prescribed by Ohio law and the rules and regulations of the
NYSE, up to an aggregate of 195,000 preferred shares in one or
more series. Our board of directors is also authorized to fix or
change the rights, preferences and limitations of each series,
including the division of such shares into series and the
designation and authorized number of each series, dividend and
distribution rights, liquidation rights, preferences and price,
redemption rights and price, sinking fund requirements, voting
rights, preemptive rights, conversion rights and restrictions on
issuance of shares. Absent a determination by the board of
directors to establish different voting rights, holders of
preferred shares are entitled to one vote per share on matters
to be voted upon by the holders of common shares and preferred
shares voting together as a single class. Ohio law also entitles
the holders of preferred shares to exercise a class vote on
certain matters.
Our board of directors will fix the rights, preferences and
limitations of each series of preferred shares that we sell
under this prospectus and any applicable prospectus supplement
in a certificate of amendment to our amended articles of
incorporation. We will file as an exhibit to the registration
statement of which this prospectus is a part, or incorporate by
reference therein from another report that we file with the SEC,
the form of any certificate of amendment to our amended articles
of incorporation that describes the terms of the series of
preferred shares that we are offering before the issuance of the
related series of preferred shares. We will also describe in the
applicable prospectus supplement the terms of the series of
preferred shares being offered.
Our board of directors may authorize the issuance of preferred
shares with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of our
common shares. The issuance of preferred shares could have the
effect of decreasing the market price of our common shares. The
issuance of preferred shares also could have the effect of
delaying, deterring or preventing a change in control of the
Company without further action by our shareholders. When we
issue preferred shares under this prospectus and a prospectus
supplement, such preferred shares will be fully paid and
nonassessable.
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Anti-Takeover
Effects of Articles of Incorporation, Code of Regulations and
Ohio Law
Certain provisions in our amended articles of incorporation and
code of regulations and the Ohio Revised Code could discourage
potential takeover attempts and make attempts by shareholders to
change management more difficult. These provisions could
adversely affect the market price of our shares.
Classified
Board of Directors
Our board of directors is divided into three classes, with
three-year staggered terms. This classification system increases
the difficulty of replacing a majority of the directors at any
one time and may tend to discourage a third-party from making a
tender offer or otherwise attempting to gain control of us. It
also may maintain the incumbency of our board of directors.
Under the Ohio General Corporation Law, shareholders may not
remove any directors on a classified board of directors without
cause.
Supermajority
Voting Provisions
Under the Ohio General Corporation Law, in the case of most
mergers, sales of all or substantially all the assets of a
corporation and amendments to a corporations articles of
incorporation, the affirmative vote of two-thirds of the voting
power of the corporation is required unless the
corporations articles of incorporation provide for a lower
amount not less than a majority. Our amended articles of
incorporation change the default voting requirement provided by
the Ohio General Corporation Law to a majority of the voting
power, except that the affirmative vote of two-thirds of the
voting power is required with respect to any of the following:
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proposed amendments to the supermajority voting provision in our
amended articles of incorporation;
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an agreement of merger or consolidation providing for the
proposed merger or consolidation of us with or into one or more
other corporations and requiring shareholder approval;
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a proposed combination or majority share acquisition involving
the issuance of our shares and requiring shareholder approval;
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a proposal to sell, exchange, transfer or otherwise dispose of
all, or substantially all, of our assets, with or without
goodwill; and
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a proposed dissolution of us.
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Limited
Shareholder Action by Written Consent
The Ohio General Corporation Law requires that an action by
written consent of the shareholders in lieu of a meeting be
unanimous, except that the code of regulations may be amended by
an action by written consent of holders of shares entitling them
to exercise two-thirds of the voting power of the corporation
or, if the articles of incorporation or code of regulations
otherwise provide, such greater or lesser amount, but not less
than a majority. This provision may have the effect of delaying,
deferring or preventing a tender offer or takeover attempt that
a shareholder might consider to be in its best interest.
Control
Share Acquisition Act
The Ohio General Corporation Law provides that certain notice
and informational filings, and special shareholder meeting and
voting procedures, must occur prior to any persons
acquisition of an issuers shares that would entitle the
acquirer to exercise or direct the voting power of the issuer in
the election of directors within any of the following ranges:
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one-fifth or more but less than one-third of such voting power;
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one-third or more but less than a majority of such voting
power; and
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a majority or more of such voting power.
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This provision, which is known as the Control Share Acquisition
Act, does not apply to a corporation if its articles of
incorporation or code of regulations so provide. We have not
opted out of the application of the Control Share Acquisition
Act.
