AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE __, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FRENCH FRAGRANCES, INC.
(Exact name of registrant as specified in its charter)
Florida 2844 59-0914138
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Oscar E. Marina, Esq.
14100 N.W. 60th Avenue 14100 N.W. 60th Avenue
Miami, Florida 33014 Miami, Florida 33014
(305) 818-8000 (305) 818-8000
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code of registrant's telephone number, including area code,
principal executive office) of agent for service)
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Copies to:
Beatriz Llorens Koltis, Esq.
Steel Hector & Davis LLP
200 S. Biscayne Blvd., Suite 4000
Miami, Florida 33131-2398
(305) 577-2903
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Approximate date of proposed commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=============================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
10-3/8% Senior Notes due 2007,
Series D. . . . . . . . . . . $40,000,000 $106.5%<F1> $42,600,000<F1> $12,567.00
=============================================================================================
<FN>
<F1> Estimated solely for purposes of calculating the registration fee pursuant to Rule
457(f)(2) under the Securities Act of 1933, as amended (the "Securities Act").
</FN>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 23, 1998
FRENCH FRAGRANCES, INC.
OFFER TO EXCHANGE ITS 10-3/8% SENIOR NOTES DUE 2007, SERIES D
FOR ANY AND ALL OUTSTANDING 10-3/8% SENIOR NOTES DUE 2007, SERIES C
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998, UNLESS EXTENDED.
French Fragrances, Inc., a Florida corporation (the "Company") hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal" and together with this Prospectus, the "Exchange Offer"), to
exchange its 10-3/8% Senior Notes due 2007, Series D (the "Exchange Notes")
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for any and all outstanding 10-3/8%
Senior Notes due 2007, Series C (the "Initial Notes," and, together with the
Exchange Notes, the "Senior Notes"), of which $40,000,000 principal amount is
outstanding. The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Initial Notes being tendered for exchange. However, the
Exchange Offer is subject to the absence of certain conditions which may be
waived by the Company. See "The Exchange Offer-Certain Conditions to the
Exchange Offer." Subject to the absence or waiver of such conditions, the
Company will accept for exchange any and all Initial Notes validly tendered on
or prior to 5:00 p.m., New York City time, on , 1998, unless the
Exchange Offer is extended (the "Expiration Date"). Initial Notes may be
tendered only in integral multiples of $1,000. The date of acceptance and
exchange of the Initial Notes (the "Exchange Date") will be the fourth
business day following the Expiration Date, unless an earlier date is selected
by the Company. Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date; otherwise such tenders are irrevocable. The Exchange Notes
will be issued and delivered promptly after the Exchange Date.
The terms of the Exchange Notes are identical in all material respects to
the terms of the Initial Notes, except that the Exchange Notes have been
registered under the Securities Act and are generally freely transferable by
holders thereof and are issued without any covenant upon the Company regarding
registration under the Securities Act. See "The Exchange Offer-Resale of
Exchange Notes." The Exchange Notes will evidence the same debt as the Initial
Notes and will be issued under and be entitled to the benefits of the
Indenture (as defined herein). For a complete description of the terms of the
Exchange Notes, see "Description of the Senior Notes." There will be no cash
proceeds to the Company from this Exchange Offer.
The Exchange Notes are unsecured senior obligations of the Company, will
rank senior in right of payment to all existing and future Subordinated
Indebtedness (as defined herein) of the Company and will rank pari passu in
right of payment with all existing and future Senior Indebtedness (as defined
herein) of the Company, including indebtedness under the Revolving Credit
Facility (as defined herein) and its 10-3/8% Senior Notes due 2007, Series B
(the "Series B Senior Notes"). The Company's obligations under the Revolving
Credit Facility (as defined herein) are, however, secured by a first priority
lien on all of the Company's accounts receivable and inventory, and,
accordingly, such indebtedness effectively will rank prior to the Exchange
Notes with respect to such assets. The Indenture permits the Company and any
Subsidiary (as defined herein) to incur additional debt, including secured
debt, subject to certain limitations. See "Description of the Senior Notes."
The Initial Notes were originally issued and sold on April 27, 1998 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Initial Notes may not be reoffered, resold, or otherwise pledged, hypothecated
or transferred in the United States unless so registered or unless an
applicable exemption from the registration requirements of the Securities Act
is available. Based upon interpretations by the staff of the Securities and
Exchange Commission (the "SEC") issued to third parties, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for
Initial Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder which is a broker-dealer or an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such Exchange Notes are
acquired in the ordinary course of business and such holders have no
arrangement with any person to participate in the distribution of such
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with a resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by such broker-dealers in connection with such resales. See "The Exchange
Offer-Resale of Exchange Notes."
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list any Senior
Notes on a national securities exchange or to apply for quotation of any
Senior Notes through the National Association of Securities Dealers Automated
Quotation System. Any Initial Notes not tendered and accepted in the Exchange
Offer will remain outstanding. To the extent that Initial Notes are tendered
and accepted in the Exchange Offer, a Holder's ability to sell untendered and
tendered but unaccepted Initial Notes could be adversely affected. Following
consummation of the Exchange Offer, the holders of Initial Notes will continue
to be subject to the existing restrictions on transfers thereof, and the
Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the Initial Notes held by them. No
assurance can be given as to the liquidity of the trading market for either
the Initial Notes or the Exchange Notes.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN
THE EXCHANGE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM WILLIAM J. MUELLER, CHIEF FINANCIAL OFFICER, AT 14100 N.W. 60TH
AVENUE, MIAMI LAKES, FLORIDA 33014, TELEPHONE NUMBER (305) 818-8000. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1998.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the SEC. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section of the SEC's office at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
regional offices in New York (7 World Trade Center, 13th Floor, New York, New
York 10048) and Chicago (Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661). Copies of such reports, proxy statements and
information may be obtained at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the SEC maintains a Web site that contains reports, proxy statements
and other information regarding registrants (such as the Company) that file
electronically with the SEC. The address of such site is http://www.sec.gov.
Copies of such information may also be inspected and copied at the library of
the Nasdaq National Market, 1735 K Street, 4th Floor, Washington, D.C. 20006,
upon which the Company's Common Stock is authorized for trading.
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement")
under the Securities Act with respect to the Exchange Notes offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Statements contained in this Prospectus
relating to the contents of any contract or other document referred to herein
are not necessarily complete, and reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement.
For further information, reference is hereby made to the Registration
Statement and the documents incorporated herein by reference, which may be
examined without charge at the public reference facilities maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
thereof may be obtained from the SEC upon payment of the prescribed fees.
While any Senior Notes remain outstanding, the Company will make available,
upon request, to any holder and any prospective purchaser of Senior Notes the
information required pursuant to Rule 144A(d)(4) under the Securities Act
during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act. Any such request should be directed to William J.
Mueller, Chief Financial Officer, French Fragrances, Inc., 14100 N.W. 60th
Avenue, Miami, Florida 33014, telephone number (305) 818-8000.
The Indenture provides that the Company will furnish to the Trustee and
the holders of the Senior Notes copies of all periodic reports required to be
filed with the SEC under the Exchange Act and shall mail such periodic reports
to the holders of the Senior Notes within 15 days of filing with the SEC. If
the Company is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company must nonetheless continue to submit to the Trustee
and the holders of the Senior Notes (i) the annual and quarterly financial
statements, including any notes thereto (and, with respect to annual reports,
an auditors' report by an accounting firm of established national practice),
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations," comparable to that which would have been required to
appear in annual or quarterly reports filed under Section 13 or 15(d) of the
Exchange Act and (ii) 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.
The Indenture provides that the Company will file a copy of such information
and reports with the SEC for public availability (unless the Commission will
not accept such a filing). The Company must provide copies of such information
and reports to the holders of the Senior Notes within 120 days of the
Company's fiscal year end in the case of annual reports, and within 60 days of
the end of each of the Company's first three fiscal quarters in the case of
quarterly reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC
pursuant to the Exchange Act (Commission File No. 1-6370) and are hereby
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1998; and
(2) the Company's Proxy Statement dated May 22, 1998, relating to its
1998 Annual Meeting of Shareholders;
(3) the Company's Current Report on Form 8-K dated March 31, 1998 filed
on April 15, 1998;
(4) the Company's Current Report on Form 8-K dated April 27, 1998 filed
on May 7, 1998; and
(5) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended April 30, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act (i) subsequent to the date of the initial
Registration Statement of which this Prospectus is a part and prior to the
effectiveness of such Registration Statement, or (ii) subsequent to the date
of this Prospectus and prior to the termination of the offering made by this
Prospectus, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing thereof.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other document subsequently filed with the SEC
which is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference herein (not
including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to William J. Mueller, Chief Financial Officer, at
14100 N.W. 60th Avenue, Miami Lakes, Florida 33014, telephone number (305)
818-8000.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made in
this Prospectus. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such
as "will likely result," "are expected to," "will continue," "is anticipated,"
"believes," "estimated," "intends," "plans," "projection" and "outlook") are
not historical facts and may be forward-looking and, accordingly, such
statements involve estimates, assumptions, and uncertainties which could cause
actual results to differ materially from those expressed in the
forward-looking statements. Accordingly, any such statements are qualified in
their entirety by reference to, and are accompanied by, the factors discussed
throughout this Prospectus, and particularly in the risk factors set forth
herein under "Risk Factors." Among the key factors that have a direct bearing
on the Company's results of operations are the substantial indebtedness and
significant debt service obligations of the Company, the Company's ability to
fund future capital requirements, the maintenance of relationships with
suppliers and customers in light of the absence of contracts between the
Company and its suppliers and customers, the Company's ability to implement
its business and acquisition strategy and to successfully integrate acquired
companies and fragrance brands into the Company, changes in the retail
industry, the availability of key personnel and general economic and business
conditions. These and other factors are discussed herein under "Risk Factors,"
Item 1. "Business" and Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1998 (the "Form 10-K"),
Part I, Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended April 30, 1998 (the "Form 10-Q") and elsewhere in
this Prospectus.
The Company cautions that the risk factors described herein could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company
and that investors should not place undue reliance on any such forward-
looking statements. Further, any forward-looking statement speaks only as of
the date on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time
to time, and it is not possible for management to predict all of such factors.
Further, management cannot assess the impact of each such factor on the
Company's business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, "THE
COMPANY" REFERS TO FRENCH FRAGRANCES, INC. AND ITS SUBSIDIARIES ON A
CONSOLIDATED BASIS AND THE FRAGRANCE MARKETING AND DISTRIBUTION BUSINESSES
CONDUCTED BY ITS PREDECESSOR.
THE EXCHANGE OFFER
THE EXCHANGE OFFER. . . . The Company is offering to exchange pursuant to the
Exchange Offer up to $40,000,000 aggregate
principal amount of the Exchange Notes for any and
all of its outstanding Initial Notes. The terms of
the Exchange Notes are identical in all material
respects (including principal amount, interest rate
and maturity) to the terms of the Initial Notes for
which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes have
been registered under the Securities Act and are
freely transferrable by holders thereof (other than
as provided herein), and are not subject to any
covenant regarding registration under the
Securities Act. See "The Exchange Offer."
EXPIRATION DATE;
WITHDRAWAL OF TENDER. . . The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless the
Exchange Offer is extended by the Company, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer-Expiration Date;
Extension; Termination; Amendment." Tenders may be
withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. See "The
Exchange Offer Withdrawal Rights."
INTEREST PAYMENTS . . . . Interest on the Exchange Notes shall accrue from
the last interest payment date (May 15 or November
15, each an "Interest Payment Date") on which
interest was paid on the Initial Notes so
surrendered or, if no interest has been paid
on such Initial Notes, from April 27, 1998.
NO MINIMUM CONDITION. . . The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Initial Notes
being tendered for exchange.
EXCHANGE DATE . . . . . . The date of acceptance and exchange (the "Exchange
Date") of the Initial Notes will be the fourth
business day following the Expiration Date, unless
an earlier date is selected by the Company and the
Company notifies the Exchange Agent (as defined
herein) of such earlier date.
CONDITIONS TO THE
EXCHANGE OFFER. . . . . . The Company shall not be required to accept for
exchange, or to issue Exchange Notes in exchange
for, any Initial Notes and may terminate or amend
the Exchange Offer, if any of certain customary
conditions exist, the occurrence of which may be
waived by the Company. The Company currently
expects that each of the conditions will be
satisfied and that no waivers will be necessary.
See "The Exchange Offer-Certain Conditions to the
Exchange Offer."
PROCEDURES FOR TENDERING
INITIAL NOTES . . . . . . Each holder of Initial Notes wishing to tender such
notes must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
Initial Notes and any other required documentation
to the Exchange Agent at the address set forth
in the Letter of Transmittal. See "The Exchange
Offer-Procedures for Tendering Initial Notes" and
"Plan of Distribution."
FEDERAL INCOME TAX
CONSEQUENCES. . . . . . . The exchange of Senior Notes pursuant to the
Exchange Offer should not be a taxable event for
federal income tax purposes. See "Certain Federal
Income Tax Consequences."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS . . . . Any beneficial owner whose Initial Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering the Initial
Notes, either make appropriate arrangements to
register ownership of the Initial Notes in such
beneficial owner's name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time. See "The Exchange Offer-
Procedures for Tendering Initial Notes."
GUARANTEED DELIVERY
PROCEDURES. . . . . . . . Holders of Initial Notes who wish to tender their
Initial Notes and whose Initial Notes are not
immediately available or who cannot deliver their
Initial Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Initial Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer-Procedures for
Tendering Initial Notes."
ACCEPTANCE OF INITIAL
NOTES AND DELIVERY OF
EXCHANGE NOTES. . . . . . On the Exchange Date, the Company will accept for
exchange any and all Initial Notes which are
properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly following
the Exchange Date. See "The Exchange Offer-
Acceptance of Initial Notes for Exchange; Delivery
of Exchange Notes."
CONSEQUENCES OF FAILURE
TO EXCHANGE . . . . . . Holders of the Initial Notes who do not tender
their Initial Notes in the Exchange Offer will
continue to hold such Initial Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture dated as
of April 27, 1998 between the Company and Marine
Midland Bank relating to the Initial Notes and the
Exchange Notes (the "Indenture"), except for any
such rights under the Registration Rights Agreement
(as defined herein) that by their terms terminate
or cease to have further effectiveness as a result
of the making of, and the acceptance for exchange
of all validly tendered Initial Notes pursuant to,
the Exchange Offer.
Holders of Initial Notes who do not exchange their
Initial Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to the
restrictions on transfer of such Initial Notes as
set forth in the legend thereon as a consequence of
the offer or sale of the Initial Notes pursuant to
an exemption from, or in a transaction not
subject to, the registration requirements of the
Securities Act and applicable state securities
laws. In general, the Initial Notes may not be
offered or sold, unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. The Company does not currently anticipate
that it will register the Initial Notes under the
Securities Act. To the extent that Initial Notes
are tendered and accepted in the Exchange Offer,
the trading market for untendered or tendered but
unaccepted Initial Notes could be adversely
affected. See "The Exchange Offer-Consequences of
Failure to Exchange."
REGISTRATION RIGHTS . . . The Company entered into a Registration Rights
Agreement dated as of April 27, 1998 (the
"Registration Rights Agreement") with Donaldson
Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser"), for the benefit of all
holders of Initial Notes, in which it agreed to
make the Exchange Offer. The Registration Rights
Agreement provides that if the Company fails to
consummate the Exchange Offer on or prior to
October 24, 1998), the Company will file a shelf
registration statement (the "Shelf Registration
Statement") to cover resales of Senior Notes by
holders who provide certain information required
for inclusion in the Shelf Registration Statement,
and who agree to be bound by the terms of the
Registration Rights Agreement. Upon a Registration
Default (as defined herein), the Company will be
required to pay certain Liquidated Damages to the
affected holders of Senior Notes. See "Registration
Rights; Liquidated Damages."
EXCHANGE AGENT. . . . . . Marine Midland Bank is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer. See "The Exchange Offer-Exchange
Agent."
RESALE OF EXCHANGE NOTES. Based upon interpretations by the staff of the SEC
issued to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Initial Notes may be offered
for resale, resold and otherwise transferred by
holders thereof (other than any holder which is a
broker-dealer or an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and
prospectus delivery provisions of the Securities
Act provided that such Exchange Notes are acquired
in the ordinary course of business and such holders
have no arrangement with any person to participate
in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with a resale of such Exchange Notes.
