As filed with the Securities and Exchange Commission on August 16, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE SCOTTS COMPANY
(Exact name of Registrant as specified in its charter)
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OHIO 31-1414921
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
14111 SCOTTSLAWN ROAD, MARYSVILLE, OHIO 43041, (937) 644-0011
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------
DAVID M. ARONOWITZ
14111 SCOTTSLAWN ROAD
MARYSVILLE, OHIO 43041
(937) 644-0011
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
RONALD A. ROBINS, JR.
VORYS, SATER, SEYMOUR AND PEASE LLP
52 EAST GAY STREET
COLUMBUS, OHIO 43215
(614) 464-6400
(614) 719-4926 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to Amounts to be Aggregate Price Per Aggregate Offering Amount of Registration
be Registered Registered(1)(2) Security(2) Price(1)(2) Fee (2)(3)
---------------------------------------- ---------------- ------------------------ ----------------------- ------------------------
Debt Securities.........................
Preferred Shares, without par value(4)..
Common Shares, without par value(5).....
Warrants................................
Stock Purchase Contracts................
Stock Purchase Units....................
Total.............................. $350,000,000 100% $350,000,000 $32,200
Common Shares, without par value(6)..... 1,600,000 shares $76,832,000(7) $ 76,832,000(7) $7,069
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(1) The initial public offering price of any debt securities denominated in
any foreign currencies or currency units shall be the U.S. dollar
equivalent thereof based on the prevailing exchange rates at the
respective times such securities are first offered. For debt securities
issued with an original issue discount, the amount to be registered is
the amount as shall result in aggregate gross proceeds of up to
$350,000,000.
(continued on following page)
(2) Pursuant to General Instruction II.D to Form S-3, the Amounts to be
Registered, Proposed Maximum Aggregate Price Per Security and Proposed
Maximum Aggregate Offering Price have been omitted for each class of
securities that are registered hereby other than the specified Common
Shares to be sold by selling shareholders. See note 6.
(3) The registration fee for the unallocated securities registered hereby
has been calculated in accordance with Rule 457(o) under the Securities
Act of 1933, as amended, and reflects the maximum offering price of
securities that may be issued rather than the principal amount of any
securities that may be issued at a discount.
(4) An indeterminate number of shares of Preferred Shares of the Registrant
are covered by this Registration Statement. Shares of preferred shares
may be issued (a) separately or (b) upon the conversion of debt
securities which are registered hereby.
(5) An indeterminate amount of Common Shares of the Registrant are covered
by this Registration Statement. Common Shares may be issued (a)
separately or (b) upon the conversion of either the debt securities or
the shares of Preferred Shares, each of which are registered hereby.
Common Shares issued upon conversion of the debt securities and the
Preferred Shares will be issued without the payment of additional
consideration.
(6) Represents Common Shares to be sold by certain selling shareholders
identified herein.
(7) Estimated solely for the purpose of determining the registration fee
and calculated in accordance with Rule 457(c) under the Securities Act
on the basis of the last reported price of the Registrant's Common
Shares on August 13, 2002, as reported on the New York Stock Exchange.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the prospectus is delivered in final form. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED AUGUST 16, 2002
PROSPECTUS
[SCOTTS LOGO]
$350,000,000
THE SCOTTS COMPANY
Debt Securities, Preferred Shares,
Common Shares, Warrants, Stock
Purchase Contracts and Stock Purchase Units
--------------
1,600,000 Common Shares
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We may from time to time issue
- debt securities;
- preferred shares;
- common shares;
- warrants to purchase debt securities, preferred shares or common
shares;
- stock purchase contracts; or
- stock purchase units
having an aggregate offering price of up to $350,000,000 (or the equivalent in
foreign denominated currency or units based on or related to currencies). The
debt securities may be either senior debt securities or subordinated debt
securities.
In addition to the common shares that we may offer from time to time,
up to 1,600,000 common shares may be sold by certain of our shareholders who are
set forth in this prospectus under the section entitled "Selling Shareholders."
Our common shares are listed on the New York Stock Exchange under the symbol
"SMG."
We will provide specific terms of these securities in supplements to
this prospectus. Any prospectus supplement may also add, update or change
information contained in this prospectus. You should read this prospectus, any
prospectus supplement and the additional information described under "Where You
Can Find More Information" carefully before you invest in our securities.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3
AND ANY PROSPECTUS SUPPLEMENT BEFORE YOU INVEST IN ANY OF OUR SECURITIES.
--------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
--------------
The date of this prospectus is _________, 2002.
TABLE OF CONTENTS
PAGE
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Forward-Looking Statements.................................................. i
Summary..................................................................... 1
Risk Factors................................................................ 3
The Scotts Company.......................................................... 7
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Share Dividends.......................................... 7
Use of Proceeds............................................................. 7
Dividend Policy............................................................. 8
Description of Debt Securities.............................................. 8
Description of Capital Stock................................................ 15
Description of Warrants..................................................... 17
Description of Stock Purchase Contracts and Stock Purchase Units............ 18
Selling Shareholders........................................................ 19
Plan of Distribution........................................................ 20
Legal Matters............................................................... 21
Experts..................................................................... 21
Incorporation by Reference.................................................. 21
Where You Can Find More Information......................................... 22
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Unless the context requires otherwise, the terms "we," "us," and "our"
refer to The Scotts Company, an Ohio corporation. Our principal executive
offices are located at 14111 Scottslawn Road, Marysville, Ohio 43041, and our
telephone number at that address is (937) 644-0011. Our website address is
http://www.scotts.com. The information on our website is not part of this
prospectus or any prospectus supplement.
Roundup(R)is a registered trademark of Monsanto Technology LLC (an
affiliate of Monsanto Company, now known as Pharmacia Corporation). Unless
otherwise indicated, all other trademarks, service marks or brand names
appearing in this prospectus or any prospectus supplement are the property of
Scotts.
You should rely only on the information contained or incorporated by
reference in this prospectus or any prospectus supplement. Neither we nor the
selling shareholders have authorized anyone to provide you with different
information. Neither we nor the selling shareholders are making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information contained in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of these
documents.
FORWARD-LOOKING STATEMENTS
This prospectus includes, and incorporates by reference,
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, including, in particular, the statements about our plans, strategies
and prospects. Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
can give no assurance that such plans, intentions or expectations will be
achieved. Important factors that could cause actual results to differ materially
from the forward-looking statements we make in, or incorporate by reference
into, this prospectus include those discussed under the caption "Risk Factors"
in this prospectus and in any prospectus supplement and elsewhere in this
prospectus or in any prospectus supplement or the documents incorporated by
reference herein. All forward-looking statements are expressly qualified in
their entirety by those cautionary statements.
i
SUMMARY
The following summary highlights selected information from this
prospectus and does not contain all of the information that may be important to
you. This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide you with a
prospectus supplement that will describe the specific amounts, prices and other
terms of the securities being offered. Any prospectus supplement may also add,
update or change information contained in this prospectus. To understand the
terms of our securities, you should carefully read this document with the
applicable prospectus supplement. Together these documents will give the
specific terms of the securities we are offering. You should also read the
documents we have incorporated by reference in this prospectus and in any
prospectus supplement.
THE SECURITIES WE MAY OFFER
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf registration process, we may offer from time to time up to an
aggregate of $350,000,000 of any of the following securities:
- debt securities;
- preferred shares;
- common shares;
- warrants;
- stock purchase contracts; and
- stock purchase units.
In addition, certain selling shareholders may offer and sell from time
to time up to an aggregate of 1,600,000 common shares owned by them and covered
by the registration statement of which this prospectus is a part.
DEBT SECURITIES
We may offer unsecured general obligations, which may be either senior
or subordinated, and may be convertible into common shares or preferred shares.