Merger
Moratorium Statute
Chapter 1704 of the Ohio Revised Code, the Merger
Moratorium Statute, generally addresses a wide range of business
combinations and other transactions (including mergers,
consolidations, asset sales, loans, disproportionate
distributions of property and disproportionate issuances or
transfers of shares or rights to acquire shares) between an Ohio
corporation and an Interested Shareholder (as such
term is defined in Section 1704.01 of the Ohio Revised
Code) who, alone or with others, may exercise or direct the
exercise of at least 10% of the voting power of the corporation
in the election of directors. The Merger Moratorium Statute
prohibits such transactions between the corporation and the
Interested Shareholder for a period of three years after a
person becomes an Interested Shareholder, unless, prior to such
date, the directors approved either the business combination or
other transaction or approved the acquisition that caused the
person to become an Interested Shareholder.
Following the three-year moratorium period, the corporation may
engage in the covered transaction with the Interested
Shareholder only if:
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the transaction receives the approval of the holders of shares
entitling them to exercise at least two-thirds of the voting
power of the corporation in the election of directors or the
approval of the holders of a majority of the voting shares held
by persons other than an Interested Shareholder; or
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the remaining shareholders receive an amount for their shares
equal to the higher of the highest amount paid in the past by
the Interested Shareholder for the corporations shares or
the amount that would be due to the shareholders if the
corporation were to dissolve.
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The Merger Moratorium Statute does not apply to a corporation if
its articles of incorporation or code of regulations so provide.
We have not opted out of the application of the Merger
Moratorium Statute.
DESCRIPTION
OF WARRANTS
We may issue warrants to purchase debt securities, common shares
or preferred shares. We may issue warrants independently or
together with any other securities we offer pursuant to a
prospectus supplement and the warrants may be attached to or
separate from the securities. We will issue each series of
warrants under a separate warrant agreement that we will enter
into with a bank or trust company, as warrant agent.
We will describe in the applicable prospectus supplement the
terms of the warrants being offered and the applicable warrant
agreement, including:
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the title of the warrants;
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the aggregate number of the warrants;
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the price or prices at which the warrants will be issued;
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any securities sold together with the warrants;
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the currencies in which the price or prices of the warrants may
be payable;
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the designation, amount and terms of the securities issuable
upon exercise of the warrants and the procedures and conditions
relating to the exercise of the warrants;
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the designation and terms of any related securities with which
the warrants will be issued, and the number of warrants that
will be issued with each security;
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the date, if any, on and after which the warrants and the
related securities will be separately transferable;
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the price at which the securities purchasable upon exercise of
the warrants may be purchased;
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the date on which the right to exercise the warrants will
commence, and the date on which the right will expire;
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the maximum or minimum number of warrants which may be exercised
at any time;
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a discussion of material federal income tax considerations
applicable to the exercise of the warrants; and
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any other material terms of the warrants, including terms,
procedures and limitations relating to the transferability,
exchange, exercise or redemption of the warrants.
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The description of the warrants in this prospectus is a summary
of the material provisions that will appear in the applicable
warrant agreement. This description does not include all of the
terms of the applicable warrant agreement and does not contain
all of the information that you may find useful. We will
describe the terms of any warrants and the applicable warrant
agreement in more detail in the applicable prospectus
supplement. We urge you to read the applicable documents because
they, and not our summaries and descriptions, will define your
rights as holders of the warrants. The form of the applicable
warrant agreement (including the form of the warrant) will be
filed with the SEC promptly after the offering of warrants and
will be available as described under the heading Where
You Can Find More Information below.
DESCRIPTION
OF PURCHASE CONTRACTS AND PURCHASE UNITS
We may issue purchase contracts obligating holders to purchase
from us, and us to sell to the holders, our securities at a
future date or dates. The purchase contracts may require us to
make periodic payments to the holders of purchase contracts.
These payments may be unsecured or prefunded on a basis to be
specified in the prospectus supplement relating to the purchase
contracts. The purchase contracts may be issued separately or as
part of purchase units consisting of a purchase contract and an
underlying security that is pledged by the holder of a purchase
contract to secure its obligations under the purchase contract.