This Prospectus, as it may be amended or
supplemented from time to time, may be used by
such broker-dealers in connection with such
resales. See "The Exchange Offer-Resale of Exchange
Notes."
THE EXCHANGE NOTES
ISSUER. . . . . . . . . . French Fragrances, Inc.
SECURITIES OFFERED. . . . $40 million in aggregate principal amount of
10-3/8% Senior Notes due 2007, Series D.
MATURITY DATE . . . . . . May 15, 2007.
INTEREST PAYMENT DATES. . Interest on the Exchange Notes is payable
semi-annually on each of May 15 and November 15,
commencing November 15, 1998.
RANKING . . . . . . . . . The Exchange Notes will be senior unsecured
obligations of the Company and will rank senior in
right of payment to all existing and future
Subordinated Indebtedness of the Company and pari
passu in right of payment with all existing and
future Senior Indebtedness of the Company,
including indebtedness under the Revolving Credit
Facility and the Series B Senior Notes. The
Revolving Credit Facility is secured by a first
priority lien on all of the Company's accounts
receivable and inventory and, accordingly, such
indebtedness effectively will rank prior to the
Exchange Notes with respect to such assets. See
"Description of the Senior Notes-General."
MANDATORY REDEMPTION. . . None, except as otherwise described below under the
captions "Change of Control" and "Asset Sale
Proceeds."
OPTIONAL REDEMPTION . . . The Exchange Notes will be redeemable at the
option of the Company, in whole or in part, at any
time on or after May 15, 2002, in cash, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, thereon to the
redemption date. In addition, at any time prior to
May 15, 2000, the Company, at its option, may
redeem up to 35% of the initially outstanding
aggregate principal amount of the Senior Notes at a
redemption price equal to 109 3/8% of the principal
amount thereof, plus accrued and unpaid interest,
if any, thereon to the redemption date, with
the net proceeds of one or more public equity
offerings generating in each case net proceeds of
at least $15.0 million, provided, among other
things, that at least 65% of the initially
outstanding aggregate principal amount of the
Senior Notes remains outstanding immediately after
any such redemption. See "Description of the Senior
Notes-Optional Redemption."
CHANGE OF CONTROL . . . . Upon a Change of Control (as defined herein), each
holder of Exchange Notes will have the right to
require the Company to repurchase all or any part
of such holder's Exchange Notes at a price in cash
equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any,
thereon to the purchase date. See "Description of
the Senior Notes-Repurchase at the Option of
Holders-Change of Control."
ASSET SALE PROCEEDS . . . The Company will be obligated in certain
circumstances to make an offer to purchase the
Exchange Notes at a purchase price equal to 100% of
the principal amount thereof plus accrued and
unpaid interest, if any, thereon to the purchase
date with the Net Proceeds of Asset Sales. See
"Description of the Senior Notes-Repurchase at the
Option of Holders-Asset Sales."
CERTAIN COVENANTS . . . . The Indenture will govern the Exchange Notes and
contains certain covenants that, among other
things, limit the ability of the Company and its
Subsidiaries to: (i) incur additional Indebtedness
or issue preferred Equity Interests (each as
defined herein); (ii) pay dividends or make certain
other restricted payments or investments; (iii)
create liens; (iv) enter into certain transactions
with affiliates; (v) enter into agreements
restricting the ability of such Subsidiaries to pay
dividends and make distributions; (vi) merge or
consolidate; or (vii) transfer or sell assets. See
"Description of the Senior Notes-Certain
Covenants."
SUBSIDIARY GUARANTEES . . The Indenture provides that, as a condition of a
Subsidiary (as defined herein) incurring
Indebtedness (as defined herein) under certain
circumstances, such Subsidiary will guarantee the
Company's payment obligations under the Exchange
Notes. Each Subsidiary Guarantee (as defined
herein) will be a senior unsecured obligation of
the Subsidiary Guarantor (as defined herein)
issuing such Subsidiary Guarantee and will rank
pari passu in right of payment with all Guarantor
Senior Indebtedness (as defined herein) of such
Subsidiary Guarantor. As of the Exchange Date, none
of the Subsidiaries will be Subsidiary Guarantors.
See "Description of the Senior Notes Certain
Covenants-Subsidiary Guarantees."
ABSENCE OF PUBLIC
MARKET. . . . . . . . . . There is no public market for the Exchange Notes,
and the Exchange Notes will not be listed on any
securities exchange. The Company has been advised
by the Initial Purchaser that, following
consummation of the Exchange Offer, the Initial
Purchaser intends to make a market in the
Exchange Notes; however, any market making may be
discontinued at any time without notice. If an
active public market does not develop, the market
price and liquidity of the Exchange Notes may be
adversely affected. See "Risk Factors."
For definitions of certain capitalized terms used herein, see
"Description of the Senior Notes."
RISK FACTORS
Prospective investors in the Exchange Notes should carefully consider the
matters set forth under "Risk Factors" beginning on page 12.
RISK FACTORS
In evaluating an investment in the Exchange Notes being offered hereby,
investors should consider carefully, among other things, the following risk
factors, as well as the other information contained or incorporated by
reference in this Prospectus.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not tender their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Initial Notes as set forth in the legend
thereon as a consequence of the issuance of the Initial Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Initial Notes may not be offered or sold unless registered under
the Securities Act and applicable state laws, or pursuant to an exemption
therefrom. The Company does not intend to register the Initial Notes under
the Securities Act, other than in the limited circumstances contemplated by
the Registration Rights Agreement. In addition, any holder of Initial Notes
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. To the extent that Initial Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered or tendered
but unaccepted Initial Notes could be adversely affected. See "The Exchange
Offer" and "Registration Rights; Liquidated Damages."
SUBSTANTIAL INDEBTEDNESS
The Company has substantial indebtedness and significant debt service
obligations. As of January 31, 1998, after giving effect to the Company's
March 1998 acquisition of certain assets of JP Fragrances, Inc. (the "JPF
Acquisition"), the issuance of the Initial Notes on April 27, 1998, and the
application of the net proceeds therefrom to repay indebtedness under the
Company's existing bank credit facility (the "Revolving Credit Facility") with
Fleet National Bank ("Fleet"), the Company would have had outstanding
indebtedness of approximately $180 million. The Revolving Credit Facility
with Fleet provides for revolving loans of up to $40.0 million and is secured
by a first priority lien on all of the Company's accounts receivable and
inventory, which constitute a substantial portion of the Company's assets.
Both the Indenture and the Revolving Credit Facility permit the Company to
incur substantial additional indebtedness, including secured indebtedness,
subject to certain limitations. See "Description of the Senior Notes Certain
Covenants," Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources" of the
Form 10-K and Part I, Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the Form 10-Q. On a pro
forma basis for fiscal year ended January 31, 1998, after giving effect to the
JPF Acquisition and the issuance of the Initial Notes, and assuming that the
Series B Senior Notes had been issued on February 1, 1997, the Company would
have had a ratio of earnings to fixed charges of 2.01. For the Company's
ratio of earnings to fixed charges for the last five fiscal years and the
quarterly period ended April 30, 1998, see "The Company."
The Company's significant leverage could have important consequences to
holders of Senior Notes, including (i) the Company's increased vulnerability
to adverse general and economic conditions, (ii) the Company's ability to
withstand competitive pressures may be limited, (iii) the Company's ability to
obtain additional financing on satisfactory terms may be limited, (iv) the
dedication of a substantial portion of the Company's cash flow to service its
indebtedness, thereby reducing the amount of funds available for operations
and future business opportunities, (v) the extent to which the Revolving
Credit Facility and future borrowings are at variable rates of interest, which
would cause the Company to be more vulnerable to increases in interest rates
and (vi) the Company's financial and operating flexibility may be limited to
the extent its indebtedness contains restrictive covenants. See "Restrictive
Debt Covenants," Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources" of the
Form 10-K, Item 8. "Financial Statements and Supplementary Data-Notes to
Consolidated Financial Statements, Notes 7, 8 and 10" of the Form 10-K and
Part I, Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Form 10-Q.
The ability of the Company to make scheduled payments in respect of its
present and future indebtedness, including the Senior Notes, may depend on,
among other things, the Company's ability to successfully execute its current
business plans on a timely and cost effective basis and the Company's future
operating performance, which, to a large extent, may depend upon factors
beyond the Company's control, such as business, economic and competitive
factors.
ABSENCE OF CONTRACTS WITH SUPPLIERS AND CUSTOMERS
As is typical in the fragrance industry, the Company does not have
long-term or exclusive contracts with any of its customers. Except for
contracts relating to brands for which the Company has exclusive distribution
and marketing rights, including the Geoffrey Beene brands of Grey Flannel, Eau
de Grey Flannel and Bowling Green, the Halston brands of Halston, Catalyst,
Z-14 and 1-12, and the brands Colors of Benetton, Hot and Cold, Ombre Rose,
Lapidus, Faconnable, Salvador Dali, Dalissime, Laguna, Cafe and Watt
(collectively, the "Controlled Brands"), the Company does not generally have
long-term or exclusive contracts with its fragrance suppliers. Virtually all
of the suppliers of the over 120 brands which the Company distributes on a
nonexclusive basis (the "Distributed Brands") can, at any time, elect to
supply fragrance products to the Company's customers directly or through
another distributor, or elect to reduce or eliminate the volume of their
products distributed by the Company. Sales to customers and purchases from
suppliers that do not have exclusive distribution contracts with the Company
are generally made pursuant to purchase orders. The Company's ten largest
suppliers of Distributed Brands accounted for approximately 81% of the
Company's cost of sales for the fiscal year ended January 31, 1998. The JPF
Acquisition is expected to increase the proportion of the Company's business
in Distributed Brands. The Company's ten largest customers accounted for
approximately 38% of net sales for the fiscal year ended January 31, 1998.
The loss of, or a significant change in, the relationship between the Company
and any of its key fragrance suppliers or customers could have a material
adverse effect on the business, financial condition and results of operations
of the Company. See Item 1. "Business-Products," "Licensing and Exclusive
Distribution Agreements," and "Distribution" of the Form 10-K.
The Company does not own or operate any manufacturing facilities and is
dependent on third-party manufacturers and suppliers for all of its supply of
Halston and Geoffrey Beene fragrances and related products and packaging
materials. The Company currently obtains its materials for these products
from a limited number of manufacturers and other suppliers. Delays in the
delivery of raw materials, components or finished products from manufacturers
or suppliers could have a material adverse effect on the business, financial
condition and results of operations of the Company. See Item 1. "Business-
Products" and "Distribution" of the Form 10-K and the Company's Current Report
on Form 8-K dated March 31, 1998 (the "Form 8-K").
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH AND INTEGRATION OF ACQUISITIONS
In order for the Company to continue to expand successfully, the
Company's management will be required to anticipate the changing and
increasing demands of the Company's growing operations and to implement
appropriate operating procedures and systems. There can be no assurance that
management will correctly anticipate these demands or successfully implement
these procedures and systems on a timely basis. The Company's success will
also depend, in part, upon its ability to identify, acquire and integrate
effectively into its operations new brands and relationships with new
suppliers and new customers, including those associated with recent or future
acquisitions. The Company believes but cannot assure that it will be able to
achieve such integration.
The Company will also need to review continually the adequacy of its
management information systems, including its inventory and distribution
systems. The Company recently completed the installation of a new management
information system which, among other things, is expected to improve
forecasting, purchasing and order tracking capabilities, as well as provide
Year 2000 compliance. Failure to continue to upgrade its information systems,
or unexpected difficulties (such as possible interruptions, delays, losses
and errors in processing of data or purchase orders) encountered with these
systems, including the Company's newly implemented management information
system, during implementation of such new management information systems or at
any time thereafter, could have a material adverse effect on the business,
financial condition and results of operations of the Company.
NO ASSURANCE OF FUTURE GROWTH OR ACQUISITIONS
The Company's strategy is to continue to increase both its Controlled
Brand and Distributed Brand operations. Currently, the Company has no
agreements or commitments for the acquisition of additional brands or
exclusive or non-exclusive distribution arrangements. There can be no
assurance that the Company will be successful in identifying, negotiating and
consummating such acquisitions or arrangements, or that such acquisitions or
arrangements that may be available, if at all, will be on terms acceptable to
the Company.
FUTURE CAPITAL REQUIREMENTS; POSSIBLE INABILITY TO OBTAIN ADDITIONAL FINANCING
The Company's capital requirements have been and will continue to be
significant. To date, the Company has financed its capital requirements
primarily through the Revolving Credit Facility, external financing (including
the issuance of $115 million aggregate principal amount of Series B Senior
Notes and the Initial Notes) and internally generated funds. The Company's
future expansion, if any, will be dependent upon the capital resources
available to the Company. Excluding any additional working capital
requirements that may result from future acquisitions, including brand
acquisitions, management believes that internally generated funds, available
financing under the Revolving Credit Facility and the net proceeds from the
issuance of the Initial Notes will be sufficient to fund the Company's
operations for the foreseeable future. The Company's future growth and
acquisitions of additional fragrance brands or exclusive distribution rights
may be dependent on the Company's ability to obtain future equity or debt
financing. There can be no assurance that the Company will be able to obtain
additional financing for such purposes or that any additional financing will
be available in amounts required or on terms satisfactory to the Company. See
Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources" of the Form 10-K and
Part I, Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Form 10-Q.
SEASONALITY; FLUCTUATIONS IN QUARTERLY SALES
The Company's business is seasonal, with a majority of its sales and
income from operations generated during the second half of its fiscal year as
a result of increased demand by retailers in anticipation of and during the
holiday season. For example, in the fiscal year ended January 31, 1998, 67%
of the Company's net sales were made during the second half of the fiscal
year. Any substantial decrease in sales during such period would likely have
a material adverse effect on the business, financial condition and results of
operations of the Company. Similarly, the Company's working capital needs are
greater during the second half of the fiscal year. In addition, the Company's
sales and profitability may vary from quarter to quarter as a result of a
variety of factors, including the timing of customer orders, additions or
losses of brands or distribution rights and competitive pricing pressures.
COMPETITION
The fragrance industry is highly competitive and at times subject to
rapidly changing consumer preferences and industry trends. The Company
competes with a large number of distributors and manufacturers, many of which
have significantly greater financial, marketing, distribution, personnel and
other resources than the Company, thereby permitting such companies to
implement extensive advertising, pricing and promotional programs. The
Company's products compete for consumer recognition and shelf space with
fragrance products that have achieved significant international, national and
regional brand name recognition and consumer loyalty. The Company's products
also compete with new products, which are regularly introduced and accompanied
by substantial promotional campaigns. These factors, as well as demographic
trends, international, national, regional and local economic conditions,
discount pricing strategies by competitors and direct sales by manufacturers
to the Company's customers could result in increased competition for the
Company and could have a material adverse effect on the business, financial
condition and results of operations of the Company. See Item 1. "Business-
Competition" of the Form 10-K.
RESTRICTIVE DEBT COVENANTS
The Revolving Credit Facility contains, and any refinancing thereof will
likely contain, a number of covenants that, among other things, limit the
Company's ability to incur additional indebtedness, pay certain dividends,
prepay indebtedness, dispose of certain assets, create liens, make capital
expenditures, make certain investments or acquisitions and otherwise restrict
corporate activities. The Revolving Credit Facility requires, and any
refinancing thereof will likely require, the Company to comply with certain
financial ratios and tests, under which the Company would be required to
achieve certain financial and operating results. In addition, the Revolving
Credit Facility is secured by a first priority lien on the Company's accounts
receivable and inventory. The ability of the Company to comply with the
provisions of the Revolving Credit Facility may be affected by events beyond
its control, including prevailing economic conditions, changes in consumer
preferences and changes in the competitive environment, which could impair the
Company's operating performance. A breach of any of the covenants under the
Revolving Credit Facility would result in a default under the Revolving Credit
Facility, in which event, the lender under the Revolving Credit Facility could
elect to declare all outstanding amounts borrowed thereunder, together with
accrued interest thereon, to be due and payable. A payment default or an
acceleration of amounts due under the Revolving Credit Facility would likely
cause a default under the Indenture relating to the Senior Notes and the
indenture relating to the Series B Senior Notes, of which $115 million in
aggregate principal amount are outstanding. Moreover, as a result of the
security afforded to the Revolving Credit Facility, there can be no assurance
that, in the event of such a default or an acceleration, the Company would
have sufficient funds to pay indebtedness outstanding under the Senior Notes
or the Series B Senior Notes after the collateral has been applied to the
obligations under the Revolving Credit Facility. Acceleration of such
indebtedness would have a material adverse effect on the Company. Further,
each of the Indenture and the indenture related to the Series B Senior Notes
contains provisions that limit the Company's activities. See "Description
of the Senior Notes," Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operation-Liquidity and Capital Resources"
of the Form 10-K, Item 8. "Financial Statement and Supplementary-Data Notes
to Consolidated Financial Statements, Note 10" of the Form 10-K and Part I,
Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of the Form 10-Q.