In this prospectus, we refer to our senior debt securities and subordinated debt
securities together as our "debt securities." The senior debt securities will
have the same rank as all of our other unsecured and unsubordinated debt. The
subordinated debt securities will be entitled to payment only after payment of
our senior debt, including amounts under current or future senior credit
facilities.
Our debt securities will be issued under one of two indentures between
us and a trustee. We have summarized general features of our debt securities
under the section entitled "Description of Debt Securities" contained in this
prospectus. We encourage you to read the indentures, the form of each of which
is an exhibit to the registration statement of which this prospectus is a
part.
PREFERRED SHARES
We may issue preferred shares, without par value, in one or more
series. Subject to the terms of our governing documents and applicable Ohio law,
our board of directors will determine the dividend, voting, conversion and other
rights and preferences of the series of preferred shares being offered.
COMMON SHARES
We may issue common shares, without par value. Holders of common shares
are entitled to receive dividends when declared by our board of directors,
subject to the rights of holders of our preferred shares. Each holder of common
shares is entitled to one vote per share. The holders of common shares have no
preemptive or cumulative voting rights.
In addition to the common shares that we may offer, certain selling
shareholders may offer and sell from time to time up to an aggregate of
1,600,000 common shares under the registration statement of which this
prospectus is a part.
1
WARRANTS
We may issue warrants for the purchase of debt securities, preferred
shares or common shares either independently or together with other securities.
Each warrant will entitle the holder to purchase the principal amount of our
debt securities, or the number of preferred shares or common shares, at the
exercise price set forth in, or calculable as set forth in, the applicable
prospectus supplement.
STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us and obligating us to sell to the holders a specified
number of common shares or preferred shares at a future date or dates. The price
per share of common shares or preferred shares may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, often referred to as stock purchase units, consisting of a stock purchase
contract and either of the following:
- debt securities of our company; or
- debt obligations of third parties, including U.S. Treasury
securities,
securing the holder's obligations to purchase our common shares or preferred
shares under the stock purchase contracts.
2
RISK FACTORS
Investing in our securities involves risks, including the risks
described in this prospectus, in any prospectus supplement and in the other
documents that are incorporated herein by reference. You should carefully
consider the risks factors together with all of the other information and data
included in this prospectus, any prospectus supplement and the documents that
are incorporated herein by reference before you decide to acquire any
securities.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS.
We have a significant amount of debt. Our substantial indebtedness
could have important consequences for you. For example, it could:
- make it more difficult for us to satisfy our obligations under
our outstanding indebtedness and otherwise;
- increase our vulnerability to general adverse economic and
industry conditions;
- require us to dedicate a substantial portion of cash flows
from operations to payments on our indebtedness, which would
reduce the cash flows available to fund working capital,
capital expenditures, research and development efforts and
other general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
- place us at a competitive disadvantage compared to our
competitors that have less debt;
- limit our ability to borrow additional funds; and
- expose us to risks inherent in interest rate fluctuations
because some of our borrowings are at variable rates of
interest, which could result in higher interest expense in the
event of increases in interest rates.
Our ability to make payments on and to refinance our indebtedness and
to fund planned capital expenditures and research and development efforts will
depend on our ability to generate cash in the future. This, to some extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash
flow from operations or that currently anticipated cost savings and operating
improvements will be realized on schedule or at all. We also cannot assure you
that future borrowings will be available to us under our credit facility in
amounts sufficient to enable us to pay our indebtedness or to fund our other
liquidity needs. We may need to refinance all or a portion of our indebtedness,
on or before maturity. We cannot assure you that we will be able to refinance
any of our indebtedness on commercially reasonable terms or at all.
ADVERSE WEATHER CONDITIONS COULD ADVERSELY IMPACT FINANCIAL RESULTS.
Weather conditions in North America and Europe have a significant
impact on the timing of sales in the spring selling season and overall annual
sales. Periods of wet weather can slow fertilizer sales, while periods of dry,
hot weather can decrease pesticide sales. In addition, an abnormally cold spring
throughout North America and/or Europe could adversely affect both fertilizer
and pesticide sales and therefore our financial results.
OUR HISTORICAL SEASONALITY COULD IMPAIR OUR ABILITY TO PAY OBLIGATIONS AS THEY
COME DUE IN ADDITION TO OUR OPERATING EXPENSES.
Because our products are used primarily in the spring and summer, our
business is highly seasonal. For the past two fiscal years, more than 75% of our
net sales have occurred in the second and third fiscal quarters combined. Our
working capital needs and our borrowings peak near the middle of our second
fiscal quarter because we are generating fewer revenues while incurring
expenditures in preparation for the spring selling season. If cash on hand is
insufficient to pay our obligations as they come due, including interest
payments on our indebtedness, or our operating expenses, at a time when we are
unable to draw on our credit facility, this seasonality could have a material
adverse effect on our ability to conduct our business. Adverse weather
conditions could heighten this risk.
3
PUBLIC PERCEPTIONS THAT THE PRODUCTS WE PRODUCE AND MARKET ARE NOT SAFE COULD
ADVERSELY AFFECT US.
We manufacture and market a number of complex chemical products, such
as fertilizers, growing media, herbicides and pesticides, bearing one of our
brands. On occasion, customers and some current or former employees have alleged
that some products have failed to perform up to expectations or have caused
damage or injury to individuals or property. Public perception that our products
are not safe, whether justified or not, could impair our reputation, damage our
brand names and materially adversely affect our business.
BECAUSE OF THE CONCENTRATION OF OUR SALES TO A SMALL NUMBER OF RETAIL CUSTOMERS,
THE LOSS OF ONE OR MORE OF OUR TOP CUSTOMERS COULD ADVERSELY AFFECT OUR
FINANCIAL RESULTS.
Our top 10 North American retail customers together accounted for more
than 70% of our total net sales and 35% of our total outstanding accounts
receivable for the past couple of fiscal years. Our top four customers, Home
Depot, Wal-Mart, Lowe's and Kmart, hold significant positions in the retail
lawn and garden market. The loss of, or reduction in orders from, Home Depot,
Wal-Mart, Lowe's, Kmart or any other significant customer could have a
material adverse effect on our business and our financial results, as could
customer disputes regarding shipments, fees, merchandise condition or related
matters. Our inability to collect accounts receivable from any of these
customers could also have a material adverse affect.
We do not have long-term sales agreements or other contractual
assurances as to future sales to any of our major retail customers. In addition,
continued consolidation in the retail industry has resulted in an increasingly
concentrated retail base. To the extent such concentration continues to occur,
our net sales and operating income may be increasingly sensitive to a
deterioration in the financial condition of, or other adverse developments
involving our relationship with, one or more customers. As a result of
consolidation in the retail industry, our customers are able to exert increasing
pressure on us with respect to pricing and payment terms.
Kmart, one of our top customers, filed for bankruptcy relief under
Chapter 11 of the bankruptcy code on January 22, 2002. Following such filing, we
recommenced shipping products to Kmart, and we intend to continue shipping
products to Kmart for the foreseeable future. If Kmart does not successfully
emerge from its bankruptcy reorganization, our business could be adversely
affected.
IF MONSANTO WERE TO TERMINATE THE MARKETING AGREEMENT FOR CONSUMER ROUNDUP(R)
PRODUCTS WITHOUT BEING REQUIRED TO PAY ANY TERMINATION FEE, WE WOULD LOSE A
SUBSTANTIAL SOURCE OF FUTURE EARNINGS.
If we were to commit a serious default under the marketing agreement
with Monsanto for consumer Roundup(R) products, Monsanto may have the right to
terminate the agreement. If Monsanto were to terminate the marketing agreement
rightfully, we would not be entitled to any termination fee, and we would lose
all, or a significant portion, of the significant source of earnings we believe
the marketing agreement provides. Monsanto may also be able to terminate the
marketing agreement within a given region, including North America, without
paying us a termination fee if sales to consumers in that region decline:
- over a cumulative three fiscal year period; or
- by more than 5% for each of two consecutive fiscal years.