We will describe in the applicable prospectus supplement the
terms of the purchase contracts
and/or
purchase units being offered, including:
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the amount that a holder will be obligated to pay under the
purchase contract, or the formula by which such amount shall be
determined;
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the settlement date or dates on which the holder will be
obligated to purchase the securities, and the conditions, if
any, under which the settlement date may occur on an earlier
date;
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the events, if any, that will cause our obligations and the
obligations of the holder under the purchase contract to
terminate;
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the settlement rate, which will determine the number of shares
or other securities to be purchased, which may be determined by
a formula, which may be based on the market price of our common
shares or preferred shares over a specified period or determined
by reference to other factors;
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whether the purchase contracts will be issued separately or as
part of units consisting of a purchase contract and an
underlying security, which would be pledged by the holder to
secure its obligations under a purchase contract;
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the type of underlying security, if any, that is pledged by the
holder to secure its obligations under a purchase contract;
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the terms of any pledge or depository arrangements relating to
any underlying securities, including the terms on which
distributions or payments of interest and principal on any
underlying securities will be retained by a collateral agent,
delivered to us or distributed to the holder; and
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the amount of the contract fee, if any, that may be payable by
us to the holder or by the holder to us, the terms of payment
and any provisions for deferral of payment (the contract fee may
be a percentage of the stated amount of the purchase contract or
determined by other factors).
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The description of the purchase contracts, purchase units and
any applicable underlying security or pledge or depository
arrangements in this prospectus is a summary of the material
provisions that will appear in the applicable documents. This
description does not include all of the terms of those documents
and does not contain all of the information that you may find
useful. We will describe the terms of any purchase contracts or
purchase units in more detail in the applicable prospectus
supplement. We urge you to read the applicable documents because
they, and not our summaries and descriptions, will define your
rights as holders of the purchase contracts or purchase units.
The forms of the relevant documents will be filed with the SEC
promptly after the offering of purchase contracts or purchase
units and will be available as described under the heading
Where You Can Find More Information below.
PLAN OF
DISTRIBUTION
We may sell any of the securities being offered by this
prospectus in any one or more of the following ways from time to
time:
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to or through underwriters;
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to or through dealers;
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through agents;
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directly to purchasers;
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through any combination of these methods of sale; or
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through any other methods described in a prospectus supplement.
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The prospectus supplement with respect to the securities being
offered will describe the specific plan of distribution and the
terms of the offering, including:
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the name or names of any underwriters, dealers or agents;
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the purchase price of the securities and the proceeds we will
receive from the sale;
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any underwriting discounts, selling commissions, agency fees or
other items constituting underwriters, dealers or
agents compensation;
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any initial public offering price;
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any discounts or concessions allowed or reallowed or paid to
dealers or agents; and
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any securities exchanges on which the securities may be listed.
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Underwriters
Securities may be offered to the public either through
underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as
underwriters. If we use underwriters, we will execute an
underwriting agreement with those underwriters relating to the
securities that we will offer. Unless we state otherwise in the
applicable prospectus supplement, the obligations of the
underwriters to purchase these securities will be subject to
certain conditions and the underwriters will be obligated to
purchase all of the offered securities if any are purchased.
The underwriters will acquire the securities for their own
account and may resell the securities from time to time in one
or more transactions at a fixed public offering price, at market
prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The
underwriters may change from time to time any initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
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Dealers
If we use dealers in a sale, unless otherwise specified in the
applicable prospectus supplement, we will sell the securities to
the dealers as principals. The dealers may then resell such
securities to the public at varying prices that they determine
at the time of resale.
Agents
If we use agents in a sale, unless otherwise specified in the
applicable prospectus supplement, the agents will act on a best
efforts basis to solicit purchases for the period of their
appointment.
Compensation
In connection with the sale of our securities, underwriters or
agents may receive compensation from us or from purchasers of
securities for whom they may act as agents in the form of
discounts, concessions or commissions. Underwriters may sell
securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or
commissions from the underwriters or commissions from the
purchasers for whom they may act as agents. Any underwriting
compensation paid by us to underwriters or agents in connection
with an offering of securities, and any discounts, concessions
or commissions allowed or reallowed or paid to dealers, will be
specified in the applicable prospectus supplement.
Underwriters, dealers and agents participating in the
distribution of the securities may be deemed to be underwriters
as defined in the Securities Act, and any discounts or
commissions received by them from us and any profit realized by
them on the resale of the securities may be treated as
underwriting discounts and commissions under the Securities Act.
Direct
Sales
We may directly solicit offers to purchase the securities and we
may make sales of securities directly to institutional investors
or others. These persons may be deemed to be underwriters within
the meaning of the Securities Act with respect to resales of the
securities. We will describe the terms of any direct sales in
the applicable prospectus supplement.
Delayed
Delivery Contracts
We may authorize underwriters, dealers or agents to solicit
offers by institutions to purchase securities from us at the
public offering price stated in the applicable prospectus
supplement under delayed delivery contracts. These contracts
provide for payment and delivery on a specified date in the
future. If we use delayed delivery contracts, the applicable
prospectus supplement will disclose such use and describe the
conditions to which the delayed delivery contracts will be
subject and the commissions payable for the solicitation of the
delayed delivery contracts.