INABILITY TO REPURCHASE SENIOR NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined herein), at any
time, the Company will be required to offer to repurchase each holder's Senior
Notes, as well as the Series B Senior Notes outstanding, at a repurchase price
equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, thereon. There can be no assurance that the Company
will have the financial resources to effect any such repurchase. In addition,
such a repurchase would likely cause a default under the Revolving Credit
Facility. See "Description of the Senior Notes-Repurchase at the Option of
the Holders-Change of Control," Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operation-Liquidity and Capital
Resources" of the Form 10-K, Item 8. "Financial Statement and Supplementary
Data-Notes to Consolidated Financial Statements, Note 10" of the Form 10-K and
Part I, Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Form 10-Q.
CONTROL BY EXECUTIVE OFFICERS, DIRECTORS AND THEIR AFFILIATES
As of May 28, 1998, the executive officers and directors of the Company
(including companies under their control) beneficially owned 6,590,612 shares,
or approximately 41%, of the Company's Common Stock (in each case determined
in accordance with Rule 13d-3 under the Exchange Act). The aggregate
beneficial ownership of such persons permits them to have effective control of
the Company and to direct the management and affairs of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the
performance of its management team. The Company's future operations could be
materially adversely affected if the services of any of the Company's senior
executives were to cease to be available to the Company. In particular, the
Company is dependent on E. Scott Beattie, its President and Chief Executive
Officer. See Item 1. "Business-Executive Officers of the Company" of the
Form 10-K.
CHANGES IN THE RETAIL INDUSTRY
From time to time, major retailers, including certain of the Company's
customers, have suffered financial difficulties. While no material adverse
effect on the Company's business or financial condition has resulted from the
financial difficulties of any of its customers, there can be no assurance that
this will continue to be the case. In addition, the retail industry has
periodically experienced consolidation and other ownership changes. Major
retailers in the United States and in foreign markets may in the future
consolidate, undergo restructuring or realign their affiliations, which could
decrease the number of stores that sell the Company's products or increase the
ownership concentration within the retail industry. Furthermore, certain
of the Company's customers have indicated to the Company that they are
considering reducing their emphasis on carrying a broad selection of fragrance
products in favor of carrying a smaller number of items. While such changes in
the retail industry or the preferences of the Company's customers to date have
not had a material adverse effect on the Company's business or financial
condition, there can be no assurance as to the future effect of any such
changes.
FRAUDULENT CONVEYANCE
The incurrence by the Company of indebtedness under the Senior Notes to
repay its existing debt, and the issuance of any Subsidiary Guarantee of the
Senior Notes by any Subsidiary Guarantor, may be subject to review under
relevant federal and state fraudulent conveyance laws in a bankruptcy case
involving, or a lawsuit commenced by or on behalf of unpaid creditors of, the
Company or any Subsidiary Guarantor. Under such laws, if a court were to find
that (i)(a) at the time the Senior Notes were issued, the Company or (b) at
the time any Subsidiary Guarantee was issued, the respective Subsidiary
Guarantor, had incurred the indebtedness under the Senior Notes or the
Subsidiary Guarantee, as the case may be, with the intent of delaying or
defrauding creditors or (ii) the Company or the respective Subsidiary
Guarantor, as the case may be, received less than reasonably equivalent value
or fair consideration for the Senior Notes or the Subsidiary Guarantee, as the
case may be, and (x) was insolvent or rendered insolvent by reason of such
transaction, (y) was engaged in a business or transaction for which the assets
remaining with the Company or the respective Subsidiary Guarantor, as the case
may be, constituted unreasonably small capital, or (z) intended to incur, or
believed that it would incur, debts that it would be unable to pay when due,
such court could subordinate the Senior Notes or the Subsidiary Guarantee, as
the case may be, to present or future indebtedness of the Company or the
respective Subsidiary Guarantor, as the case may be, avoid the issuance
of some or all of the debt under the Senior Notes or the Subsidiary Guarantee,
as the case may be, direct the repayment of any amounts paid thereunder to the
Company or the respective Subsidiary Guarantor, as the case may be, or to a
fund for the benefit of the creditors of the Company or the respective
Subsidiary Guarantor, as the case may be, or take other action which would be
detrimental to the holders of the Senior Notes.
The Company believes that the indebtedness represented by the Senior
Notes was (as to the Initial Notes) and is being (as to the Exchange Notes)
incurred for proper purposes and in good faith, that the Company is receiving
reasonably equivalent value or fair consideration for incurring such
indebtedness, that the Company was, is and will be solvent under the foregoing
standards and that it had, has and will have sufficient capital for carrying
on its business and was, is, and will be able to pay its debts as they mature.
There can be no assurance, however, that a court would reach the same
conclusions.
ABSENCE OF A PUBLIC MARKET FOR EXCHANGE NOTES
The Exchange Notes will constitute a new issue of securities for which
there is no established trading market. The Company does not intend to list
the Exchange Notes on any national securities exchange or to seek the
admission of the Exchange Notes for quotation through the National Association
of Securities Dealers Automated Quotation System. Although the Initial
Purchaser has advised the Company that it currently intends to make a market
in the Exchange Notes, it is not obligated to do so and may discontinue
such market making at any time without notice. In addition, such market
making activity will be subject to the limits imposed by the Securities Act
and the Exchange Act, and may be limited during the Exchange Offer and the
pendency of any Shelf Registration Statement. See "Registration Rights;
Liquidated Damages." There can be no assurance as to the development or
liquidity of any market for the Exchange Notes, the ability of the holders of
the Exchange Notes to sell their Exchange Notes or the price at which the
holders would be able to sell their Exchange Notes. Future trading prices of
the Exchange Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities.
THE COMPANY
French Fragrances, Inc. ("FFI") was formed as a privately held Florida
corporation on June 26, 1992 by Rafael Kravec and a group of investors
represented by Bedford in order to acquire the fragrance-related net assets of
National Trading Manufacturing, Inc. ("National Trading"). National Trading,
a privately held Florida corporation controlled by Rafael Kravec, the
Company's Chairman of the Board, had been engaged in the manufacture and
distribution of gold jewelry and other gift items and, beginning in 1981, had
also been engaged in the purchase and United States mass-market distribution
of prestige perfumes and other fragrance products. In 1992, Rafael Kravec
determined to acquire the interests of National Trading's three other
shareholders, to cease National Trading's jewelry and gift items business and,
with the financial investment and managerial support of Bedford Capital
Corporation, a Toronto, Canada based merchant banking firm ("Bedford") and the
investors it represented, to concentrate on expanding the fragrance
distribution business, which was acquired from National Trading by FFI on
July 2, 1992.
After the acquisition, the Company experienced significant growth as a
distributor of prestige fragrances to the United States mass market. To
further enhance its distribution relationships, profitability and industry
position, the Company began acquiring ownership of or exclusive United States
distribution rights to a selection of prestige fragrance and cosmetic brands.
As a result of its growth, the Company determined that its then existing
physical facilities had become inadequate. On November 30, 1995, it acquired
its present distribution facility in Miami Lakes, Florida (the "Miami Lakes
Facility") and became a publicly held company through the merger of FFI with
and into Suave Shoe Corporation ("Suave"), a publicly held company that had
previously discontinued its shoe manufacturing and distribution operations
(the "Merger"). Following the Merger, Suave, as the surviving corporation,
changed its name to French Fragrances, Inc., and its operations consist
entirely of the fragrance business of FFI, which was the acquiror in the
Merger for financial reporting purposes.
The Company's ratio of earnings to fixed charges for the fiscal years
ended June 30, 1994, the seven months ended January 31, 1994, the seven months
ended January 31, 1995, the twelve months ended January 31, 1995, the fiscal
year ended January 31, 1996, the fiscal year ended January 31, 1997, the
fiscal year ended January 31, 1998 and the three months ended April 30, 1998
was 2.00, 2.19, 3.82, 3.13, 2.19, 2.88, 2.60 and 1.14, respectively. This
information has been derived from the audited and unaudited consolidated
financial statements of the Company and FFI for the relevant periods.
Effective January 31, 1995, FFI changed its fiscal year end to January 31 from
June 30. For this reason, the seven months ended January 31, 1995 and 1994
are presented. The foregoing data should be read in conjunction with the
consolidated financial statements of the Company and related notes and the
other financial information incorporated herein by reference.
The Company's principal executive offices are located at 14100 N.W. 60th
Avenue, Miami Lakes, Florida 33014, and its telephone number is (305)
818-8000.
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "FRAG." The closing sales price of the Common Stock on June 23,
1998 was $15.9375 per share.
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal
(which together constitute the Exchange Offer), to exchange up to $40 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Initial Notes properly tendered on or prior to the Expiration Date
and not withdrawn as permitted pursuant to the procedures described below. The
Exchange Offer is being made with respect to any and all of the Initial Notes.
As of the date of this Prospectus, $40 million aggregate principal amount
of the Initial Notes is outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1998, to all
holders of Initial Notes registered on the note register of the Company. The
Company's obligation to accept Initial Notes for exchange pursuant to the
Exchange Offer is subject to the satisfaction or waiver by the Company of
certain conditions set forth under "Certain Conditions to the Exchange Offer"
below. The Company currently expects that each of the conditions will be
satisfied and that no waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were issued on April 27, 1998 in a transaction exempt
from the registration requirements of the Securities Act. Accordingly, the
Initial Notes may not be reoffered, resold, or otherwise transferred unless so
registered or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.
In connection with the issuance and sale of the Initial Notes, the
Company entered into the Registration Rights Agreement, which requires the
Company to file with the Commission a registration statement relating to the
Exchange Offer not later than 60 days after the date of issuance of the
Initial Notes, and to use its reasonable best efforts to cause the
registration statement relating to the Exchange Offer to become effective
under the Securities Act not later than 150 days after the date of issuance of
the Initial Notes and the Exchange Offer to be consummated not later than 30
business days after the date of the effectiveness of the Registration
Statement (or use its reasonable best efforts to cause to become effective
a shelf registration statement with respect to resales of the Initial Notes by
the 150th calendar day after the date on which the Company becomes obligated
to file such shelf registration statement). A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement.
The Exchange Offer is being made by the Company to satisfy its
obligations with respect to the Registration Rights Agreement. The term
"holder," with respect to the Exchange Offer, means any person in whose name
Initial Notes are registered on the note register of the Company or any other
person who has obtained a properly completed bond power from the registered
holder, or any person whose Initial Notes are held of record by The Depository
Trust Company. Other than pursuant to the Registration Rights Agreement,
the Company is not required to file any registration statement to register any
outstanding Initial Notes. Holders of Initial Notes who do not tender their
Initial Notes or whose Initial Notes are tendered but not accepted would have
to rely on exemptions to registration requirements under the securities laws,
including the Securities Act, if they wish to sell their Initial Notes.
The Company is making the Exchange Offer in reliance on the position of
the staff of the SEC as set forth in certain interpretive letters addressed to
third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the staff would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Initial Notes may be offered for resale, resold
and otherwise transferred by a holder (other than any holder who is a
broker-dealer or an "affiliate" of the Company within the meaning of Rule 405
of the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange Notes. See " Resale of
Exchange Notes." Each broker-dealer that receives Exchange Notes for its own
account in exchange for Initial Notes, where such Initial Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set
forth herein and in the Letter of Transmittal accompanying this Prospectus,
$1,000 in principal amount of Exchange Notes for each $1,000 in principal
amount of the Initial Notes. The terms of the Exchange Notes are identical in
all material respects to the terms of the Initial Notes for which they may be
exchanged pursuant to this Exchange Offer, except that the Exchange Notes will
generally be freely transferable by holders thereof and will not be subject to
any covenant regarding registration under the Securities Act. The Exchange
Notes will evidence the same indebtedness as the Initial Notes and will be
entitled to the benefits of the Indenture. See "Description of the Senior
Notes."
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Initial Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the SEC with respect to whether the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Initial Notes
may be offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on an interpretation by the staff of the SEC
set forth in a series of no-action letters issued to third parties, the
Company believes that Exchange Notes issued pursuant to the Exchange Offer in
exchange for Initial Notes may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is a broker-dealer or is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and neither such holder
nor any other such person is engaging in or intends to engage in a
distribution of such Exchange Notes. Since the SEC has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the staff of the SEC would make a similar determination with respect to
the Exchange Offer. Any holder who is an affiliate of the Company or who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and cannot rely on such interpretation by the staff of the SEC and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Initial Notes,
where such Initial Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such
Exchange Notes. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Initial Notes so surrendered or, if no
interest has been paid on such Initial Notes, from April 27, 1998.
Tendering holders of the Initial Notes shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
1998, unless the Company has extended the period of time for which
the Exchange Offer is open (such date, as it may be extended, is referred to
herein as the "Expiration Date"). The Expiration Date will be at least 20
business days after the commencement of the Exchange Offer in accordance with
Rule 14e-1(a) under the Exchange Act. The Company expressly reserves the
right, at any time or from time to time, in its sole discretion, to extend the
period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Initial Notes, by giving oral or written notice
to the Exchange Agent and by timely public announcement no later than 9:00
a.m. New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Initial Notes
previously tendered will remain subject to the Exchange Offer unless properly
withdrawn.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Initial Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "Certain Conditions to the Exchange Offer" which have
not been waived by the Company and (ii) amend the terms of the Exchange Offer
in any manner which, in its good faith judgment, is advantageous to the
holders of the Initial Notes, whether before or after any tender of the
Initial Notes. If any such termination or amendment occurs, the Company will
notify the Exchange Agent and will either issue a press release or give oral
or written notice to the holders of the Initial Notes as promptly as
practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will, subject to the conditions described under
"Certain Conditions to the Exchange Offer," exchange the Exchange Notes for
the Initial Notes on the Exchange Date.
PROCEDURES FOR TENDERING INITIAL NOTES
The tender to the Company of Initial Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal.
A holder of Initial Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references
in this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Initial Notes being tendered and any required
signature guarantees and any other documents required by the Letter of
Transmittal, to the Exchange Agent at its address set forth below (see
"Exchange Agent") on or prior to the Expiration Date (or complying with the
procedure for book-entry transfer described below) or (ii) complying with the
guaranteed delivery procedures described below.
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender such Initial Notes should contact such registered holder promptly
and instruct such registered holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender Initial Notes on such
beneficial owner's own behalf, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering the Initial Notes,
either make appropriate arrangements to register ownership of the Initial
Notes in such beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may
take considerable time.
THE METHOD OF DELIVERY OF INITIAL NOTES, LETTERS OF TRANSMITTAL AND ALL
OF THE REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO INSURE TIMELY DELIVERY. NO INITIAL NOTES OR LETTERS OF
TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If tendered Initial Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purposes described herein,
shall include any participant in The Depository Trust Company (the "Book-Entry
Transfer Facility") whose name appears on a security listing as the owner of
Initial Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Initial Notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to the Company and duly
executed by the registered holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a bank, broker, dealer, credit
union, savings association, clearing agency or other institution (each an
"Eligible Institution") that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Exchange
Act. If the Exchange Notes and/or Initial Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Initial Notes, the signature in the Letter of
Transmittal must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the
Initial Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Initial Notes by causing
such Book-Entry Transfer Facility to transfer such Initial Notes into the
Exchange Agent's account with respect to the Initial Notes in accordance with
the Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of Initial Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal with any required signature guarantee and all other
required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
If a holder desires to tender Initial Notes in the Exchange Offer and
time will not permit a Letter of Transmittal or Initial Notes to reach the
Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
the Exchange Agent has received at its address set forth below on or prior to
the Expiration Date, a letter, telegram or facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
courier) from an Eligible Institution setting forth the name and address of
the tendering holder, the names in which the Initial Notes are registered and,
if possible, the certificate numbers of the Initial Notes to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
three business days after the Expiration Date, the Initial Notes in proper
form for transfer (or a confirmation of book-entry transfer of such Initial
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility),
will be delivered by such Eligible Institution together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents). Unless Initial Notes being tendered by the above-described method
are deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Company may, at its option, reject the tender.