THE EXPIRATION OF PATENTS RELATING TO ROUNDUP(R) AND THE SCOTTS TURF BUILDER(R)
LINE OF PRODUCTS COULD SUBSTANTIALLY INCREASE OUR COMPETITION IN THE UNITED
STATES.
Glyphosate, the active ingredient in Roundup(R), was subject to a
patent in the United States that expired in September 2000. We cannot predict
the success of Roundup(R) now that glyphosate is no longer patented. Substantial
new competition in the United States could adversely affect us. Glyphosate is no
longer subject to patent in Europe and is not subject to patent in Canada. While
sales of Roundup(R) in such countries have continued to increase despite the
lack of patent protection, sales in the United States may decline as a result of
increased competition. Any such decline in sales would adversely affect our
financial results through the reduction of commissions as calculated under the
Roundup(R) marketing agreement. We are aware that Spectrum Brands produced
glyphosate one-gallon products for Home Depot and Lowe's to be sold under the
Real-Kill(R) and No-Pest(R) brand names, respectively, in fiscal year 2001.
Additional competitive products have been introduced in fiscal year 2002. It is
too early to determine whether these product introductions will have a material
adverse effect on our sales of Roundup(R).
4
Our methylene-urea product composition patent, which covered Scotts
Turf Builder(R), Scotts Turf Builder(R) Plus 2(R) with Weed Control and Scotts
Turf Builder(R) with Halts(R) Crabgrass Preventer, expired in July 2001. This
could also result in increased competition. Any decline in sales of Turf
Builder(R) products after the expiration of the methylene-urea product
composition patent could adversely affect our financial results.
THE HAGEDORN PARTNERSHIP L.P. BENEFICIALLY OWNS APPROXIMATELY 40% OF OUR
OUTSTANDING COMMON SHARES ON A FULLY DILUTED BASIS.
The Hagedorn Partnership L.P. beneficially owns approximately 40% of
our outstanding common shares on a fully diluted basis and has sufficient voting
power to significantly influence the election of directors and the approval of
other actions requiring the approval of our shareholders.
COMPLIANCE WITH ENVIRONMENTAL AND OTHER PUBLIC HEALTH REGULATIONS COULD INCREASE
OUR COST OF DOING BUSINESS.
Local, state, federal and foreign laws and regulations relating to
environmental matters affect us in several ways. In the United States, all
products containing pesticides must be registered with the United States
Environmental Protection Agency ("U.S. EPA") and, in many cases, similar state
agencies before they can be sold. The inability to obtain or the cancellation of
any registration could have an adverse effect on our business. The severity of
the effect would depend on which products were involved, whether another product
could be substituted and whether our competitors were similarly affected. We
attempt to anticipate regulatory developments and maintain registrations of, and
access to, substitute chemicals. We may not always be able to avoid or minimize
these risks.
The Food Quality Protection Act, enacted by the U.S. Congress in August
1996, establishes a standard for food-use pesticides: that a reasonable
certainty of no harm will result from the cumulative effect of pesticide
exposures. Under this act, the U.S. EPA is evaluating the cumulative risks from
dietary and non-dietary exposures to pesticides. The pesticides in our products,
certain of which may be used on crops processed into various food products,
continue to be evaluated by the U.S. EPA as part of this exposure risk
assessment. It is possible that the U.S. EPA or a third party active ingredient
registrant may decide that a pesticide we use in our products will be limited or
made unavailable to us. For example, in June 2000, DowAgroSciences, an active
ingredient registrant, voluntarily agreed to a gradual phase-out of residential
uses of chlorpyrifos, an active ingredient used in our lawn and garden products.
In December 2000, the U.S. EPA reached agreement with various parties, including
manufacturers of the active ingredient diazinon, regarding a phased withdrawal
from retailers by December 2004 of residential uses of products containing
diazinon, used also in our lawn and garden products. We cannot predict the
outcome or the severity of the effect of the U.S. EPA's continuing evaluations
of active ingredients used in our products.
The use of certain pesticide and fertilizer products is regulated by
various local, state, federal and foreign environmental and public health
agencies. Regulations regarding the use of some pesticide and fertilizer
products may include requirements that only certified or professional users
apply the product, that the products be used only in specified locations or that
certain ingredients not be used. Users may be required to post notices on
properties to which products have been or will be applied and may be required to
notify individuals in the vicinity that products will be applied in the future.
Even if we are able to comply with all such regulations and obtain all necessary
registrations, we cannot assure you that our products, particularly pesticide
products, will not cause injury to the environment or to people under all
circumstances. The costs of compliance, remediation or products liability have
adversely affected operating results in the past and could materially affect
future quarterly or annual operating results.
The harvesting of peat for our growing media business has come under
increasing regulatory and environmental scrutiny. In the United States, state
regulations frequently require us to limit our harvesting and to restore the
property to an agreed-upon condition. In some locations, we have been required
to create water retention ponds to control the sediment content of discharged
water. In the United Kingdom, our peat extraction efforts are also the subject
of legislation.
In addition to the regulations already described, local, state, federal
and foreign agencies regulate the disposal, handling and storage of waste, air
and water discharges from our facilities. In June 1997, the Ohio Environmental
Protection Agency ("Ohio EPA") initiated an enforcement action against us with
respect to alleged surface water violations and inadequate treatment
capabilities at our Marysville facility and is seeking corrective action under
the Resource Conservation Recovery Act. We have met with the Ohio EPA and the
Ohio Attorney General's office to negotiate an amicable resolution of these
issues. On December 3, 2001, an agreed judicial Consent Order was submitted to
the Union County Common Pleas Court and was entered by the court on January 25,
2002.
5
For the nine months ended June 29, 2002, we made approximately $1.9
million in environmental expenditures, compared with approximately $0.6 million
in environmental capital expenditures and $2.1 million in other environmental
expenses for the entire fiscal year 2001. Management anticipates that
environmental capital expenditures and other environmental expenses for the
remainder of fiscal year 2002 will not differ significantly from those incurred
in fiscal year 2001.
The adequacy of these anticipated future expenditures is based on our
operating in substantial compliance with applicable environmental and public
health laws and regulations and several significant assumptions:
- that we have identified all of the significant sites that must be
remediated;
- that there are no significant conditions of potential
contamination that are unknown to us; and
- that with respect to the agreed judicial Consent Order in Ohio,
that potentially contaminated soil can be remediated in place
rather than having to be removed and only specific stream segments
will require remediation as opposed to the entire stream.
If there is a significant change in the facts and circumstances
surrounding these assumptions or if we are found not to be in substantial
compliance with applicable environmental and public health laws and regulations,
it could have a material impact on future environmental capital expenditures and
other environmental expenses and our results of operations, financial position
and cash flows.
OUR SIGNIFICANT INTERNATIONAL OPERATIONS MAKE US SUSCEPTIBLE TO FLUCTUATIONS IN
CURRENCY EXCHANGE RATES AND TO THE COSTS OF INTERNATIONAL REGULATION.
We currently operate manufacturing, sales and service facilities
outside of North America, particularly in the United Kingdom, Germany and
France. Our international operations have increased with the acquisitions of
Levington, Miracle Garden Care Limited, Ortho and Rhone-Poulenc Jardin and with
the marketing agreement for consumer Roundup(R) products. In fiscal year 2001,
international sales accounted for approximately 20% of our total sales.
Accordingly, we are subject to risks associated with operations in foreign
countries, including:
- fluctuations in currency exchange rates;
- limitations on the conversion of foreign currencies into U.S.
dollars;
- limitations on the remittance of dividends and other payments by
foreign subsidiaries;
- additional costs of compliance with local regulations; and
- historically, higher rates of inflation than in the United States.