Indemnification
We may indemnify underwriters, dealers or agents who participate
in the distribution of securities against certain liabilities,
including liabilities under the Securities Act, and agree to
contribute to payments which these underwriters, dealers or
agents may be required to make.
General
Information
Underwriters, agents or dealers and their affiliates may be
customers of, engage in transactions with or perform services
for us in the ordinary course of business.
The securities offered hereby may be a new issue of securities
with no established trading market. Any underwriters that
purchase securities from us may make a market in these
securities. The underwriters will not be obligated, however, to
make a market and may discontinue market-making at any time
without notice to
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holders of the securities. We cannot assure you that there will
be liquidity in the trading market for any securities of any
series.
In order to facilitate an offering of securities, persons
participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the offered
securities. Such transactions, if commenced, may be discontinued
at any time. If any such activities will occur, they will be
described in the applicable prospectus supplement.
We also may sell the securities in connection with a remarketing
upon their purchase, in connection with a redemption or
repayment, by a remarketing firm acting as principal for its own
account or as our agent. Remarketing firms may be deemed to be
underwriters as defined by the Securities Act in connection with
the securities that they remarket.
LEGAL
MATTERS
Unless otherwise specified in the applicable prospectus
supplement, the validity of the common shares, preferred shares,
warrants, purchase contracts and purchase units will be passed
upon for us by Vorys, Sater, Seymour and Pease LLP, Columbus,
Ohio, and the validity of the debt securities and the guarantees
of debt securities will be passed upon for us by Katten Muchin
Rosenman LLP, New York, New York. Any underwriters, dealers or
agents will be advised by their own legal counsel concerning
issues relating to any offering.
EXPERTS
The consolidated financial statements and related consolidated
financial statement schedules as of September 30, 2009 and
2008, and for each of the three years in the period ended
September 30, 2009 incorporated in this prospectus by
reference from our Current Report on
Form 8-K
dated January 11, 2010, and the effectiveness of our
internal control over financial reporting have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports incorporated
by reference herein (which reports (1) express an
unqualified opinion on the consolidated financial statements and
related consolidated financial statement schedules and include
an explanatory paragraph referring to the adoption of new
guidance regarding employers accounting for defined
benefit pension and postretirement plans on September 30,
2007 and (2) express an unqualified opinion on the
effectiveness of internal control over financial reporting).
Such financial statements and financial statement schedules have
been so incorporated in reliance upon the reports of such firm
given upon their authority as experts in auditing and accounting.
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus information that we file with the SEC. This
means that we can disclose important information to you by
referring you to those documents. The information we incorporate
by reference is considered part of this prospectus, and
information that we file later with the SEC will automatically
update and supersede information included or previously
incorporated by reference into this prospectus from the date we
file the document containing such information.
Except to the extent furnished and not filed with the SEC
pursuant to Item 2.02 or Item 7.01 of
Form 8-K
or as otherwise permitted by the SEC rules, we incorporate by
reference the following documents that we have filed with the
SEC and any future filings we will make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act from
the date of this prospectus until the completion of the offering
in the applicable prospectus supplement to which this prospectus
relates or this offering is terminated:
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Annual Report on
Form 10-K
for the fiscal year ended September 30, 2009;
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Current Reports on
Form 8-K
filed on December 16, 2009 and January 11,
2010; and
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the description of our common shares contained in our
Registration Statement on Form
8-A/A
(Amendment No. 1) filed with the SEC on April 7,
2003, as amended in our Current Report on
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Form 8-K
filed with the SEC on March 24, 2005, together with any
subsequent registration statement or report filed for the
purpose of updating such description.
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We will provide without charge, upon written or oral request, a
copy of any or all of the documents that are incorporated by
reference into this prospectus (other than exhibits, unless they
are specifically incorporated by reference in the documents).
Requests should be directed to: The Scotts Miracle-Gro Company,
14111 Scottslawn Road, Marysville, Ohio 43041, Attention:
Treasurer, telephone number
(937) 644-0011.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. These SEC filings are
available to the public at the SECs Internet website at
http://www.sec.gov.
You may also read and copy any of these SEC filings at the
SECs Public Reference Room located at
100 F Street, N.E., Washington, D.C. 20549.
Please call
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. Our SEC filings are also available on our website at
http://www.scotts.com.
The information on our website is not a part of this prospectus
or any applicable prospectus supplement.
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$200,000,000
7.25% Senior Notes due
2018
PROSPECTUS SUPPLEMENT
BofA Merrill Lynch
J.P. Morgan
BMO Capital Markets
BNP PARIBAS
Rabo Securities USA,
Inc.
Scotia Capital
CALYON
Fifth Third Securities,
Inc.
PNC Capital Markets
LLC
RBS
January 11, 2010