Copies of the notice of guaranteed delivery ("Notice of Guaranteed Delivery")
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Initial Notes (or a confirmation of book-entry transfer of
such Initial Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility) is received by the Exchange Agent, or (ii) a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) from an Eligible Institution is received by the
Exchange Agent. Issuances of Exchange Notes in exchange for Initial Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal
(and any other required documents) and the tendered Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Initial Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any and all tenders of any particular Initial Notes not properly
tendered or not to accept any particular Initial Notes which acceptance might,
in the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Initial Notes either
before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Initial Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Initial Notes for exchange
must be cured within such reasonable period of time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall
be under any duty to give notification of any defect or irregularity with
respect to any tender of Initial Notes for exchange, nor shall any of them
incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Initial Notes, such Initial Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders appear
on the Initial Notes.
If the Letter of Transmittal or any Initial Notes or powers of attorney
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, or if it is an
affiliate, it will comply with the registration and prospectus requirements of
the Securities Act to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Initial Notes where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Initial Notes acquired directly from the Company) must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer.
The party tendering Initial Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Initial Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Initial Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Initial
Notes and to acquire Exchange Notes issuable upon the exchange of such
tendered Initial Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Initial
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The Transferor also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Initial Notes or transfer
ownership of such Initial Notes on the account books maintained by a
Book-Entry Transfer Facility. The Transferor further agrees that acceptance of
any tendered Initial Notes by the Company and the issuance of Exchange Notes
in exchange therefor shall constitute performance in full by the Company of
certain of its obligations under the Registration Rights Agreement. All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act and that it is
acquiring the Exchange Notes offered hereby in the ordinary course
of such Transferor's business and that such Transferor has no arrangement with
any person to participate in the distribution of such Exchange Notes. Each
holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of Exchange Notes. Each
Transferor which is a broker-dealer receiving Exchange Notes for its own
account must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. By so acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in
exchange for Initial Notes where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company will, for a period of one year after the Exchange
Date, make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent at the address set forth herein prior
to the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Initial Notes to be withdrawn (the
"Depositor"), (ii) identify the Initial Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Initial Notes),
(iii) specify the principal amount of Initial Notes to be withdrawn, (iv)
include a statement that such holder is withdrawing his election to have such
Initial Notes exchanged, (v) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Initial Notes
were tendered or as otherwise described above (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee under the Indenture register the transfer of such Initial
Notes into the name of the person withdrawing the tender and (vi) specify the
name in which any such Initial Notes are to be registered, if different from
that of the Depositor. The Exchange Agent will return the properly withdrawn
Initial Notes promptly following receipt of notice of withdrawal. If Initial
Notes have been tendered pursuant to the procedure for book-entry transfer,
any notice of withdrawal must specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Initial
Notes or otherwise comply with the Book-Entry Transfer Facility's procedure.
All questions as to the validity of notices of withdrawals, including time of
receipt, will be determined by the Company in its sole discretion
and such determination will be final and binding on all parties.
Any Initial Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Initial Notes
which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Initial Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Initial Notes will be credited to an
account with such Book-Entry Transfer Facility specified by the holder) as
soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Initial Notes may be retendered by
following one of the procedures described under "Procedures for Tendering
Initial Notes" above at any time on or prior to the Expiration Date.
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly on the Exchange Date, all Initial
Notes properly tendered and will issue the Exchange Notes promptly after such
acceptance. See "Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Initial Notes for exchange when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
For each Initial Note accepted for exchange, the holder of such Initial
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Initial Note.
In all cases, issuance of Exchange Notes for Initial Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Initial Notes or
a timely book-entry confirmation of such Initial Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Initial Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Initial Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted
or non-exchanged Initial Notes will be returned without expense to the
tendering holder thereof (or, in the case of Initial Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
above, such non-exchanged Initial Notes will be credited to an account with
such Book-Entry Transfer Facility specified by the holder) as promptly as
practicable after the Exchange Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any
extension of the Exchange Offer, the Company shall not be required to accept
for exchange, or to issue Exchange Notes in exchange for, any Initial Notes
and may terminate or amend the Exchange Offer (by oral or written notice to
the Exchange Agent or by a timely press release) if at any time before the
acceptance of such Initial Notes for exchange or the exchange of the Exchange
Notes for such Initial Notes, any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the contemplated benefits of the Exchange
Offer to the Company; or
(b) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Initial Notes or the
Exchange Notes or that may materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any law, rule or regulation or applicable interpretations of the
staff of the SEC is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of
the Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer
or have a material adverse effect on the contemplated benefits of the
Exchange Offer to the Company; or
(f) there shall occur a change in the current interpretation by the
staff of the SEC which permits the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Initial Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is a broker-dealer or an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities
Act provided that such Exchange Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether
or not mandatory), (ii) any limitation by any governmental agency or
authority which may adversely affect the ability of the Company to
complete the transactions contemplated by the Exchange Offer, (iii) a
declaration of a banking moratorium or any suspension of payments
in respect of banks by Federal or state authorities in the United States
(whether or not mandatory), (iv) a commencement of a war, armed
hostilities or other international or national crisis directly or
indirectly involving the United States, (v) any limitation (whether or
not mandatory) by any governmental authority on, or other event having a
reasonable likelihood of affecting, the extension of credit by banks or
other leading institutions in the United States, or (vi) in the case of
any of the foregoing existing at the time of the commencement of the
Exchange Offer, a material acceleration or worsening thereof.
The Company expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Initial Notes upon the occurrence of any of
the foregoing conditions (which represent all of the material conditions to
the acceptance by the Company of properly tendered Initial Notes). In
addition, the Company may amend the Exchange Offer at any time prior to the
Expiration Date if any of the conditions set forth above occur. Moreover,
regardless of whether any of such conditions has occurred, the Company
may amend the Exchange Offer in any manner which, in its good faith judgment,
is advantageous to holders of the Initial Notes.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time. If the Company waives or
amends the foregoing conditions, it will, if required by law, extend the
Exchange Offer for a minimum of five business days from the date that the
Company first gives notice, by public announcement or otherwise, of such
waiver or amendment, if the Expiration Date would otherwise occur within such
five business-day period. Any determination by the Company concerning the
events described above will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Initial Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Initial Notes, if at such time any stop order shall be threatened or in effect
with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended. In any such event the Company is required
to use every reasonable effort to obtain the withdrawal of any stop order at
the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount
of Initial Notes being tendered for exchange.
EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
BY HAND/OVERNIGHT COURIER: BY MAIL:
Marine Midland Bank (insured or registered recommended)
Attention: Corporate Trust Marine Midland Bank
Operations Attention: Corporate Trust
140 Broadway, Level A Operations
New York, New York 10005-1180 140 Broadway, Level A
New York, New York 10005-1180
BY FACSIMILE: (212) 658-2292
Attention: Paulette Shaw
Telephone: (212) 658-5931
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address
and telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH IN THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH IN THE LETTER OF TRANSMITTAL, WILL NOT
CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith. The Company will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this and other related documents to the
beneficial owners of the Initial Notes and in handling or forwarding tenders
for their customers.
The estimated cash expenses to be incurred in connection with the
Exchange Offer will be paid by the Company and are estimated in the aggregate
to be approximately $100,000, which includes fees and expenses of the Exchange
Agent, Trustee, registration fees, accounting, legal, printing and related
fees and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company.
Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Initial Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
However, the Company may, at its discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Initial Notes in such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the
exchange of Initial Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Initial Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the registered holder of
the Initial Notes tendered, or if tendered Initial Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Initial
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Initial
Notes as reflected in the Company's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Initial Notes. Expenses
incurred in connection with the issuance of the Exchange Notes will be
amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not tender their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Initial Notes as set forth in the legend
thereon. Initial Notes not exchanged pursuant to the Exchange Offer will
continue to remain outstanding in accordance with their terms. In general, the
Initial Notes may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Initial Notes
under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Initial
Notes should carefully consider whether to participate. Holders of Initial
Notes are urged to consult their financial and tax advisors in making their
own decision whether or not to tender their Initial Notes. See "Certain
Federal Income Tax Consequences."
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the Registration
Rights Agreement. Holders of Initial Notes who do not tender their Initial
Notes in the Exchange Offer will continue to hold such Initial Notes and will
be entitled to all the rights and limitations applicable thereto under the
Indenture, except for any such rights under the Registration Rights Agreement
that by their terms terminate or cease to have further effectiveness as a
result of the making of this Exchange Offer. All untendered Initial Notes will
continue to be subject to the restrictions on transfer set forth in the
legend thereon. To the extent that Initial Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered Initial Notes could be
adversely affected.
The Company may in the future seek to acquire, subject to the terms of
the Indenture, untendered Initial Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no obligation and no present plan to acquire any Initial Notes which are not
tendered in the Exchange Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of
the staff of the SEC as set forth in certain interpretive letters addressed to
third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the staff would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Initial Notes may be offered for resale, resold
and otherwise transferred by a holder (other than any holder who is a
broker-dealer or an "affiliate" of the Company within the meaning of Rule 405
of the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Exchange Notes. However, any holder who
is an "affiliate" of the Company or who has an arrangement or understanding
with respect to the distribution of the Exchange Notes to be acquired pursuant
to the Exchange Offer, or any broker-dealer who purchased Initial Notes from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act (i) cannot rely on the applicable interpretations
of the staff and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act. A broker-dealer who holds Initial
Notes that were acquired for its own account as a result of market-making or
other trading activities may be deemed to be an "underwriter" within the
meaning of the Securities Act and must, therefore, deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of Exchange Notes. Each such broker-dealer that receives Exchange Notes for
its own account in exchange for Initial Notes, where such Initial Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities (other than Initial Notes acquired directly from
the Company) must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by such broker-dealers in connection with such resales. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption
from registration or qualification is available and is complied with. The
Company has agreed, pursuant to the Registration Rights Agreement and subject
to certain specified limitations therein, to register or qualify the Exchange
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Notes reasonably requests. Such
registration or qualification may require the imposition of restrictions or
conditions (including suitability requirements for offerees or purchasers) in
connection with the offer or sale of any Exchange Notes.
DESCRIPTION OF THE SENIOR NOTES
GENERAL
The Initial Notes were, and the Exchange Notes will be, issued pursuant
to an indenture dated as of April 27, 1998 (the "Indenture") between the
Company and Marine Midland Bank, as trustee (the "Trustee"), a copy of which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon the
issuance of the Exchange Notes, if any, or the effectiveness of a Shelf
Registration Statement (as defined herein), the Indenture will be subject to
and governed by the Trust Indenture Act. The Senior Notes are subject to all
such terms, and holders of Senior Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of the
material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The definitions of certain
terms used in the following summary are set forth below under "Certain
Definitions." Unless the context requires otherwise, references to the Senior
Notes shall include the Exchange Notes.
The Senior Notes are unsecured senior obligations of the Company, rank
senior in right of payment to all existing and future Subordinated
Indebtedness of the Company and rank pari passu in right of payment with all
existing and future Senior Indebtedness of the Company, including indebtedness
under the Revolving Credit Facility and the Series B Senior Notes. As of
January 31, 1998, after giving effect to the JPF Acquisition, the issuance of
the Initial Notes and the application of the net proceeds therefrom, the
Company would have had approximately $180 million of total indebtedness. The
Indenture limits the ability of the Company and its Subsidiaries to incur
additional indebtedness; however, subject to certain limitations, the Company
and its Subsidiaries are permitted to incur certain indebtedness, which may be
secured. See "Certain Covenants."
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in aggregate principal amount to $40 million
and will mature on May 15, 2007. Interest on the Senior Notes accrues at the
rate of 10-3/8% per annum and will be payable in cash semi-annually in arrears
on May 15 and November 15, commencing on November 15, 1998, to holders of
record on the immediately preceding May 1 and November 1, respectively.
Interest on the Senior Notes accrues from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest
on the Senior Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
holders of the Senior Notes at their respective addresses set forth in the
register of holders of Senior Notes. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Exchange Notes will be issued in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
OPTIONAL REDEMPTION
The Senior Notes are not redeemable at the Company's option prior to May
15, 2002. Thereafter, the Senior Notes are subject to redemption, at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, in cash, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest, if any, thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on May 15 of the years indicated
below:
YEAR PERCENTAGE
---- ----------
2002. . . . . . . . . . . . . . . . .105.188%
2003. . . . . . . . . . . . . . . . .103.458%
2004. . . . . . . . . . . . . . . . .101.729%
2005 and thereafter . . . . . . . . .100.000%
Notwithstanding the foregoing, at any time prior to May 15, 2000, the
Company, at its option, may on any one or more occasions redeem up to 35% of
the initially outstanding aggregate principal amount of Senior Notes at a
redemption price equal to 109 3/8% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the redemption date, with the
net proceeds of one or more public equity offerings of the Company generating
in each case net proceeds of at least $15.0 million; provided that at least
65% of the initially outstanding aggregate principal amount of Senior Notes
remains outstanding immediately after the occurrence of any such redemption;
and provided, further, that such redemption occurs within 60 days of the date
of the closing of any such public equity offering of the Company.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Senior Notes
will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Senior
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
purchase (the "Change of Control Payment"). Within 60 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 Senior Notes 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 Senior Notes as a result
of a Change of Control.
On the payment date set forth in the Change of Control Offer (the "Change
of Control Payment Date"), the Company will, to the extent lawful, (i) accept
for payment all Senior Notes or portions thereof properly tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Senior Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Senior Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Senior Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to each
holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered,
if any; provided that each such new Senior Note will be in a principal amount
of $1,000 or an integral multiple 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.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) 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 Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) (other than the Principals or their Related Parties (as defined
below)), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction or
series of transactions (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" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act), directly or indirectly, of (a) 35% or more of the voting
Capital Interests of the Company and (b) more of the voting Capital Interests
of the Company than are, in the aggregate, beneficially owned by the
Principals and their Related Parties at the time of such consummation, or (iv)
the first day on which a majority of the members of the Board of Directors are
not Continuing Directors. For purposes of this definition, any transfer of an
equity interest of an entity that was formed for the purpose of acquiring
voting Capital Interests of the Company will be deemed to be a transfer
of such portion of such voting Capital Interests as corresponds to the portion
of the equity of such entity that has been so transferred.
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 developing 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
Senior Notes to require the Company to repurchase such Senior 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.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on
the date of the Indenture or (ii) was nominated for election or elected to
such Board of Directors with the approval of (a) a majority of the
Principals who were beneficial owners of voting Capital Interests of the
Company at the time of such nomination or election or (b) a majority of the
Continuing Directors who were members of such Board of Directors at the time
of such nomination or election.
"PRINCIPALS" means Rafael Kravec, E. Scott Beattie, J.W. Nevil Thomas,
Fred Berens and Richard C.W. Mauran.
"RELATED PARTY" with respect to any Principal means (a) any spouse or
immediate family member of such Principal or (b) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest of which
consist of such Principal and/or such other Persons referred to in the
immediately preceding clause (a).
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders of the Senior
Notes to require that the Company repurchase or redeem the Senior Notes in the
event of a takeover, recapitalization or similar restructuring.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, engage in an Asset Sale, unless (a) the Company (or
the Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to
the Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of and (b) at least 75% of the consideration therefor received
by the Company or such Subsidiary is in the form of cash or Cash Equivalents;
provided that the amount of (i) any liabilities (as shown on the Company's or
such Subsidiary's most recent balance sheet or in the notes thereto) of the
Company or any Subsidiary (other than liabilities that are by their terms
subordinated to the Senior Notes or any guarantee thereof) that are assumed by
the transferee of any such assets and (ii) any securities, notes or other
obligations received by the Company or any such Subsidiary from such
transferee that are promptly converted by the Company or such Subsidiary into
cash (to the extent of the cash received), will be deemed to be cash for
purposes of this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds (a) to permanently reduce Senior
Indebtedness, (b) to permanently reduce Indebtedness permitted to be incurred
pursuant to clause (i) of the second paragraph of the covenant described below
under "Certain Covenants-Incurrence of Indebtedness and Issuance of
Disqualified Stock" or (c) to an Investment in another business, the making of
a capital expenditure or the acquisition of other tangible assets, in each
case, in the same or a similar or related line of business as the Company and
its Subsidiaries were engaged in on the date of the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." Within 30 days after the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
holders of Senior Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Senior Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon
to the date of purchase (the "Asset Sale Offer Price"), in accordance with the
procedures set forth in the Indenture; provided that if by reason of the
comparable provision in the indenture relating to the Series B Senior Notes,
the Company is required to make a similar offer to the holders of the Series B
Senior Notes, the Excess Proceeds may first be applied to the purchase of the
Series B Senior Notes and, to the extent so applied, the Excess Proceeds
available for the purchase of Senior Notes shall be correspondingly reduced.