In addition, our operations outside the United States are subject to the risk of
new and different legal and regulatory requirements in local jurisdictions,
potential difficulties in staffing and managing local operations and potentially
adverse tax consequences. The costs related to our international operations
could adversely affect our operations and financial results in the future.
RESTRICTIVE COVENANTS MAY ADVERSELY AFFECT US.
Our credit facility and the indenture governing our outstanding senior
subordinated notes contain restrictive covenants that require us to maintain
specified financial ratios and satisfy other financial condition tests. Our
ability to meet those financial ratios and tests can be affected by events
beyond our control, and we cannot assure you that we will meet those tests. A
breach of any of these covenants could result in a default under our credit
facility and/or our outstanding senior subordinated notes. Upon the occurrence
of an event of default under our credit facility and/or the senior subordinated
notes, the lenders and/or noteholders could elect to declare all of our
outstanding indebtedness to be immediately due and payable and terminate all
commitments to extend further credit. We cannot be sure that our lenders or the
noteholders would waive a default or that we could pay the indebtedness in full
if it were accelerated.
6
THE SCOTTS COMPANY
The Scotts Company, an Ohio corporation, traces its heritage back to a
company founded by O.M. Scott in Marysville, Ohio in 1868. In the mid 1900's, we
became widely known for the development of quality lawn fertilizers and grass
seeds that led to the creation of a new industry -- consumer lawn care. Today,
the Scotts(R) Turf Builder(R), Miracle-Gro(R), Ortho(R) and Roundup(R) brands
make us the most widely recognized company in lawn care in the United States.
In the 1990's, we significantly expanded our product offering by
acquiring two additional leading brands in the U.S. home lawn and garden
industry. In 1995, through a merger, we acquired the Miracle-Gro(R) brand, the
industry leader in water-soluble garden plant foods. In fiscal 1999, we acquired
the Ortho(R) brand and exclusive rights to market the consumer Roundup(R) brand,
thereby adding industry-leading pesticides and herbicides to our portfolio. We
are among the most widely recognized marketers and manufacturers of products for
lawns, gardens and professional horticulture, and we are rapidly expanding into
the lawn care service industry through our Scotts LawnService(R) business. We
believe that our market leadership is driven by our leading brands,
consumer-focused advertising, product performance and close relationships with
major U.S. retailers in our categories.
In 1997, our presence in Europe expanded with the acquisition of
several established brands. We now have a strong presence in the consumer garden
business in the United Kingdom, France and Germany, and expect to increase our
share in these markets through consumer-focused marketing, a model we have
successfully followed in the United States. We also have a presence in the
remaining countries in Europe, Australia, the Far East, Latin America and South
America.
RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
The following table sets forth our consolidated ratio of earnings to
fixed charges and of earnings to combined fixed charges and preferred share
dividends for each of the periods shown:
NINE
MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 29,
-------------------------------------------- --------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges......... 3.3x 2.6x 2.3x 2.1x 1.3x 3.7x
Ratio of earnings to combined fixed
charges and preferred share dividends.. 2.1x 1.8x 2.0x 1.9x 1.3x 3.7x
For the purposes of the table above, earnings include income before
provision for income taxes and the cumulative effect of changes in accounting
principles, adjusted for income or loss of equity investors and fixed charges,
excluding capitalized interest. Fixed charges consist of interest on all
indebtedness, amortization of debt issuance costs and discount or premium
relating to any indebtedness, capitalized interest and a portion of rental
charges considered to be representative of the interest component in the
particular case. Preferred share dividends are the pre-tax equivalent, at our
effective tax rate, of dividends earned on 195,000 shares of Class A Convertible
Preferred Stock that were converted into common shares as of October 1, 1999.
USE OF PROCEEDS
Unless otherwise stated in the applicable prospectus supplement, we
intend to use all or a portion of the net proceeds from the sale of the
securities offered by this prospectus and any accompanying prospectus supplement
for general corporate purposes. General corporate purposes may include the
repayment of outstanding indebtedness, the purchase of our common shares,
capital expenditures, mergers, acquisitions and other strategic investments. We
have not made specific allocations of the proceeds for such purposes at this
time. The net proceeds may be invested temporarily or applied to repay short
term or revolving debt until they are used for their stated purposes.
We will not receive any of the proceeds from the sale of common shares
by the selling shareholders, if any.
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DIVIDEND POLICY
We have not paid dividends on our common shares in the past and do not
presently plan to pay dividends on our common shares. Other than dividends to be
paid on outstanding preferred shares issued after the date of this prospectus,
we presently anticipate that earnings will be retained and reinvested to support
the growth of our business. The payment of any future dividends on our common
shares or preferred shares will be determined by our board of directors in light
of conditions then existing, including our earnings, financial condition and
capital requirements, restrictions in financing agreements, business conditions
and other factors.
DESCRIPTION OF DEBT SECURITIES
The following description discusses the general terms and provisions of
the debt securities that we may offer under this prospectus. The debt securities
may be issued as senior debt securities or subordinated debt securities. The
indebtedness represented by the senior debt securities will rank equally with
all of our other unsecured and unsubordinated debt. The indebtedness represented
by the subordinated debt securities will rank junior and be subordinate in right
of payment to the prior payment in full of our senior debt, to the extent and in
the manner set forth in the applicable prospectus supplement for the securities.
The senior debt securities and the subordinated debt securities will be
issued under separate indentures between us and one or more U.S. banking
institutions (each, a "Trustee"). The Trustee for each series of our debt
securities will be identified in the applicable prospectus supplement. We may
refer to the indenture covering the senior debt securities as the "Senior
Indenture" and the indenture covering the subordinated debt securities as the
"Subordinated Indenture." Together the Senior Indenture and the Subordinated
Indenture are called "Indentures."
The forms of the Indentures are filed as exhibits to the registration
statement of which this prospectus is a part. The Indentures are subject to and
governed by the Trust Indenture Act of 1939, and may be supplemented or amended
from time to time following their execution. We have not yet selected a Trustee
for either of the Indentures, and we have not yet executed either Indenture.
Prior to issuing any debt securities, we will be required to select a Trustee
for the applicable Indenture or Indentures, to qualify the Trustee or Trustees
under the Trust Indenture Act of 1939 and to execute the applicable Indenture or
Indentures.
The form of each Indenture gives us broad authority to set the
particular terms of each series of debt securities, including the right to
modify certain of the terms contained in the Indenture. The particular terms of
a series of debt securities and the extent, if any, to which the particular
terms of the issue modify the terms of the applicable form of Indenture will be
described in the prospectus supplement relating to the debt securities.
We have summarized selected provisions of the Indentures below. Because
this section is a summary, it does not describe every aspect of the debt
securities or the applicable Indenture. This summary is subject to, and
qualified in its entirety by reference to, all the provisions of the applicable
Indenture, including definitions of terms used in the applicable Indenture,
which we urge you to read. Whenever we refer in this prospectus or in the
prospectus supplement to defined terms of the Indentures, those defined terms
are incorporated by reference herein or therein, as applicable. Capitalized
terms used in this summary have the meanings specified in the Indentures.
GENERAL
The debt securities will be our direct, unsecured general obligations.
The senior debt securities will rank equally with all of our other unsecured and
unsubordinated indebtedness. The subordinated debt securities will be
subordinated in right of payment to the prior payment in full of our Senior
Indebtedness (including any senior debt securities) as described under "--
Subordination" below and in the applicable prospectus supplement.
The Indentures provide that we will be able to issue an unlimited
aggregate principal amount of debt securities under each Indenture, in one or
more series, and in any currency or currency units. We need not issue all debt
securities of one series at the same time and, unless otherwise provided, we may
reopen a series, without the consent of the holders of the debt securities of
that series, for issuances of additional debt securities of that series.
Prior to the issuance of each series of debt securities, the terms of
the particular securities will be specified in a supplemental indenture or a
resolution of our board of directors or in one or more officer's certificates
pursuant to a board resolution.
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A prospectus supplement will include the terms of any debt securities
being offered. We refer you to the applicable prospectus supplement for a
description of the following terms of the series of offered debt securities
("Offered Debt Securities"):
- the title of the Offered Debt Securities;
- whether the Offered Debt Securities are senior debt securities or
subordinated debt securities;
- the aggregate principal amount of the Offered Debt Securities;
- the date or dates on which principal will be payable or how to
determine the dates;
- the rate or rates or method of determination of interest; the date
from which interest will accrue; the dates on which interest will
be payable and any record dates for the interest payable on the
interest payment dates;
- the place of payment on the Offered Debt Securities;
- any obligation or option we have to redeem, purchase or repay the
Offered Debt Securities, or any option of the registered holder to
require us to redeem or repurchase Offered Debt Securities, and
the terms and conditions upon which the Offered Debt Securities
will be redeemed, purchased or repaid;
- the currency or currencies, including composite currencies or
currency units, in which payment of the principal of (or premium,
if any) or interest, if any, on any of the Offered Debt Securities
will be payable if other than the currency of the United States of
America;
- any index, formula or other method used to determine the amount of
principal, premium, if any, or interest;
- the terms and conditions upon which payment on the Offered Debt
Securities may change;
- whether the Offered Debt Securities are defeasible;
- any addition to or change in the Events of Default;
- any addition to or change in the covenants in the applicable
Indenture;
- the terms of any right to convert the Offered Debt Securities into
other securities or other property; and
- any other terms of the Offered Debt Securities not inconsistent
with the provisions of the applicable Indenture.
If the Offered Debt Securities are denominated in whole or in part in
any currency other than U.S. dollars, if the principal of (and premium, if any)
or interest, if any, on the Offered Debt Securities are to be payable in a
currency or currencies other than that in which the debt securities are to be
payable, or if any index is used to determine the amount of payments of
principal of, premium, if any, or interest on any series of the debt securities,
special U.S. federal income tax, accounting and other considerations applicable
thereto will be described in the applicable prospectus supplement.
If so provided in the applicable prospectus supplement, we may issue
our debt securities at a discount below their principal amount and pay less than
the entire principal amount of our debt securities upon declaration of
acceleration of their maturity ("Original Issue Discount Securities"). The
applicable prospectus supplement will describe all material U.S. federal income
tax, accounting and other considerations applicable to the Original Issue
Discount Securities.
The general provisions of the Indentures do not contain any provisions
that would limit our ability or the ability of our subsidiaries to incur
indebtedness or that would afford holders of our debt securities protection in
the event of a highly leveraged or similar transaction involving us or any of
our subsidiaries. Please refer to the applicable prospectus supplement for
information with respect to any deletions from, modifications of or additions,
if any, to the Events of Default described below that are applicable to the
Offered Debt Securities or any covenants or other provisions providing event
risk or similar protection.
PAYMENT
Unless indicated differently in the applicable prospectus supplement,
we will pay interest on a debt security on each interest payment date to the
person in whose name the debt security is registered as of the close of business
on the regular record date relating to the interest payment date.
Unless we indicate differently in the applicable prospectus supplement,
we will pay principal of and any premium on the debt securities at stated
maturity, upon redemption or otherwise, upon presentation of the debt securities
at the office of the applicable Trustee, as our paying agent, or at other
designated places. Any other paying agent initially designated for the debt
securities of a particular series will be named in the applicable prospectus
supplement.
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FORM, TRANSFERS AND EXCHANGES
The debt securities of each series will be issued only in fully
registered form, without interest coupons. Unless otherwise specified in the
applicable prospectus supplement, the debt securities will be issued in
denominations of $1,000 each or multiples thereof.
Subject to the terms of the applicable Indenture and the limitations
applicable to global securities, you may exchange or transfer debt securities at
the corporate trust office of the Trustee or at any other office or agency
maintained by us for that purpose, without the payment of any service charge,
except for any tax or governmental charge.
GLOBAL SECURITIES
The debt securities of any series may be issued, in whole or in part,
by one or more global certificates that will be deposited with the depositary
identified in the applicable prospectus supplement.
No global security may be exchanged in whole or in part for the debt
securities registered in the name of any person other than the depositary for
that global security or any nominee of that depositary unless:
- the depositary is unwilling or unable to continue as depositary;
- an Event of Default has occurred and is continuing; or
- as otherwise provided in the applicable prospectus supplement.
Unless otherwise stated in any prospectus supplement, The Depository
Trust Company, or DTC, will act as depositary. Beneficial interests in global
certificates will be shown on, and transfers of global certificates will be
affected only through records maintained by DTC and its participants.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable prospectus supplement, an
event of default ("Event of Default") occurs with respect to debt securities of
any series if:
- we do not pay any interest on any debt securities of the
applicable series within 30 days of the due date (following any
deferral allowed under the terms of the debt securities and
elected by us);
- we do not pay principal or premium, if any, on any debt securities
of the applicable series at maturity;
- we do not deposit any sinking fund payment when due by the terms
of the applicable debt securities;
- we default in the performance, or are in breach, of a covenant or
warranty of the applicable Indenture, other than a covenant or
warranty a default in whose performance or whose breach is
elsewhere specifically dealt with or which expressly has been
included in the applicable Indenture solely for the benefit of
debt securities other than that series, and such default or breach
continues for a period of 60 days after there has been given by
registered or certified mail, to us by the applicable Trustee or
to us and the applicable Trustee by the Holders of at least 25% of
the principal amount of debt securities of the affected series, a
written notice specifying such default or breach and requiring it
to be remedied;
- certain events of bankruptcy, insolvency, receivership or
reorganization with respect to us occur; or
- any other Event of Default provided with respect to debt
securities of that series occurs.
No Event of Default with respect to a series of debt securities
necessarily constitutes an Event of Default with respect to the debt securities
of any other series issued under the Indentures.
Each Indenture requires us to file annually with the applicable Trustee
an officers' certificate as to our compliance with all conditions and covenants
under the applicable Indenture. Each Indenture provides that the applicable
Trustee may withhold notice to the Holders of a series of debt securities of any
default, except payment defaults on those debt securities, if it considers such
withholding to be in the interest of the Holders of that series of debt
securities.
If an Event of Default occurs and is continuing with respect to any
series of debt securities, then either the applicable Trustee or the Holders of
not less than 25% in principal amount of the outstanding debt securities of that
series may declare the principal amount, or, if any debt securities of that
series are Original Issue Discount Securities, that portion of the principal
amount of those Original Issue Discount Securities as may be specified in the
terms of those Original Issue Discount Securities, of all of the debt securities
of that series to be due and payable immediately, by a
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notice in writing to us, and to the applicable Trustee if given by the Holders,
and upon any such declaration that principal amount, or specified amount, plus
accrued and unpaid interest, and premium, if any, will become immediately due
and payable. Upon payment of that amount in the currency in which the debt
securities are denominated (except as otherwise provided in the applicable
Indenture or specified in the applicable prospectus supplement), all of our
obligations in respect of the payment of principal of the debt securities of
that series will terminate.
After a declaration of acceleration has been made and before the
Trustee has obtained a judgment or decree for payment of the money due on any
series of debt securities, the Holders of not less than a majority in aggregate
principal amount of the outstanding debt securities of that series, by written
notice to us and the applicable Trustee, may rescind and annul the declaration
and its consequences, subject to any terms or conditions specified in the
applicable prospectus supplement.
If an Event of Default results from bankruptcy, insolvency or
reorganization, the principal amount of all the debt securities of a series, or
that portion of the principal amount of such debt securities as may be specified
in the applicable prospectus supplement, will automatically become immediately
due and payable.