To the extent that the aggregate amount of Senior Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds available to purchase
Senior Notes, the Company and its Subsidiaries may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Senior Notes surrendered by holders thereof exceeds the amount of Excess
Proceeds available to purchase Senior Notes, the Trustee will select the
Senior Notes to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds will be reset at zero.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Senior Notes are listed, or, if the Senior
Notes are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided that no Senior Notes of
$1,000 or less will be redeemed in part. Notices of redemption will be mailed
by first class mail at least 30 but not more than 60 days before the
redemption date to each holder of Senior Notes to be redeemed at its
registered address. If any Senior Note is to be redeemed in part only, the
notice of redemption that relates to such Senior Note will state the portion
of the principal amount thereof to be redeemed. A new Senior Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of
the holder thereof upon cancellation of the original Senior Note. On and after
the redemption date, interest ceases to accrue on Senior Notes or portions
thereof called for redemption unless the Company defaults in making the
redemption payment.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on account of the Company's or any of its
Subsidiaries' Equity Interests (including, without limitation, any such
distribution by such Persons in connection with any merger or consolidation
involving the Company) (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends
or distributions payable to the Company or any Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any direct or indirect parent of the Company;
(iii) make any principal payment on, or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Indebtedness, except at scheduled
maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) 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 most recently ended four fiscal
quarters for which financial statements are available, 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 Disqualified Stock"; and
(C) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii) and (iii) of the next succeeding paragraph), is less than
the sum of (1) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (2) 100% of the aggregate net cash proceeds
received by the Company from the issuance or sale since the date of the
Indenture of Equity Interests of the Company or of debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt securities that
have been converted into Disqualified Stock or Equity Interests issued
upon conversion of the Company's Series B Convertible Preferred Stock,
$.01 par value, or Series C Convertible Preferred Stock, $.01 par value,
outstanding on the date of the Indenture), plus (3) 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.
The foregoing provisions will not prohibit (i) the payment of any
dividend or distribution 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; (ii) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition will be excluded from clause (C)(2) of the preceding
paragraph; and (iii) the defeasance, redemption or repurchase of Subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to a
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 or other
acquisition will be excluded from clause (C)(2) of the preceding paragraph.
The amount of all Restricted Payments (other than cash) will be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company will
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 the covenant "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available
financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock;
provided that the Company may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock and any Subsidiary may incur Indebtedness (including
Acquired Debt), if, (i) in each case, the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least (a) 2.00 to 1, on or prior to May 15, 1999 and (b)
2.25 to 1, thereafter, in each case, 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 had been
issued, as the case may be, at the beginning of such four-quarter period and
(ii) in the case of incurrence of Indebtedness by a Subsidiary (other than
Acquired Debt), such Subsidiary guarantees on a senior unsecured basis (a
"Subsidiary Guarantee") the Company's payment obligations under the Senior
Notes (each such Subsidiary, a "Subsidiary Guarantor"). See "Subsidiary
Guarantees" and "Limitations on Issuances of Guarantees of Indebtedness."
The foregoing provisions do not apply to:
(i) the incurrence by the Company and any Subsidiary Guarantor of
Senior Revolving Debt and letters of credit pursuant to any Credit
Facility for working capital purposes (with letters of credit being
deemed to have a principal amount equal to the maximum potential
liability of the Company thereunder) in an aggregate principal amount not
to exceed the amount of the Borrowing Base;
(ii) the incurrence by the Company of the Existing Indebtedness;
(iii) the incurrence by the Company of the Indebtedness represented
by the Senior Notes and the incurrence by any Subsidiary Guarantor of the
Indebtedness represented by its Subsidiary Guarantee;
(iv) the incurrence by the Company and any Subsidiary Guarantor of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or
refund, Indebtedness that was permitted by the Indenture to be incurred;
(v) the incurrence by the Company or any Subsidiary Guarantor of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries; provided that (A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held
by a Person other than a Wholly Owned Subsidiary and (B) any sale or
other transfer of any such Indebtedness to a Person that is not either
the Company or a Wholly Owned Subsidiary will be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
(vi) the incurrence by the Company and any Subsidiary Guarantor of
Indebtedness (A) represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing up to all or any part of the purchase price or cost
of construction or improvement of property used in the business of the
Company or such Subsidiary Guarantor, or (B) represented by mortgage
financing secured solely by the Miami Lakes Facility (in addition to
Indebtedness permitted to be incurred pursuant to clauses (ii) or (iv)
above in this covenant) in a principal amount for (A) and (B) in the
aggregate not to exceed $7.5 million at any time outstanding;
(vii) the incurrence by the Company and any Subsidiary Guarantor of
Hedging Obligations in the ordinary course of business of the Company or
such Subsidiary Guarantor, as the case may be;
(viii) the incurrence by the Company and any Subsidiary Guarantor of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business
of the Company or such Subsidiary Guarantor, as the case may be; and
(ix) the incurrence by the Company and any Subsidiary Guarantor of
Indebtedness not otherwise permitted under the Indenture in an aggregate
amount for all such Indebtedness not to exceed $7.5 million at any time
outstanding.
The Company will not incur any secured Indebtedness which is not Senior
Indebtedness. No Subsidiary Guarantor will incur any secured Indebtedness
which is not Guarantor Senior Indebtedness.
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, create, incur, assume or otherwise cause or suffer to
exist or become effective any Lien of any kind (other than Permitted Liens)
upon any of their property or assets, now owned or hereafter acquired, unless
all payments due under the Indenture and the Senior Notes, and all obligations
under the Subsidiary Guarantees, if any, are secured on an equal and ratable
basis with the obligations so secured until such time as such obligations are
no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a)(i) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (A) on their Capital
Interests or (B) with respect to any other interest or participation in, or
measured by, its profits, or (ii) pay any Indebtedness owed to the Company or
any of its Subsidiaries, (b) make loans or advances to the Company or any of
its Subsidiaries or (c) transfer any of its properties or assets to the
Company or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) Existing Indebtedness as in
effect on the date of the Indenture, including, without limitation, the Series
B Senior Notes and the indenture related thereto, (ii) any Credit Facility,
provided that any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereto are
no more restrictive with respect to such dividend and other payment
restrictions than those contained in the Revolving Credit Facility as in
effect on the date of the Indenture, (iii) the Indenture and the Senior Notes,
(iv) applicable law, (v) by reason of customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with
past practices, (vi) Capital Lease Obligations, mortgage financings or
purchase money obligations for property acquired in the ordinary course of
business or mortgage financings secured by the Miami Lakes Facility that
impose restrictions of the nature described in clause (c) above on the
property so acquired or the Miami Lakes Facility, as the case may be, (vii)
existing with respect to any Person or the property or assets of such Person
acquired by the Company or any of its Subsidiaries, at the time of such
acquisition and not incurred in contemplation thereof, which encumbrances or
restrictions are not applicable to any Person or the property or assets of any
Person other than such Person or the property or assets of such Person so
acquired, or (viii) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its assets in one or more related transactions to, another corporation,
Person or entity, unless (i) the Company is the surviving Person or the entity
or the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the
Senior Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) the Company or the
entity or Person formed by or surviving any such consolidation or merger, or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction
and (B) except in the case of a transaction the principal purpose and effect
of which is to change the Company's state of incorporation, will, at the time
of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Disqualified Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, 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 any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Subsidiary with an unrelated Person and (b) the Company delivers to
the Trustee (i) with respect to any Affiliate Transaction involving
aggregate consideration in excess of $1.0 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (a) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors and (ii) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $5.0 million,
an opinion as to the fairness to the Company or such Subsidiary of such
Affiliate Transaction from a financial point of view issued by a
nationally-recognized investment banking firm; provided that (A) any
reasonable employment, compensation, bonus or benefit arrangement entered into
by the Company or any of its Subsidiaries in the ordinary course of business
of the Company or such Subsidiary, including without limitation, (x) the grant
of stock options, stock appreciation rights or other stock-based incentive
awards (other than Disqualified Stock) in the ordinary course of business of
the Company or such Subsidiary, as the case may be, provided that any
non-stock payments by the Company or any Subsidiary in connection with
the grant or exercise or other settlement of such stock options, stock
appreciation rights or other stock-based incentive awards are permitted under
the provisions of the Indenture described above under "Restricted
Payments" and (y) the payment of bonuses to officers of the Company from the
Company's 6% Bonus Pool and any renewals, extensions or amendments thereof,
provided that amounts paid thereunder with respect to any fiscal year shall
not exceed in the aggregate 6% of the Company's pre-tax profits for such
fiscal year as determined pursuant to the terms of the 6% Bonus Pool as in
effect on the date of the Indenture, (B) transactions between or among the
Company and/or its Subsidiaries, (C) the payment of reasonable fees,
expense reimbursement and customary indemnification, advances and other
similar arrangements to directors and officers of the Company, (D) reasonable
loans or advances to employees of the Company and its Subsidiaries in the
ordinary course of business of the Company or such Subsidiary, as the case may
be, (E) transactions permitted by the provisions of the Indenture described
above under the caption "Restricted Payments," (F) scheduled payments of
principal and interest with respect to Existing Indebtedness and (G)
scheduled payments pursuant to the lease of the National Trading Facility as
in effect on the date of the Indenture, in each case, shall not be deemed to
be Affiliate Transactions.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company and any Subsidiary Guarantor may enter into a sale
and leaseback transaction if (a) the Company or such Subsidiary Guarantor
could have (i) incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to the covenant
described above under the caption "Incurrence of Indebtedness and Issuance of
Disqualified Stock" and (ii) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under the caption "Liens," (b) the
gross cash proceeds of such sale and leaseback transaction are at least equal
to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback transaction and
(c) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company or such Subsidiary Guarantor applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"Repurchase at the Option of Holders Asset Sales."
LIMITATION ON ISSUANCES AND SALES OF CAPITAL INTERESTS OF WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that the Company (a) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease
or otherwise dispose of (including by way of merger, consolidation or similar
transaction) any Capital Interests of any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (i) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Interests of such Wholly Owned Subsidiary
and (ii) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described above
under the caption "Repurchase at the Option of Holders-Asset Sales," and (b)
will not permit any Wholly Owned Subsidiary of the Company to issue any of its
Equity Interests (other than, if necessary, Capital Interests constituting
directors' qualifying shares or interests) to any Person other than to the
Company or a Wholly Owned Subsidiary of the Company, except to the extent that
(x) in the case of clause (a) above, such transfer, conveyance, sale, lease or
other disposition is by a Wholly Owned Subsidiary of any such Capital
Interests to a Subsidiary of the Company and does not constitute an Asset Sale
by reason of clause (a) of the last sentence of the definition of "Asset Sale"
and (y) in the case of clause (b) above, any such issuance of Equity Interests
is to a Subsidiary of the Company and does not constitute an Asset Sale by
reason of clause (b) of the last sentence of the definition of "Asset Sale."
LIMITATION ON PREFERRED STOCK OR PREFERRED EQUITY INTERESTS OF
SUBSIDIARIES
The Indenture provides that the Company will not permit any of its
Subsidiaries to issue or sell any preferred stock or preferred Equity
Interests (other than to the Company or to a Wholly Owned Subsidiary
of the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to own any preferred stock or preferred Equity
Interests of any Subsidiary.
BUSINESS ACTIVITIES
The Indenture provides that the Company will not, and will not permit any
Significant Subsidiary to, engage in any business other than such business
activities as the Company and its Subsidiaries are engaged in on the date of
the Indenture and such business activities similar or reasonably related
thereto.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any
holder of any Senior Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Senior
Notes, unless such consideration is offered to be paid or agreed
to be paid to all holders of the Senior Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding,
the Company will furnish to the holders of Senior Notes (i) all quarterly and
annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
SUBSIDIARY GUARANTEES
As described above under the caption "Incurrence of Indebtedness and
Issuance of Disqualified Stock," the Indenture permits any Subsidiary to incur
Indebtedness under certain circumstances, provided that, in certain cases,
such Subsidiary guarantees on a senior unsecured basis the Company's payment
obligations under the Senior Notes. To effect such Guarantee, such Subsidiary
will, no later than the incurrence of such Indebtedness, execute and deliver
to the Trustee a supplemental indenture to the Indenture providing for the
Guarantee of the payment of the Senior Notes by such Subsidiary Guarantor.
Each Subsidiary Guarantee will be a senior unsecured obligation of the
Subsidiary Guarantor issuing such Subsidiary Guarantee and will rank pari
passu in right of payment with all Guarantor Senior Indebtedness
of such Subsidiary Guarantor. The obligations of each Subsidiary Guarantor
under its Subsidiary Guarantee will be limited so as to not to constitute a
fraudulent conveyance under applicable law. See "Risk Factors-Fraudulent
Conveyance."
The Indenture provides that no Subsidiary Guarantor may consolidate with
or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person), another corporation, Person or entity whether or not
affiliated with such Subsidiary Guarantor (other than the Company or a
Subsidiary Guarantor), unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of
such Subsidiary Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Senior Notes and
the Indenture, (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists and (iii) such Subsidiary Guarantor, or any
Person formed by or surviving any such consolidation or merger, would be
permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio to
incur, immediately after giving effect to such transaction, at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the covenant described above under the caption "Incurrence
of Indebtedness and Issuance of Disqualified Stock"; provided that the
foregoing provisions will not apply to any Asset Sale subject to the
provisions described above under the caption "Repurchase at the Option of
Holders-Asset Sales."