Subject to the provisions of each Indenture relating to the duties of
the applicable Trustee, in case an Event of Default with respect to our debt
securities of a particular series occurs and is continuing, the applicable
Trustee will be under no obligation to exercise any of its rights or powers
under that Indenture at the request, order or direction of any of the Holders of
debt securities of that series, unless the Holders have offered to the
applicable Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with such request or
direction. Subject to the provisions for the indemnification of the applicable
Trustee, the Holders of a majority in principal amount of our outstanding debt
securities of that series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the applicable
Trustee under the applicable Indenture, or exercising any trust or power
conferred on the applicable Trustee with respect to our debt securities of that
series.
MERGER OR CONSOLIDATION
Each Indenture provides that we may not consolidate with or merge or
wind up into any other entity, whether or not we are the surviving corporation,
and that we may not sell, assign, convey, transfer or lease our properties and
assets substantially as an entirety to any Person, unless:
- the corporation formed by the consolidation or into which we are
merged, or the Person which acquires us or which leases our
properties and assets substantially as an entirety, is an entity
organized and existing under the laws of the United States of
America or any State or territory of the United States or the
District of Columbia, and expressly assumes, by supplemental
indenture, the due and punctual payment of the principal, premium
and interest on all the outstanding debt securities and the
performance of all of our covenants under the applicable
Indenture;
- immediately after giving effect to such transaction, no Event of
Default under the applicable Indenture, and no event which after
notice or lapse of time or both would become an Event of Default,
has happened and is continuing; and
- all other conditions specified in the applicable prospectus
supplement are met.
MODIFICATION OR WAIVER
Without prior notice to or the consent of any Holders, we and the
applicable Trustee may modify the applicable Indenture for any of the following
purposes:
- to evidence the succession of another entity to us and the
assumption by that successor of our covenants and obligations
under the applicable Indenture and under our debt securities
issued thereunder in accordance with the terms of the applicable
Indenture;
- to add one or more covenants or other provisions for the benefit
of the Holders of all or any series of debt securities, and if
those covenants are to be for the benefit of less than all series,
stating that those covenants are expressly being included solely
for the benefit of that series, or to surrender any right or power
conferred upon us;
- to add any additional Events of Default for all or any series of
debt securities, and if those Events of Default are to be
applicable to less than all series, stating that those Events of
Default are expressly being included solely to be applicable to
that series;
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- to change or eliminate any provision of the applicable Indenture
or to add any new provision to the applicable Indenture that does
not adversely affect the interests of the Holders;
- to provide security for the debt securities of any series or to
provide that any of our obligations under the debt securities or
the applicable Indenture shall be guaranteed and the terms and
conditions for the release or substitution of the security or
guarantee;
- to supplement any of the provisions of the applicable Indenture to
the extent necessary to permit or facilitate the defeasance and
discharge of any series of debt securities, provided that any such
action will not adversely affect the interests of the Holders of
debt securities of that series or any other series of debt
securities issued under the applicable Indenture in any material
respect;
- to establish the form or terms of debt securities of any series as
permitted by the applicable Indenture;
- to evidence and provide for the acceptance of appointment of a
separate or successor Trustee with respect to one or more series
of debt securities and to add to or change any of the provisions
of the applicable Indenture as is necessary to provide for or
facilitate the administration of the trusts thereunder by more
than one Trustee; or
- to cure any ambiguity, defect or inconsistency; to eliminate any
conflict between the terms of the applicable Indenture and the
debt securities issued thereunder and the Trust Indenture Act or
to modify any other provisions with respect to matters or
questions arising under the applicable Indenture that will not be
inconsistent with any provision of the applicable Indenture;
provided those other provisions do not adversely affect the
interests of the Holders of our outstanding debt securities of any
series created thereunder prior to such modification in any
material respect.
We and the applicable Trustee may, with some exceptions, amend or
modify any Indenture with the consent of the Holders of at least a majority in
aggregate principal amount of the outstanding debt securities of all series
affected by the amendment or modification. However, no amendment or modification
may, without the consent of the Holder of each outstanding debt security
affected thereby:
- change the stated maturity of the principal of or interest on any
debt security (other than pursuant to the terms of the debt
security), or reduce the principal amount, interest or premium
payable or change the currency in which any debt security is
payable, or impair the right to bring suit to enforce any payment;
- reduce the percentages of Holders whose consent is required for
any modification or waiver or reduce the requirements for quorum
and voting under the applicable Indenture;
- modify certain of the provisions in the applicable Indenture
relating to supplemental indentures and waivers of certain
covenants and past defaults; or
- make any change that adversely affects the right to convert any
convertible debt security or decrease the conversion rate or
increase the conversion price of any convertible debt security.
A modification which changes or eliminates any provision of an
Indenture expressly included solely for the benefit of Holders of debt
securities of one or more particular series or modifies the Holders' rights will
be deemed not to affect the rights under the Indenture of the registered holders
of debt securities of any other series.
Each of the Indentures provides that the Holders of not less than a
majority in aggregate principal amount of the then outstanding debt securities
of any series, by notice to the relevant Trustee, may on behalf of the Holders
of the debt securities of that series waive any default or Event of Default and
its consequences under the applicable Indenture, except:
- a continuing default or Event of Default in the payment of
interest on, premium, if any, or the principal of, any such debt
security held by a non-consenting Holder; or
- a default in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the
Holder of each outstanding debt security of each series affected.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The applicable Indenture with respect to the debt securities of any
series may be discharged, subject to the terms and conditions as specified in
the applicable prospectus supplement when either:
- all debt securities, with the exceptions provided for in the
applicable Indenture, of that series have been delivered to the
applicable Trustee for cancellation;
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- all debt securities of that series not theretofore delivered to
the applicable Trustee for cancellation:
- have become due and payable;
- will become due and payable at their Stated Maturity within
one year; or
- are to be called for redemption within one year; or
- certain events or conditions occur as specified in the applicable
prospectus supplement.
In addition, each series of debt securities may provide additional or
different terms or conditions for the discharge or defeasance of some or all of
our obligations as may be specified in the applicable prospectus supplement.
If provision is made for the defeasance of debt securities of a series,
and if the debt securities of that series are registered securities and
denominated and payable only in U.S. dollars, then the provisions of each
Indenture relating to defeasance will be applicable except as otherwise
specified in the applicable prospectus supplement for debt securities of that
series. Defeasance provisions, if any, for debt securities denominated in a
foreign currency or currencies may be specified in the applicable prospectus
supplement.
At our option, either (1) we will be deemed to have been discharged
from our obligations with respect to debt securities of any series, i.e., the
"legal defeasance option," or (2) we will cease to be under any obligation to
comply with certain provisions of the applicable Indenture with respect to
certain covenants, if any, specified in the applicable prospectus supplement
with respect to debt securities of any series, i.e., the "covenant defeasance
option," at any time after the conditions set forth in the applicable prospectus
supplement have been satisfied.
SENIOR DEBT SECURITIES
The senior debt securities will be unsecured senior obligations and
will rank equally with all other senior unsecured and unsubordinated debt. The
senior debt securities will, however, be subordinated in right of payment to all
of our secured indebtedness to the extent of the value of the assets securing
that indebtedness. Except as provided in the Senior Indenture or specified in
any authorizing resolution or supplemental indenture relating to a series of
senior debt securities to be issued, no Senior Indenture will limit the amount
of additional indebtedness that may rank equally with the senior debt securities
or the amount of indebtedness, secured or otherwise, that may be incurred or
preferred shares that may be issued by any of our subsidiaries.
SUBORDINATION
If our assets are distributed upon our dissolution, winding up,
liquidation or reorganization, the payment of the principal of, premium, if any,
and interest on any subordinated debt securities will be subordinated in right
of payment, to the extent provided in the Subordinated Indenture and the
applicable prospectus supplement, to the prior payment in full of all Senior
Indebtedness, including senior debt securities. However, our obligation to pay
principal of, and premium, if any, or interest on the subordinated debt
securities will not otherwise be affected. Unless otherwise indicated in the
applicable prospectus supplement, no payment on account of principal, premium,
if any, sinking fund or interest may be made on the subordinated debt securities
at any time when there is a default in the payment of principal, premium, if
any, sinking fund, interest or certain other obligations on Senior Indebtedness.
In addition, the prospectus supplement for any series of subordinated debt
securities may provide that payments on account of principal, premium, if any,
or interest in respect of the subordinated debt securities may be delayed or not
paid under specified circumstances and periods. If, while we are in default on
Senior Indebtedness, any payment is received by the Trustee under the
Subordinated Indenture or the Holders of any of the subordinated debt securities
before we have paid all Senior Indebtedness in full, the payment or distribution
must be paid over to the Holders of the unpaid Senior Indebtedness or applied to
the repayment of the unpaid Senior Indebtedness. Subject to paying the Senior
Indebtedness in full, the Holders of the subordinated debt securities will be
subrogated to the rights of the holders of the Senior Indebtedness to the extent
that payments are made to the holders of Senior Indebtedness out of the
distributive share of the subordinated debt securities.
Due to the subordination, if our assets are distributed upon
insolvency, some or all of our general creditors may recover more, ratably, than
Holders of subordinated debt securities. The Subordinated Indenture or
applicable supplemental indenture may state that its subordination provisions
will not apply to money and securities held in trust under the satisfaction and
discharge and the legal defeasance provisions of the Subordinated Indenture.
If this prospectus is being delivered in connection with the offering
of a series of subordinated debt securities, the accompanying prospectus
supplement or the information incorporated by reference in it will set forth the
approximate
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amount of Senior Indebtedness outstanding as of a recent date. "Senior
Indebtedness" with respect to any series of subordinated debt securities will
have the meaning specified in the applicable prospectus supplement for that
series.
CONVERSION RIGHTS
The terms and conditions of any debt securities being offered that are
convertible into our common shares will be set forth in a prospectus supplement.
These terms will include the conversion price, the conversion period, provisions
as to whether conversion will be mandatory, or at the option of the holder or
us, the events requiring an adjustment of the conversion price and provisions
affecting conversion in the event that the debt securities are redeemed.
CORPORATE EXISTENCE
Subject to the terms of the applicable Indenture, we will do or cause
to be done all things necessary to preserve and keep in full force and effect
our corporate existence, charter and statutory rights and franchises; provided,
however, that we will not be required to preserve any right or franchise if we
determine that the preservation thereof is no longer desirable in the conduct of
our business.
GOVERNING LAW
The Indentures and our debt securities will be governed by, and
construed in accordance with, the law of the State of New York.
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DESCRIPTION OF CAPITAL STOCK
In this section, we describe the material features and rights of our
capital stock. This summary does not purport to be exhaustive and is qualified
in its entirety by reference to applicable Ohio law and our amended and restated
articles of incorporation and code of regulations, each of which is filed as an
exhibit to the registration statement of which this prospectus is a part.
OUR AUTHORIZED CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 common shares,
without par value, and 195,000 preferred shares, without par value. As of August
13, 2002, there were (1) 29,744,790 common shares issued and outstanding, held
by approximately 300 holders of record; and (2) no preferred shares issued and
outstanding. In addition, the Hagedorn Partnership L.P. and certain other
selling shareholders hold currently exercisable warrants to purchase up to
3,000,000 common shares exercisable in three 1,000,000 share tranches at
exercise prices of $21, $25 and $29 per share, respectively.
COMMON SHARES
Holders of our common shares are entitled to:
- one vote for each share held;
- receive dividends when and if declared by the board of directors
from funds legally available therefor, subject to the rights of
holders of our preferred shares, if any, and to restrictions
contained in our long-term indebtedness; and
- share ratably in our net assets, legally available to our
shareholders in the event of our liquidation, dissolution or
winding up, after provision for distribution to the holders of any
preferred shares.
Holders of our common shares have no preemptive, subscription,
redemption, conversion or cumulative voting rights. Our outstanding common
shares are, and the shares that may be issued upon any conversion will be, when
issued, fully paid and nonassessable.
Our common shares are listed on the New York Stock Exchange under the
symbol "SMG."
PREFERRED SHARES
Our amended and restated articles of incorporation authorize our board
of directors to issue, without any further vote or action by our shareholders,
subject to certain limitations prescribed by Ohio law and the rules and
regulations of the New York Stock Exchange, up to an aggregate of 195,000
preferred shares in one or more classes or series. With respect to any classes
or series, our board of directors may determine the designation and the number
of shares, preferences, limitations and special rights, including dividend
rights, voting rights, conversion rights, redemption rights and liquidation
preferences. Absent a determination by the board of directors to establish
different voting rights, holders of preferred shares are entitled to one vote
per share on matters to be voted upon by the holders of common shares and
preferred shares voting together as a single class. Ohio law also entitles the
holders of preferred shares to exercise a class vote on certain matters.
ANTI-TAKEOVER EFFECTS OF ARTICLES OF INCORPORATION, CODE OF REGULATIONS AND THE
OHIO GENERAL CORPORATION LAW
There are provisions in our amended and restated articles of
incorporation and code of regulations, and the Ohio Revised Code that could
discourage potential takeover attempts and make attempts by shareholders to
change management more difficult. These provisions could adversely affect the
market price of our shares.
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Classified Board of Directors
Our board of directors is divided into three classes, with three-year
staggered terms. This classification system increases the difficulty of
replacing a majority of the directors at any one time and may tend to discourage
a third-party from making a tender offer or otherwise attempting to gain control
of us. It also may maintain the incumbency of our board of directors. Under a
recent revision to the Ohio General Corporation Law, shareholders may not remove
any directors on a classified board of directors without cause.
Limited Shareholder Action by Written Consent
The Ohio General Corporation Law requires that an action by written
consent of the shareholders in lieu of a meeting be unanimous, except that the
code of regulations may be amended by an action by written consent of holders of
shares entitling them to exercise two-thirds of the voting power of the
corporation or, if the articles of incorporation or code of regulations
otherwise provide, such greater or lesser amount, but not less than a majority.
This provision may have the effect of delaying, deferring or preventing a tender
offer or takeover attempt that a shareholder might consider to be in its best
interest.
Control Share Acquisition Act
The Ohio General Corporation Law provides that certain notice and
informational filings, and special shareholder meeting and voting procedures,
must occur prior to any person's acquisition of an issuer's shares that would
entitle the acquirer to exercise or direct the voting power of the issuer in the
election of directors within any of the following ranges:
- one-fifth or more but less than one-third of such voting power;
- one-third or more but less than a majority of such voting power;
- a majority or more of such voting power.
The Control Share Acquisition Act does not apply to a corporation if
its articles of incorporation or code of regulations so provide. We have not
opted out of the application of the Control Share Acquisition Act.
Merger Moratorium Statute
Chapter 1704 of the Ohio Revised Code generally addresses a wide range
of business combinations and other transactions (including mergers,
consolidations, asset sales, loans, disproportionate distributions of property
and disproportionate issuances or transfers of shares or rights to acquire
shares) between an Ohio corporation and an "Interested Shareholder" who, alone
or with others, may exercise or direct the exercise of at least 10% of the
voting power of the corporation. The Merger Moratorium Statute prohibits such
transactions between the corporation and the Interested Shareholder for a period
of three years after a person becomes an Interested Shareholder, unless, prior
to such date, the directors approved either the business combination or other
transaction or approved the acquisition that caused the person to become an
Interested Shareholder.
Following the three-year moratorium period, the corporation may engage
in the covered transaction with the Interested Shareholder only if:
- the transaction receives the approval of the holders of two-thirds
of all the voting shares and the approval of the holders of a
majority of the voting shares held by persons other than an
Interested Shareholder; or
- the remaining shareholders receive an amount for their shares
equal to the higher of the highest amount paid in the past by the
Interested Shareholder for the corporation's shares or the amount
that would be due to the shareholders if the corporation were to
dissolve.