The Indenture provides that, (i) in the event of a sale or other
disposition of all, or substantially all, of the assets of any Subsidiary
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Subsidiary Guarantor, such
Subsidiary Guarantor (in the event of a sale or other disposition, by way of
such a merger, consolidation or otherwise, of all of the capital stock
of such Subsidiary Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all, or substantially all, of the
assets of such Subsidiary Guarantor) will be released and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net Proceeds of
such sale or other disposition are applied in accordance with the applicable
provisions of the Indenture described above under the caption "Repurchase at
the Option of Holders-Asset Sales," (ii) in the event the Subsidiary
Guarantee was issued by reason of the incurrence of Indebtedness by a
Subsidiary Guarantor permitted pursuant to the covenant described above under
the caption "Incurrence of Indebtedness and Issuance of Disqualified Stock,"
upon the payment in full, whether at maturity or otherwise, of all
Indebtedness incurred by such Subsidiary Guarantor in accordance with such
covenant, such Subsidiary Guarantor will be released and relieved of any
obligations under such Subsidiary Guarantee or (iii) in the event the
Subsidiary Guarantee was issued by reason of the Guarantee or securing of
payment of Indebtedness other than the Senior Notes pursuant to the covenant
described below under the caption "Limitations on Issuances of Guarantees of
Indebtedness," upon the release or discharge of the Guarantee by the
Subsidiary Guarantor of all such Indebtedness, except a discharge by or as a
result of payment under such Guarantee, such Subsidiary Guarantor will be
released and relieved of any obligations under such Subsidiary Guarantee.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
The Indenture provides that the Company will not permit any Subsidiary,
directly or indirectly, to guarantee or secure the payment of any Indebtedness
other than the Senior Notes, unless such Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for the
Guarantee of the payment of the Senior Notes by such Subsidiary, which
Guarantee will rank senior to or pari passu with such Subsidiary's Guarantee
of, or pledge to secure, such other Indebtedness. Notwithstanding the
foregoing, any such Guarantee by a Subsidiary of the Senior Notes will provide
by its terms that it will be automatically and unconditionally released and
discharged upon either (a) the release or discharge of such Guarantee of such
other Indebtedness, except a discharge by or as a result of payment under such
Guarantee, or (b) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Interests in, or all
or substantially all the assets of, such Subsidiary, which sale, exchange or
transfer is made in compliance with the applicable provisions of the
Indenture. The form of such Guarantee is attached as an exhibit to the
Indenture.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Senior Notes; (ii) default in the payment of all or any part of the principal,
or premium, if any, on the Senior Notes when and as the same becomes due and
payable at maturity, upon redemption, by acceleration, or otherwise,
including, without limitation, the payment of the Change of Control Payment or
the Asset Sale Offer Price, or otherwise; (iii) failure by the Company or any
of its Subsidiaries to observe or perform in all material respects the
covenants set forth in the Indenture described above under the captions
"Certain Covenants-Restricted Payments," "Incurrence of Indebtedness and
Issuance of Disqualified Stock," "Liens" and "Merger, Consolidation or Sale of
Assets"; (iv) failure by the Company or any of its Subsidiaries to observe or
perform in all material respects any other covenant or agreement on the part
of the Company or such Subsidiary contained in the Senior Notes or the
Indenture and the continuance of such failure for a period of 30 days after
written notice is given to the Company by the Trustee or to the Company and
the Trustee by the holders of at least 25% in aggregate principal amount of
the Senior Notes then outstanding, specifying such default, requiring that it
be remedied and stating that such notice is a "Notice of Default"; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (A)
is caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (B) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each of (A) and (B), the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $3.0 million or more; (vi) failure by the Company or any of its
Subsidiaries to pay final non-appealable judgments aggregating in excess of
$3.0 million, which judgments are not paid, discharged or stayed for a period
of 60 consecutive days; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee 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 Subsidiary Guarantor, or any Person acting on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, all outstanding Senior Notes
will become due and payable without further action or notice. Holders of the
Senior Notes may not enforce the Indenture or the Senior Notes except as
provided in the Indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Senior Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from holders of the Senior Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Senior Notes pursuant
to the optional redemption provisions of the Indenture, an equivalent premium
will also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Senior Notes. If an Event of Default occurs
prior to May 15, 2002 by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Senior Notes prior to May 15, 2002, then the
premium specified in the Indenture will also become immediately due and
payable to the extent permitted by law upon the acceleration of the Senior
Notes.
The holders of a majority in aggregate principal amount of the Senior
Notes then outstanding by notice to the Trustee may on behalf of the holders
of all of the Senior Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Senior Notes,
and except as to payments required under the covenants described above under
the captions "Repurchase at the Option of Holders-Change of Control" and
"Asset Sales."
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, PARTNERS AND
STOCKHOLDERS
No director, officer, employee, incorporator, partner or stockholder of
the Company or any Subsidiary of the Company, as such, has any liability for
any obligations of the Company or any Subsidiary Guarantor under the Senior
Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder
of Senior Notes by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Senior Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws, and it is the view of the Commission that
such a waiver is against public policy.
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 Senior Notes ("Legal
Defeasance") except for (i) the rights of holders of outstanding Senior Notes
to receive payments in respect of the principal of, premium, if any, and
interest on such Senior Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Senior
Notes concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations will not constitute a Default or Event of Default with respect to
the Senior Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default and Remedies" will no longer
constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the outstanding Senior Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Senior Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or 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 will confirm that, the holders of the outstanding
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the holders of the outstanding Senior 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; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company must
have delivered to the Trustee an opinion of counsel to the effect that after
the 91st day following the deposit, assuming that no holder of a Senior Note
is an "insider" as defined in Section 101(31) of the U.S. Bankruptcy
Code and assuming that prior to such 91st day no voluntary or involuntary
bankruptcy case has been commenced with respect to the Company, such deposit
will not constitute a preference as defined in Section 547 of the U.S.
Bankruptcy Code, and, assuming such a bankruptcy case is commenced on or after
such 91st day, the trust funds will not constitute property included within
the estate of the debtor; (vii) 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 Senior Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for in the Indenture
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Senior Note selected for redemption. Also, the Company is not
required to transfer or exchange any Senior Note for a period of 15 days
before a selection of Senior Notes to be redeemed.
The registered holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture
or the Senior Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the Senior Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Senior Notes), and any existing Default or compliance with
any provision of the Indenture or the Senior Notes may be waived with the
consent of the holders of a majority in principal amount of the then
outstanding Senior Notes (including consents obtained in connection with a
tender offer or exchange offer for Senior Notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any Senior Notes held by a non-consenting holder) (i)
reduce the principal amount of Senior Notes whose holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Senior Note or alter the provisions with respect to the
redemption of the Senior Notes, (iii) reduce the rate of or change the time
for payment of interest, including default interest, on any Senior Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Senior Notes including, without
limitation, payment of the Change of Control Payment or the Asset Sale
Offer Price (except a rescission of acceleration of the Senior Notes by the
holders of at least a majority in aggregate principal amount of the then
outstanding Senior Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Senior Note payable in money other than
that stated in the Senior Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of Defaults or the rights of holders of Senior
Notes to receive payments of principal of or premium, if any, or interest on
the Senior Notes, (vii) waive a redemption payment with respect to any Senior
Note or (viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of
Senior Notes, the Company and the Trustee may amend or supplement the
Indenture, the Senior Notes or any Subsidiary Guarantee to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Senior Notes in
addition to or in place of certificated Senior Notes, to provide for the
assumption of the Company's or any Subsidiary Guarantor's obligations to
holders of Senior Notes in the case of a merger, consolidation or other
similar business combination, to make any change that would provide any
additional rights or benefits to the holders of Senior Notes or that does not
materially adversely affect the legal rights under the Indenture of any such
holder, to provide for Subsidiary Guarantees of the Senior Notes or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must (i) eliminate such conflict within 90 days, (ii) apply to the Commission
for permission to continue or (iii) resign.
The holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required,
in the exercise of its power, to use the degree of care of a prudent man in
the conduct of his own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Senior Notes, unless such holder
shall have offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to French Fragrances, Inc., 14100 N.W. 60th Avenue,
Miami Lakes, Florida 33014, Attention: Chief Financial Officer.
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, (i)
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, provided
that such Indebtedness was not incurred in contemplation of such other Person
merging with or into or becoming a Subsidiary of such specified Person and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person, provided that such Indebtedness was not incurred in
contemplation of such acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through
the ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person will
be deemed to be control.
"Asset Sale" means (a) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of a sale and leaseback
or by way of merger, consolidation or similar transaction) other than sales of
inventory in the ordinary course of business consistent with past practices
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole will be governed by the provisions of the Indenture described above
under the caption "Repurchase at the Option of Holders-Change of Control"
and/or the provisions described above under the caption "Certain
Covenants-Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), (b) the issuance by any Subsidiary of Equity
Interests of such Subsidiary and (c) the disposition by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in
the case of either clause (a), (b) or (c), whether in a single transaction or
a series of related transactions, (i) that have a fair market value in excess
of $1.0 million or (ii) for net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, (a) a transfer of assets by the Company to a
Wholly Owned Subsidiary that is a Subsidiary Guarantor, or by a Subsidiary to
the Company or to another Subsidiary, (b) an issuance of Equity Interests by a
Subsidiary to the Company or to another Subsidiary, (c) a Restricted Payment
that is permitted by the covenant described above under the caption "Certain
Covenants-Restricted Payments," (d) any sale and leaseback transaction
otherwise permitted pursuant to the covenant described above under the caption
"Certain Covenants-Sale and Leaseback Transactions" and (e) sales of accounts
receivable in the ordinary course of business of the Company consistent with
past practices for the purpose of insuring against the risk of
uncollectibility pursuant to the Heller Arrangement (or any replacement
thereof on terms that are no less favorable to the Company), in each case will
not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors, except that for the purposes
of the definitions of the terms "Change of Control" and "Continuing
Directors," the term "Board of Directors" shall mean the entire Board of
Directors of the Company and not any authorized committee of the Board of
Directors.
"Borrowing Base" means, as of any date, an amount equal to (a) 85% of the
face amount of all accounts receivable owned by the Company and its
Subsidiaries as of such date that are not more than 90 days past due, plus (b)
65% of the book value (calculated on an average cost basis) of all inventory
owned by the Company and its Subsidiaries as of such date, minus (c) any
amount applied pursuant to the second paragraph of the covenant described
above under the caption "Repurchase at the Option of Holders-Asset
Sales" to permanently reduce Indebtedness permitted to be incurred pursuant to
clause (i) of the second paragraph of the covenant described above under the
caption "Certain Covenants-Incurrence of Indebtedness and Issuance of
Disqualified Stock," all calculated on a consolidated basis and in accordance
with GAAP. To the extent that information is not available as to the amount
of accounts receivable or inventory as of a specific date, the Company may
utilize the most recent available information for purposes of calculating the
Borrowing Base.
"Capital Interests" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or other business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits or demand deposits, in
each case with any lender party to any Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $1.0 billion, (iv)
repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Ratings Service, a division of The McGraw-Hill Companies, Inc., and in each
case maturing within six months after the date of acquisition and (vi)
investments in money market funds all of whose assets comprise securities of
the types described in clauses (i), (ii) and (iii) above.
"Commission" means the Securities and Exchange Commission.
"Consolidated Cash Flow" means with respect to any Person for any period,
the Consolidated Net Income of such Person and its Subsidiaries for such
period plus (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) (to the extent such
losses were deducted in computing such Consolidated Net Income), plus (ii) the
provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision for taxes
was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus (iv) all items classified as "depreciation"
or "amortization" on such Person's statement of operations and other non-cash
charges (including non-cash, equity-based compensation charges, but excluding
any non-cash charge to the extent that it represents an accrual of or reserve
for cash charges in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Subsidiaries
for such period to the extent that such depreciation, amortization and other
non-cash charges were deducted in computing such Consolidated Net Income.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the referent Person will be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its organizational documents and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends or distributions paid
in cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii)
the Net Income of any Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without prior approval (that has not been obtained) pursuant to the terms of
its organizational documents and all agreements, instruments, judgments,
decrees, orders, statutes, rules or governmental regulations applicable to
that Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the
date of such acquisition will be excluded, (iv) the cumulative effect of a
change in accounting principles will be excluded, (v) Consolidated Net Income
will not include any gain (but shall include any loss), together with any
related provision for taxes on such gain (but not such loss), realized in
connection with (A) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (B) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries
and (vi) Consolidated Net Income will not include any extraordinary or
nonrecurring gain (but shall include any loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not such
loss).
"Consolidated Net Worth" means, with respect to any Person, the sum of
(i) the consolidated equity of the holders of common Equity Interests in such
Person and its consolidated Subsidiaries plus (ii) the respective amounts
reported on such Person's most recent balance sheet with respect to any series
of preferred stock or preferred Equity Interests; provided that the preferred
stock or preferred Equity Interests will be included in Consolidated Net Worth
only if such preferred stock or preferred Equity Interests are not
Disqualified Stock, less (x) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of tangible assets of a going
concern business made within twelve months after the acquisition of such
business) subsequent to the date of the most recently completed fiscal quarter
in the book value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, investments in
marketable securities), and (z) all unamortized debt discount and expense and
unamortized deferred financing charges, all of the foregoing determined in
accordance with GAAP.
"Credit Facility" means any credit facility entered into by and among the
Company, any Subsidiary Guarantor and the lending institutions party thereto,
including any credit agreement, 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.
"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 Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the 91st day after the date on which the Senior Notes mature.
"Equity Interests" means Capital Interests and all warrants, options or
other rights to acquire Capital Interests (but excluding any debt security
that is convertible into, or exchangeable for, Capital Interests).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of the Company and its Subsidiaries in existence on the date of
the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations but
excluding amortization of deferred financing fees), (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized
during such period, (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Subsidiaries or secured
by a Lien on assets of such Person or one of its Subsidiaries (whether or not
such Guarantee or Lien is called upon) and (iv) the product of (a) the amount
of dividends or distributions paid, whether or not in cash, in respect of
preferred stock or preferred Equity Interests of such Person, other than
dividend payments on Equity Interests payable solely in Equity Interests 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 the case
of clauses (i) through (iv), determined on a consolidated basis and, in the
case of clauses (i) through (iii), determined in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other
than revolving borrowings under any Credit Facility) or issues or redeems
preferred stock or preferred Equity Interests subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated
but prior to the date on which the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock or preferred Equity Interests, as if
the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter
reference period, (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) 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
referent Person or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"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, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor Senior Indebtedness" means any Indebtedness permitted to be
incurred by any Subsidiary Guarantor under the terms of the Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides
that it is subordinated in right of payment to such Subsidiary Guarantor's
Subsidiary Guarantee. Notwithstanding the foregoing, Guarantor Senior
Indebtedness shall not include (i) any Obligation of such Subsidiary Guarantor
to any Subsidiary of such Subsidiary Guarantor, (ii) any liability for
federal, state, local or other taxes owed or owing by such Subsidiary
Guarantor, (iii) any accounts payable or other liability to trade creditors
arising in the ordinary course of business of the Subsidiary Guarantor
(including Guarantees thereof or instruments evidencing such liabilities),
(iv) any Indebtedness, Guarantee or Obligation of the Subsidiary Guarantor
that is contractually subordinated or junior in any respect to any other
Indebtedness, Guarantee or Obligation of such Subsidiary Guarantor or (v)
any Indebtedness incurred in violation of the Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (iii) agreements entered into for the purpose of fixing or hedging
the risks associated with fluctuations in foreign currency exchange rates.
"Heller Arrangement" means the arrangement pursuant to an agreement dated
July 13, 1993 between the Company and Heller Intercredit Company, a division
of Heller Financial, Inc., pursuant to which the Company insured from risk of
uncollectibility a portion of the Company's accounts receivable.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability on
a balance sheet of such Person prepared in accordance with GAAP, as well as
all indebtedness of others secured by a Lien on any asset of such Person
(whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person.
"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 but
excluding advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person or its
Subsidiaries in accordance with GAAP), 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 consisting of Indebtedness, Equity Interests or other securities
and all other items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by the Company for
consideration consisting of common equity securities of the Company will not
be deemed to be an Investment.
"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).
"Miami Lakes Facility" means the land and buildings comprising the
Company's executive offices and distribution facility at 14100 N.W. 60th
Avenue, Miami Lakes, Florida 33014.
"National Trading Facility" means the land and buildings leased by the
Company from National Trading Manufacturing, Inc. located at 15595 N.W. 15th
Avenue, Miami, Florida 33169.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its 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, regulatory compliance costs and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), amounts required
to be applied to the repayment of Indebtedness (other than Senior Revolving
Debt) secured by a Lien on the asset or assets that were the subject of such
Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company that is engaged in the same or a
similar or related line of business as the Company and its Subsidiaries were
engaged in on the date of the Indenture; (b) any Investments in Cash
Equivalents; (c) Investments by the Company or any Subsidiary of the Company
in a Person, if as a result of such Investment (i) such Person becomes a
Wholly Owned Subsidiary of the Company that is engaged in the same or a
similar or related line of business as the Company and its Subsidiaries were
engaged in on the date of the Indenture or (ii) 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
Wholly Owned Subsidiary of the Company that is engaged in the same or a
similar or related line of business as the Company and its Subsidiaries were
engaged in on the date of the Indenture; (d) Investments made as a result of
the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-Repurchase at the Option of Holders-Asset Sales"; (e) Investments
in endorsements of negotiable instruments and similar negotiable documents in
the ordinary course of business; (f) Investments existing on the date of the
Indenture; (g) Investments in obligations of account debtors to the Company or
any of its Subsidiaries and stock or obligations issued to the Company or any
such Subsidiary by any Person, in each case, in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of such Person's Indebtedness; and (h) other
Investments in any one or more Persons that do not exceed $5.0 million in the
aggregate at any time outstanding.
"Permitted Liens" means (i) Liens on accounts receivable and inventory
securing Indebtedness permitted to be incurred under clause (i) of the second
paragraph of the covenant described above under "-Certain Covenants-Incurrence
of Indebtedness and Issuance of Disqualified Stock"; (ii) Liens in favor
of the Company; (iii) Liens to secure Indebtedness permitted to be incurred
pursuant to the first paragraph of the covenant described above under
"-Certain Covenants-Incurrence of Indebtedness and Issuance of Disqualified
Stock" that is incurred to finance the acquisition of property or assets
acquired by the Company or any Subsidiary after the date of the Indenture, so
long as (A) such Indebtedness is incurred and the Lien securing such
Indebtedness is created within 90 days of such acquisition and (B) such Lien
does not extend to any property or assets of the Company or any Subsidiary
other than the property and assets so acquired; (iv) Liens on property of a
Person existing at the time such Person is merged into, consolidated with or
acquired by the Company or any Subsidiary of the Company; provided that such
Liens were not incurred 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 any Subsidiary or those of an unrelated third
party; (v) 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 incurred in contemplation of such acquisition; (vi) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business of the Company or any Subsidiary of the Company; (vii) Liens to
secure Indebtedness permitted by clause (vi) of the second paragraph of the
covenant described above under "-Certain Covenants-Incurrence of Indebtedness
and Issuance of Disqualified Stock" covering only the assets acquired,
constructed or improved with such Indebtedness or the Miami Lakes Facility, as
the case may be; (viii) Liens existing on the date of the Indenture; (ix)
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 pursued, provided that any
reserve or other appropriate provision as is required in conformity with GAAP
shall have been made therefor; (x) Liens securing Permitted Refinancing
Indebtedness, provided that such Liens do not extend to or cover any assets or
property other than the collateral securing the Indebtedness to be refinanced;
(xi) Liens arising by operation of law in connection with judgments, which do
not give rise to an Event of Default with respect thereto; (xii) easements,
rights of way, zoning restrictions and other similar encumbrances or title
defects which do not materially detract from the value of the property or the
assets subject thereto or interfere with the ordinary conduct of the business
of the Company and its Subsidiaries, taken as a whole; (xiii) Liens securing
Attributable Debt with respect to any sale and leaseback transaction in an
aggregate amount not to exceed the aggregate principal amount of Attributable
Debt permitted to be incurred pursuant to the covenant described above under
"-Certain Covenants-Incurrence of Indebtedness and Issuance of Disqualified
Stock," provided that such Liens do not extend to or cover any assets or
property other than the collateral securing such Attributable Debt; (xiv)
Liens on sales of accounts receivable that do not constitute an "Asset
Sale" pursuant to clause (e) of the definition thereof and (xv) Liens incurred
in the ordinary course of business of the Company or any Subsidiary of the
Company with respect to obligations that (A) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (B) do not in the
aggregate materially detract from the value of the property subject thereto or
materially impair the use thereof in the operation of business by the Company
or such Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its 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 Subsidiaries; provided that
(i) the principal amount of such Permitted Refinancing Indebtedness does not
exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Senior Notes
on terms at least as favorable to the holders of Senior Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Subsidiary that
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means the revolving credit facility dated as
of May 13, 1997, between the Company and Fleet National Bank, as amended.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Senior Indebtedness" means any Indebtedness which ranks pari passu in
right of payment with, and which is not expressly by its terms subordinated in
right of payment of principal, interest or premium, if any, to the Senior
Notes, whether or not such Indebtedness is secured.
"Senior Revolving Debt" means revolving credit borrowings under any
Credit Facility.
"Series B Senior Notes" means the Company's 10-3/8% Senior Notes due
2007, Series B.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of the Indenture; provided that each Subsidiary Guarantor will be
deemed a Significant Subsidiary.
"6% Bonus Pool" means the annual bonus pool created by the Company for
members of senior management and other key employees and consultants equal to
6% of the pre-tax profit of the Company.
"Subordinated Indebtedness" means any Indebtedness which is expressly by
its terms subordinated in right of payment of principal, interest or premium,
if any, to the Senior Notes.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total
voting power of Capital Interests entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof).
"Subsidiary Guarantor" means any Subsidiary of the Company that executes
a Subsidiary Guarantee in accordance with the provisions of the Indenture, and
its successors and assigns.
"Weighted Average Life To Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person, all of the outstanding Capital Interests or other ownership interests
of which (other than directors' qualifying shares or interests) are at the
time owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person (or a combination thereof).
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The Initial Notes were offered and sold to Qualified Institutional Buyers
as defined in Rule 144A under the Securities Act ("QIBs") in the form of one
or more registered global notes without interest coupons (collectively, the
"U.S. Global Notes"). Exchange Notes issued in exchange for each of the U.S.
Global Notes initially will be represented by one or more Notes in registered,
global form without interest coupons (collectively, the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the Trustee, as custodian
for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee for credit to the accounts of
DTC's Direct and Indirect Participants (as defined below).
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be
exchanged for Exchange Notes in certificated form in certain limited
circumstances. See "-Transfer of Interests in Global Notes for Certificated
Notes." In addition, transfer of beneficial interests in any Global Notes
will be subject to the applicable rules and procedures of DTC and its Direct
or Indirect Participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Senior
Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through
electronic book-entry changes in accounts of Direct Participants. The Direct
Participants include securities brokers and dealers (including the Initial
Purchaser), banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect custodial relationship
with a Direct Participant (collectively, the "Indirect Participants").
DTC has also advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants which receive Exchange Notes with corresponding portions of the
principal amount of the Global Notes, and (ii) DTC will maintain records of
the ownership interests of such Direct Participants in the Global Notes and
the transfer of ownership interests by and between Direct Participants. DTC
will not maintain records of the ownership interests of, or the transfer of
ownership interests by and between, Indirect Participants or other owners of
beneficial interests in the Global Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of,
and the transfer of ownership interests by and between, Indirect Participants
and other owners of beneficial interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. All ownership
interests in any Global Notes are subject to the procedures and requirements
of DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that
they own. This may limit or curtail the ability to transfer beneficial
interests in a Global Note to such persons. Because DTC can act only on
behalf of Direct Participants, which in turn act on behalf of Indirect
Participants and others, the ability of a person having a beneficial interest
in a Global Note to pledge such interest to persons or entities that are not
Direct Participants in DTC, or to otherwise take actions in respect of such
interests, may be affected by the lack of physical certificates evidencing
such interests. For certain other restrictions on the transferability of the
Exchange Notes, see "-Transfers of Interests in Global Notes for Certificated
Notes."
EXCEPT AS DESCRIBED IN "-TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL
NOT HAVE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Exchange Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving payments and for
any and all other purposes whatsoever. Payments in respect of the principal,
premium and interest on Global Notes registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee as the registered
holder under the Indenture. Consequently, neither the Company, the Trustee
nor any agent of the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any Direct
Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global Note or (ii) any other matter relating to
the actions and practices of DTC or any of its Direct Participants or Indirect
Participants.
DTC has advised the Company that its current payment practice (for
payments of principal, interest and the like) with respect to securities such
as the Exchange Notes is to credit the accounts of the relevant Direct
Participants with such payment on the payment date in amounts proportionate to
such Direct Participant's respective ownership interests in the Global Notes
as shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Exchange Notes will be governed
by standing instructions and customary practices between them and will not be
the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or its Direct Participants
or Indirect Participants in identifying the beneficial owners of the Exchange
Notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Exchange Notes, for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System
and, therefore, transfers between Direct Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants who hold an interest
through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Direct Participants to whose account interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default under
the Senior Notes, DTC reserves the right to exchange Global Notes (without the
direction of one or more of its Direct Participants) for Exchange Notes in
certificated form, and to distribute such certificated forms of Exchange Notes
to its Direct Participants. See "-Transfers of Interests in Global Notes for
Certificated Notes."
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Company, the
Initial Purchaser or the Trustee shall have any responsibility for the
performance by DTC or its respective Direct and Indirect Participants of their
respective obligations under the rules and procedures governing any of their
operations.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Exchange Notes in
registered, certificated form without interest coupons ("Certificated Notes")
if (i) DTC (x) notifies the Company that it is unwilling or unable to continue
as depositary for the Global Notes and the Company thereupon fails to appoint
a successor depositary within 90 days or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Certificated Notes or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Exchange Notes. In any such
case, the Company will notify the Trustee in writing that, upon surrender by
the Direct and Indirect Participants of their interest in such Global Note,
Certificated Notes will be issued to each person that such Direct and Indirect
Participants and DTC identify as being the beneficial owner of the related
Exchange Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may also be exchanged for Certificated Notes upon request to DTC
by such Direct Participant (for itself or on behalf of an Indirect
Participant) and by DTC to the Trustee in accordance with customary DTC
procedures. Certificated Notes delivered in exchange for any beneficial
interest in any Global Note will be registered in the names, and issued in any
approved denominations, requested by DTC on behalf of such Direct or Indirect
Participants (in accordance with DTC's customary procedures).
Neither the Company nor the Trustee will be liable for any delay by the
holder of any Global Note or DTC in identifying the beneficial owners of
Exchange Notes, and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global
Note or DTC for all purposes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser, for the benefit of the holders of
Senior Notes, entered into a Registration Rights Agreement (the "Registration
Rights Agreement") dated as of April 27, 1998. Pursuant to the Registration
Rights Agreement, the Company filed with the SEC the Registration Statement
with respect to the Exchange Offer (the "Exchange Offer Registration
Statement"). If any holder of Transfer Restricted Senior Notes (as defined
below) notifies the Company, within 20 business days following the
consummation of the Exchange Offer, that (A) such holder was prohibited by law
or SEC policy from participating in the Exchange Offer, or (B) such holder may
not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and this Prospectus is not appropriate
or available for such resales by such holder, the Company will file with the
SEC a shelf registration statement (the "Shelf Registration Statement") to
cover resales of the Transfer Restricted Senior Notes by the holders
thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Company
will use reasonable best efforts to cause the Shelf Registration
Statement to be declared effective as promptly as possible by the SEC. For
purposes of the foregoing, "Transfer Restricted Senior Notes" means each
Senior Note until the earliest to occur of (i) the date on which such Senior
Note is exchanged in the Exchange Offer for an Exchange Note which may be
resold to the public by the holder thereof without complying with the
prospectus delivery requirements of the Securities Act, (ii) the date on which
such Senior Note has been sold or otherwise disposed of in accordance with the
Shelf Registration Statement, (iii) the date on which such Senior Note is
disposed of by a broker-dealer as contemplated by the Exchange Offer
Registration Statement (including delivery of this Prospectus) and (iv)
the date on which such Senior Note is distributed to the public pursuant to
Rule 144 under the Securities Act.
A holder of Transfer Restricted Senior Notes who sells such Senior Notes
pursuant to the Shelf Registration Statement will generally be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are
applicable to such a holder (including certain indemnification obligations).
The Registration Rights Agreement provides that the Company will use
reasonable best efforts to issue Exchange Notes in exchange for all Initial
Notes tendered in the Exchange Offer. If the Company is obligated to file the
Shelf Registration Statement, the Company will file the Shelf Registration
Statement with the SEC on or prior to 30 days after such filing obligation
arises and use reasonable best efforts to cause the Shelf Registration
Statement to be declared effective by the SEC on or prior to 150 days after
such obligation arises; provided that if the Company has not consummated the
Exchange Offer by October 24, 1998, then the Company will file the Shelf
Registration Statement with the SEC on or prior to October 25, 1998. The
Company shall use reasonable best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended until April 27,
2000 or such shorter period that will terminate when all the Senior Notes
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or are eligible for sale under Rule 144(k) under
the Securities Act; provided, however that, if the Company is engaged in a
material acquisition or disposition and in certain other circumstances,
the Company may suspend offers and sales under the Shelf Registration
Statement, subject to certain conditions, for up to 30 days in each year
during which the Shelf Registration Statement is required to be effective. If
(a) the Company fails to file the Shelf Registration Statement on or before
the date specified for such filing, (b) the Shelf Registration Statement is
not declared effective by the SEC on or prior to the date specified for such
effectiveness, (c) the Company fails to consummate the Exchange Offer on or
prior to , 1998, (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter,
subject to certain exceptions, ceases to be effective for a period of one
business day or (e) at any time when the prospectus is required by the
Securities Act to be delivered in connection with sales of the Transfer
Restricted Senior Notes, the Company shall conclude, or the holders of a
majority in principal amount of the affected Transfer Restricted Senior Notes
shall reasonably conclude, based on the advice of their counsel, and shall
give notice to the Company, that either (A) any event shall have occurred or
fact exist as a result of which it is necessary to amend or supplement the
prospectus in order that it will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading, or (B) it shall be necessary to amend or supplement such
Registration Statement or the prospectus in order to comply with the
requirements of the Securities Act or the rules of the SEC thereunder, and in
the case of clause (A) or (B), such Registration Statement is not
appropriately amended by an effective post-effective amendment, or the
prospectus is not amended or supplemented, in a manner reasonably satisfactory
to the holders of Transfer Restricted Senior Notes so as to be declared
effective and made usable within one business day after the Company shall so
conclude or shall receive the above-mentioned notice from holders of Transfer
Restricted Senior Notes (each such event referred to in clauses (a) through
(e) above, a "Registration Default"), then the Company will pay as liquidated
damages ("Liquidated Damages") to each holder of Transfer Restricted Senior
Notes, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $0.05 per week
for each $1,000 principal amount of Senior Notes held by such holder. The
amount of the Liquidated Damages will increase by an additional $0.05 per week
per $1,000 principal amount of Senior Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $0.50 per week for each $1,000 principal
amount of Senior Notes. Liquidated Damages will not accrue during any period
the Company is permitted, as set forth above, to suspend offerings and sales
when the Company is engaged in a material acquisition or disposition or in
certain other circumstances. All accrued Liquidated Damages will be paid by
the Company to the holder of the U.S. Global Notes or the Global Notes,
as the case may be, by wire transfer of immediately available same day funds.
With respect to Certificated Notes, such Liquidated Damages will be paid by
the Company to the holder of a Certificated Note, by mailing a check to each
such holder's registered address. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Transfer Restricted Senior Notes will be required to make
certain representations to the Company (as described herein under the caption
"-The Exchange Offer-Procedures for Tendering Initial Notes") in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Transfer
Restricted Senior Notes included in the Shelf Registration Statement and
benefit from the provisions regarding Liquidated Damages set forth above.
Holders of Transfer Restricted Notes will be responsible for the fees and
disbursements, if any, of their counsel, accountants and any other advisors,
and for underwriting commissions and discounts, brokerage commissions, agent
fees (other than the fees of the Exchange Agent for the Exchange Offer) and
transfer taxes relating to the Exchange Offer Registration Statement or the
Shelf Registration Statement.
The foregoing description of the Registration Rights Agreement is a
summary only and does not purport to be complete. This summary is qualified in
its entirety by reference to all provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The exchange of an Initial Note for an Exchange Note pursuant to the
Exchange Offer should not be treated as an exchange for United States federal
income tax purposes and, therefore, will not be a taxable event. Accordingly,
an Exchange Note should be treated as a continuation of the corresponding
Initial Note and, as a result, an exchanging holder should not recognize any
gain or loss on the exchange, his holding period for the Exchange Note would
include his holding period for the Initial Note, his basis in the Exchange
Note would be the same as his basis in the Initial Note, and the tax treatment
of any bond premium previously recognized with respect to the Initial Note
should not change.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF INITIAL NOTES FOR
EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTIONS.
PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the Initial Notes. The Company does not intend to apply for the
listing of the Senior Notes on a national securities exchange or for their
quotation through The Nasdaq Stock Market. The Initial Notes are eligible for
trading in the PORTAL market. The Company has been advised by the Initial
Purchaser that the Initial Purchaser currently intends to make a market in the
Senior Notes; however, the Initial Purchaser is not obligated to do so and any
market making may be discontinued by the Initial Purchaser at any time. In
addition, such market making activity may be limited during the Exchange
Offer. Therefore, there can be no assurance that an active market for the
Initial Notes or the Exchange Notes will develop.
If a trading market develops for the Initial Notes or the Exchange Notes,
future trading prices of such securities will depend on many factors,
including, among other things, prevailing interest rates, the Company's
results of operations and the market for similar securities. Depending on such
factors, such securities may trade at a discount from their offering price.
With respect to resale of Exchange Notes, based on an interpretation by
the staff of the SEC set forth in no-action letters issued to third parties,
the Company believes that a holder (other than a person that is an affiliate
of the Company within the meaning of Rule 405 under the Securities Act or
"broker" or "dealer" registered under the Exchange Act) who exchanges Initial
Notes for Exchange Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, will be allowed to resell the Exchange Notes to the public
without further registration under the Securities Act and without delivering
to the purchasers of the Exchange Notes a prospectus that satisfies the
requirements of Section 10 thereof. However, if any holder acquires Exchange
Notes in the Exchange Offer for the purpose of distributing or participating
in a distribution of the Exchange Notes, such holder cannot rely on the
position of the staff of the SEC enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988) or similar no-action or interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, and such secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if
the resales are of Exchange Notes obtained by such holder in exchange for
Initial Notes acquired by such holder directly from the Company or an
affiliate thereof, unless an exemption from registration is otherwise
available.
As contemplated by the above no-action letters and the Registration
Rights Agreement, each holder accepting the Exchange Offer is required to
represent to the Company in the Letter of Transmittal that (i) the Exchange
Notes are to be acquired by the holder in the ordinary course of business,
(ii) the holder is not engaging and does not intend to engage in the
distribution of the Exchange Notes, and (iii) the holder acknowledges that if
such holder participates in the Exchange Offer for the purpose of distributing
the Exchange Notes such holder must comply with the registration and
prospectus delivery requirements of the Securities Act and cannot rely on the
above no-action letters.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holds Initial Notes that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Initial Notes acquired directly from the Company) may exchange
such Initial Notes for Exchange Notes pursuant to the Exchange Offer; however,
such Broker-Dealer may be deemed an underwriter within the meaning of the
Securities Act and, therefore, must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the
Exchange Notes received by it in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of this
Prospectus. The Company has agreed to cause the Exchange Offer Registration
Statement, of which this Prospectus is a part, to remain continuously
effective for a period of one year from the Exchange Date, and to make this
Prospectus, as amended or supplemented, available to any such Broker-Dealer
for use in connection with resales. Any Broker-Dealer Participating in the
Exchange Offer will be required to acknowledge that it will deliver a
prospectus in connection with any resales of Exchange Notes received by
it in the Exchange Offer. The delivery by a Broker-Dealer of a prospectus in
connection with resales of Exchange Notes shall not be deemed to be an
admission by such Broker-Dealer that it is an underwriter within the meaning
of the Securities Act.
The Company will not receive any proceeds from any sale of Exchange Notes
by Broker-Dealers. Exchange Notes received by Broker-Dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to a purchaser or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such Broker-Dealer and/or the purchasers of any such Exchange Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer
other than fees and disbursements of counsel, accountants and any advisors to
holders of Initial Notes, underwriting commissions and discounts, brokerage
commissions, agent fees (other than the fees of the Exchange Agent) and
transfer taxes relating to the Exchange Offer Registration Statement.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Steel Hector & Davis LLP, Miami, Florida.
EXPERTS
The financial statements incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended January 31,
1998 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The balance sheet as of December 31, 1997 and the related statements of
income and retained earnings and cash flows for the year then ended of J.P.
Fragrances, Inc., included in the Company's Form 8-K, dated March 31, 1998
which is incorporated by reference in this Prospectus have been audited by
Richard A. Eisner & Company, LLP, independent auditors, and are incorporated
by reference herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
No dealer, salesperson, or other person
has been authorized to give any information
or to make any representations not contained
in this Prospectus and, if given or made,
such information or representations must not
be relied upon as having been authorized by FRENCH FRAGRANCES, INC.
the Company. This Prospectus does not Offer to Exchange its
constitute an offer to sell, or solicitation 10-3/8% Senior Notes due 2007, Series D
of an offer to buy, the Senior Notes to any for any and all outstanding
person in any jurisdiction in which such an 10-3/8% Senior Notes due 2007, Series C
offer to sell or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication that the
information contained herein is correct as of
any time subsequent to the date hereof.
____________________
TABLE OF CONTENTS
PAGE ____________________
Available Information......................... 2
Incorporation of Certain Documents PROSPECTUS
by Reference................................ 3 ____________________
Cautionary Note Regarding Forward-
Looking Statements.......................... 4
Prospectus Summary............................ 5
Risk Factors.................................. 12
The Company................................... 18
The Exchange Offer............................ 19
Description of the Senior Notes............... 31
Registration Rights; Liquidated Damages....... 58
Certain Federal Income Tax
Consequences................................ 60
Plan of Distribution.......................... 60
Legal Matters................................. 62
Experts....................................... 62
__________, 1998
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company has authority under Section 607.0850 of the Florida Business
Corporation Act (the "FBCA") to indemnify its directors and officers to the
extent provided for in such statute. The Company's Amended and Restated
Articles of Incorporation provide that, to the fullest extent permitted
by applicable law, as amended from time to time, the Company will indemnify
any person who was or is a director or officer of the Company, or serves or
served in such capacity with any other enterprise at the request of the
Company, against all fines, liabilities, settlements, costs and expenses
asserted against or incurred by such person in his capacity or arising out of
his status as such officer or director. The Company may also indemnify
employees or agents of the Company if the Company's Board so approves.
This indemnification includes the right to advancement of expenses when
allowed pursuant to applicable law.
The provisions of the FBCA authorize a corporation to indemnify its
officers and directors in connection with actions, suits and proceedings
brought against them if the person acted in good faith and in a manner which
the person reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to any criminal actions, had no
reasonable cause to believe the person's conduct was unlawful. Unless
pursuant to a determination by a court, the determination of whether a
director, officer or employee has acted in accordance with the applicable
standard of conduct must be made by (i) a majority vote of directors who were
not parties to the proceeding or a committee consisting solely of two or more
directors not parties to the proceedings, (ii) independent legal counsel
selected by a majority vote of the directors who were not parties to the
proceeding or committee of directors (or selected by the full board if a
quorum or committee can not be obtained), or (iii) the affirmative vote of
the majority of the corporation's shareholders who were not parties to the
proceeding.
The FBCA further provides that a corporation may make any other or
further indemnity by resolution, bylaw, agreement, vote of shareholders
disinterested directors or otherwise, except with respect to certain
enumerated acts or omissions of such persons. Florida law prohibits
indemnification or advancement of expenses if a judgment or other final
adjudication establishes that the actions of a director, officer or employee
constitute (i) a violation of criminal law, unless the person had reasonable
cause to believe his conduct was unlawful, (ii) a transaction from which such
person derived an improper personal benefit, (iii) willful misconduct or
conscious disregard for the best interests of the corporation in the case of a
derivative action by a shareholder, or (iv) in the case of a director, a
circumstance under which a director would be liable for improper distributions
under Section 607.0834 of the FBCA. The FBCA does not affect a director's
responsibilities under any other law, such as federal securities laws.
At present, there is no pending litigation or other proceeding involving
a director or officer of the Company as to which indemnification is being
sought, nor is the Company aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The Company maintains directors' and officers' liability insurance for
its directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
Exhibit
Number Description
- ------- ------------------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation of the Company dated
March 6, 1996 (incorporated herein by reference to Exhibit 3.1
filed as a part of the Company's Form 10-K for the fiscal year
ended January 31, 1996 (Commission File No. 1-6370)).
3.2 Amendment dated September 19, 1996 to the Amended and Restated
Articles of Incorporation of the Company (incorporated by reference
to Exhibit 4.4 filed as part of the Company's Form 10-Q for the
quarter ended October 31, 1996 (Commission File No. 1-6370)).
3.3 By-Laws of the Company (incorporated herein by reference to Exhibit
3.2 filed as a part of the Company's Form 10-K for the fiscal year
ended January 31, 1996 (Commission File No. 1-6370)).
4.1 Indenture, dated as of May 13, 1997, between the Company and Marine
Midland Bank, as trustee (incorporated herein by reference to
Exhibit 4.1 filed as a part of the Company's Form 8-K dated May 13,
1997 (including forms of 10-3/8% Senior Note due 2007, Series A and
10-3/8% Senior Note due 2007, Series B) (Commission File No.
1-6370)).
4.2 Credit Agreement, dated as of May 13, 1997, by and among the Company
and Fleet National Bank (incorporated herein by reference to Exhibit
4.3 filed as a part of the Company's Form 8-K dated May 13, 1997
(Commission File No. 1-6370)).
4.3 First Amendment to Credit Agreement and Other Transaction Documents
dated December 31, 1997 between the Company and Fleet National Bank
(incorporated herein by reference to Exhibit 4.3 filed as a part of
the Company's Form 10-K for the fiscal year ended January 31, 1998
(Commission File No. 1-6370)).
4.4 Letter Agreement dated March 23, 1998 between French Fragrances,
Inc. and Fleet National Bank (incorporated herein by reference to
Exhibit 4.3 filed as a part of the Company's Form 10-K for the
fiscal year ended January 31, 1998 (Commission File No. 1-6370)).
4.5 Indenture, dated as of April 27, 1998, between the Company and
Marine Midland Bank, as trustee (incorporated herein by reference to
Exhibit 4.1 filed as a part of the Company's Form 8-K dated April
27, 1998 (including forms of 10-3/8% Senior Note due 2007, Series C
and 10-3/8% Senior Note due 2007, Series D) (Commission File No.
1-6370)).
4.6 Registration Rights Agreement, dated as of April 27, 1998, between
the Company and Donaldson, Lufkin & Jenrette Securities Corporation
(incorporated herein by reference to Exhibit 4.2 filed as a part of
the Company's Form 8-K dated April 27, 1998) (Commission File No.
1-6370)).
5.1 Opinion of Steel Hector & Davis LLP.
10.1 Registration Rights Agreement dated as of November 30, 1995, among
the Company, Bedford Capital Corporation ("Bedford"), Fred Berens,
Rafael Kravec and Eugene Ramos (incorporated herein by reference to
Exhibit 10.1 filed as a part of the Company's Form 10-K for the
fiscal year ended September 30, 1995 (Commission File No. 1-6370)).
10.2 Amendment dated as of March 20, 1996 to Registration Rights
Agreement dated as of November 30, 1995, among the Company, Bedford,
Fred Berens, Rafael Kravec and Eugene Ramos (incorporated herein by
reference to Exhibit 10.2 filed as a part of the Company's Form 10-K
for the year ended January 31, 1996 (Commission File No. 1-6370)).
10.3 Second Amendment dated as of July 22, 1996 to Registration Rights
Agreement dated as of November 30, 1995, among the Company, Bedford,
Fred Berens, Rafael Kravec and the Estate of Eugene Ramos
(incorporated by reference to Exhibit 10.3 filed as part of the
Company's Form 10-Q for the quarter ended July 31, 1996 (Commission
File No. 1-6370)).
10.4 Employment Agreement dated as of April 1, 1997, between the Company
and Rafael Kravec (incorporated herein by reference to Exhibit 10.4
filed as a part of the Company's Form 10-K for the year ended
January 31, 1997 (Commission File No. 1-6370)).
10.5 Non-Employee Director Stock Option Plan (incorporated herein by
reference to Exhibit 10.4 filed as a part of the Company's Form 10-K
for the fiscal year ended September 30, 1995 (Commission File No.
1-6370)).
10.6 1995 Stock Option Plan (incorporated herein by reference to Exhibit
10.5 filed as a part of the Company's Form 10-K for the fiscal year
ended September 30, 1995 (Commission File No. 1-6370)).
10.7 Lease Agreement, dated as of July 2, 1992, between FFI and National
Trading (incorporated herein by reference to Exhibit 10.13 filed as
a part of the Company's Form 10-K for the fiscal year ended
September 30, 1995 (Commission File No. 1-6370)).
10.8 Option Agreement, dated July 2, 1992, between FFI and National
Trading and Memorandum of Lease and Option Agreement related thereto
(incorporated herein by reference to Exhibit 10.14 filed as a part
of the Company's Form 10-K for the fiscal year ended September 30,
1995 (Commission File No. 1-6370)).
10.9 Amended and Restated Exclusive Trademark License Agreement, dated
February 29, 1980, between Geoffrey Beene, Inc., and Epocha
Distributors, Inc. (now known as Sanofi Beaute, Inc.) as amended
July 29, 1992 and February 13, 1995 (incorporated herein by
reference to Exhibit 10.15 filed as a part of the Company's Form
10-K for the fiscal year ended September 30, 1995 (Commission File
No. 1-6370)).
10.10 Asset Purchase Agreement dated as of February 1, 1996, by and
between the Company and Halston-Borghese, Inc. and its affiliates
(incorporated herein by reference to Exhibit 2.1 filed as a part of
the Company's Form 8-K dated March 20, 1996 (Commission File
No. 1-6370)).
10.11 Asset Purchase Agreement dated as of February 25, 1998, among the
Company, J.P. Fragrances, Inc., Joseph A. Pappalardo and Gloria
Pappalardo (incorporated herein by reference to Exhibit 2.1 filed as
a part of the Company's Form 8-K dated March 31, 1998 (Commission
File No. 1-6370)).
10.12 Amendment to Asset Purchase Agreement dated as of March 30, 1998,
among the Company, JPF, Joseph A. Pappalardo and Gloria Pappalardo
(incorporated herein by reference to Exhibit 2.2 filed as a part of
the Company's Form 8-K dated March 31, 1998 (Commission File No.
1-6370)).
10.13 Purchase Agreement, dated April 27, 1998, between the Company and
Donaldson, Lufkin & Jenrette Securities Corporation.
10.14 Lease Agreement dated as of May 4, 1998, between the Company and MAC
Papers, Inc. (incorporated herein by reference to Exhibit 10.13
filed as part of the Company's Form 10-Q for the quarter ended April
30, 1998 (Commission File No. 1-6370)).
12.1 Statement Regarding Computation of Ratios.
21.1 Subsidiaries of the Company (incorporated herein by reference to
Exhibit 21.1 filed as a part of the Company's Form 10-K for the
fiscal year ended January 31, 1998 (Commission File No. 1-6370)).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Steel Hector & Davis LLP (contained in the opinion filed
as Exhibit 5.1).
23.3 Consent of Richard A. Eisner & Company, LLP.
24.1 Power of Attorney (contained on signature page).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of Marine Midland Bank, as Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
The foregoing list omits instruments defining the rights of holders of long
term debt of the Company where the total amount of securities authorized
thereunder does not exceed 10% of the total assets of the Company. The
Company hereby agrees to furnish a copy of each such instrument or agreement
to the Commission upon request.
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Commission are either not required under the related
instructions, are not applicable (and therefore have been omitted), or the
required disclosures are contained in the financial statements included
herein.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), such reoffering prospectus
will contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
items of the applicable form.
(3) That every prospectus (i) that is filed pursuant to paragraph
(2) immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to this Registration Statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) That, insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under Item 20 above, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(5) To respond to requests for information that is incorporated by
reference in the Prospectus pursuant to Items 4, 10(b), 11 or 13 of Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of
responding to the request.
POWER OF ATTORNEY
Each director and/or officer of the registrant whose signature appears
below hereby appoints E. Scott Beattie and Oscar E. Marina, Esq., and each of
them severally, as his attorney-in-fact to sign in his name and on his behalf,
in any and all capacities stated below, and to file with the Securities and
Exchange Commission, any and all amendments, including post-effective
amendments, to this registration statement.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida
on June 24, 1998.
FRENCH FRAGRANCES, INC.
By: /s/ E. Scott Beattie
------------------------------------------
E. Scott Beattie
President, Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Rafael Kravec Chairman of the Board and Director June 24, 1998
- -----------------------
Rafael Kravec
/s/ E. Scott Beattie President, Chief Executive Officer June 24, 1998
- ----------------------- and Director
E. Scott Beattie (Principal Executive Officer)
/s/ William J. Mueller Vice President-Operations and June 24, 1998
- ----------------------- Chief Financial Officer
William J. Mueller (Principal Financial and
Accounting Officer)
/s/ J. W. Nevil Thomas Director June 24, 1998
- -----------------------
J. W. Nevil Thomas
/s/ George Dooley Director June 24, 1998
- -----------------------
George Dooley
EXHBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
5.1 Opinion of Steel Hector & Davis LLP.
10.13 Purchase Agreement, dated April 27, 1998, between the Company
and Donaldson, Lufkin & Jenrette Securities Corporation.
12.1 Statement Regarding Computation of Ratios.
23.1 Consent of Deloitte & Touche LLP.
23.3 Consent of Richard A. Eisner & Company, LLP.
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of Marine Midland Bank, as Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.