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DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities, preferred shares or
common shares. We may issue warrants independently or together with any other
securities we offer pursuant to a prospectus supplement and the warrants may be
attached to or separate from the securities. We will issue each series of
warrants under a separate warrant agreement that we will enter into with a bank
or trust company, as warrant agent. We will set forth additional terms of the
warrants and the applicable warrant agreements in the applicable prospectus
supplement.
Each warrant will entitle the holder to purchase the principal amount
of debt securities or the number of preferred shares or common shares at the
exercise price set forth in, or calculable as set forth in, the applicable
prospectus supplement. The exercise price may be subject to adjustment upon the
occurrence of certain events, as set forth in the applicable prospectus
supplement. After the close of business on the expiration date of the warrant,
unexercised warrants will become void. The place or places where, and the manner
in which, warrants may be exercised shall be specified in the applicable
prospectus supplement.
The applicable prospectus supplement will describe the following terms,
where applicable, of the warrants in respect of which this prospectus is being
delivered.
- the title of the warrants;
- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the designation, aggregate principal amount and terms of the
securities issuable upon exercise of the warrants and the
procedures and conditions relating to the exercise of the
warrants;
- the designation and terms of any related securities with which the
warrants will be issued, and the number of warrants that will be
issued with each security;
- the date, if any, on and after which the warrants and the related
debt securities will be separately transferable;
- the price at which the securities purchasable upon exercise of the
warrants may be purchased;
- the date on which the right to exercise the warrants will
commence, and the date on which the right will expire;
- the maximum or minimum number of warrants which may be exercised
at any time;
- a discussion of the certain U.S. federal income tax considerations
applicable to the exercise of the warrants; and
- any other terms of the warrants and terms, procedures and
limitations relating to the exercise of the warrants.
Holders may exchange warrant certificates for new warrant certificates
of different denominations, and may exercise warrants at the corporate trust
office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the securities
purchasable upon the exercise and will not be entitled to payments of principal,
premium or interest on the securities purchasable upon the exercise.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contacts representing contacts obligating
holders to purchase from us and obligating us to sell to the holders a specified
number of common shares or preferred shares at a future date or dates. The price
per share of common shares or preferred shares may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, often known as stock purchase units, consisting of a stock purchase
contract and either of the following:
- debt securities of our company, or
- debt obligations of third parties, including U.S. Treasury
securities,
securing the holder's obligations to purchase our common shares or preferred
shares under the stock purchase contracts. The stock purchase contracts may
require us to make periodic payments to the holders of the stock purchase units
or vise versa, and such payments may be unsecured or prefunded on some basis.
The stock purchase contracts may require holders to secure their obligations in
a specified manner and in certain circumstances we may deliver newly issued
prepaid stock purchase contracts, often known as prepaid securities, upon
release to a holder of any collateral securing each holder's obligations under
the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any
stock purchase contracts or stock purchase units and, if applicable, prepaid
securities. The description in the applicable prospectus supplement will not
contain all of the information that you may find useful. For more information,
you should review the stock purchase contracts, the collateral arrangements and
the depositary arrangements, if applicable, relating to such stock purchase
contracts or stock purchase units and, if applicable, the prepaid securities and
the document pursuant to which the prepaid securities will be issued, which will
be filed with the Securities and Exchange Commission promptly after the offering
of such stock purchase contracts or stock purchase units and, if applicable,
prepaid securities.
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SELLING SHAREHOLDERS
The following table sets forth the number of shares beneficially owned
by each of the selling shareholders as of August 13, 2002. Each of the selling
shareholders may be deemed to be an affiliate of Scotts. No estimate can be
given as to the amount of our common shares that will be beneficially owned by
the selling shareholders after completion of an offering because the selling
shareholders may offer all, some or none of the common shares beneficially owned
by them or that may hereafter be acquired by them upon the exercise of stock
options. The shares described in this prospectus may be offered from time to
time by the selling shareholders named below.
NUMBER OF COMMON SHARES
BENEFICIALLY OWNED BEFORE THE OFFERING(1)
------------------------------------------------------
NUMBER OF COMMON
SHARES SHARES TO BE
ACQUIRABLE BENEFICIALLY OWNED
UPON EXERCISE OF MAXIMUM AFTER THE SALE OF THE
COMMON SHARES OPTIONS/ PERCENT NUMBER OF MAXIMUM NUMBER OF PERCENT
BENEFICIALLY WARRANTS OF COMMON SHARES COMMON SHARES OF
NAME OF BENEFICIAL OWNER OWNED WITHIN 60 DAYS TOTAL CLASS(2) TO BE SOLD NUMBER CLASS
------------------------ ----- -------------- ----- -------- ---------- ------ -----
John Kenlon................ 135,000 118,142(3) 253,142 * 6,642 246,500 *
Kenlon family members
c/o John Kenlon........ -- 60,000(3) 60,000 * 60,000 -- --
Hagedorn Partnership, L.P. 9,712,021(4) 3,000,000(4) 12,712,021 38.82% 1,533,358 11,178,663 34.14%
-------------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all common shares reflected in the table. All
fractional common shares have been rounded to the nearest whole common
share.
(2) The "Percent of Class" computation is based upon the sum of (i)
29,744,790 common shares outstanding on August 13, 2002, and (ii) the
number of common shares as to which the named person has the right to
acquire beneficial ownership upon the exercise of options or warrants
exercisable within 60 days after August 13, 2002.
(3) Mr. Kenlon owns warrants to purchase 6,642 common shares. The Hagedorn
Partnership, L.P., a Delaware limited partnership, has the right to vote,
and a right of first refusal with respect to, our securities received by
Mr. Kenlon and his children in connection with the Miracle-Gro merger in
1995 (135,000 common shares presently held by Mr. Kenlon and warrants to
purchase an aggregate of 66,642 common shares, of which warrants to
purchase 60,000 common shares are held by Mr. Kenlon's children). The
Hagedorn Partnership has waived its right of first refusal in connection
with the sale of common shares contemplated by this prospectus. Mr. Kenlon
also holds currently exercisable options to purchase 111,500 common shares.
(4) The Hagedorn Partnership owns 9,577,021 common shares and warrants to
purchase 2,933,358 common shares, and has the right to vote, and a right of
first refusal with respect to, Scotts' securities received by Mr. Kenlon
and his children. See note (3) above. Mr. James Hagedorn, Ms. Katherine
Hagedorn Littlefield, Mr. Paul Hagedorn, Mr. Peter Hagedorn, Mr. Robert
Hagedorn and Ms. Susan Hagedorn are siblings, general partners of the
Hagedorn Partnership and former shareholders of Stern's Miracle-Gro
Products, Inc. The general partners share voting and dispositive power with
respect to the securities held by the Hagedorn Partnership and those
subject to the right to vote and right of first refusal in favor of the
Hagedorn Partnership. Mr. James Hagedorn and Ms. Katherine Hagedorn
Littlefield are directors of Scotts, and Mr. James Hagedorn is our
President and Chief Executive Officer. Community Funds, Inc., a New York
not-for-profit corporation, is a limited partner of the Hagedorn
Partnership. Does not include 27,700 common shares held by Mr. James
Hagedorn directly and 9,215 common share units that are allocated to his
account and held by the trustee under our Retirement Savings Plan. Also
does not include 2,232 common share equivalents that are attributable to
Mr. James Hagedorn's account relating to common share units under The
Scotts Company Executive Retirement Plan and currently exercisable options
to purchase 320,000 common shares. Also excludes currently exercisable
options to purchase 11,500 common shares held by Ms. Littlefield.
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PLAN OF DISTRIBUTION
The debt securities, preferred shares, common shares, warrants, stock
purchase contracts and stock purchase units may be sold:
- to or through underwriting syndicates represented by managing
underwriters;
- through one or more underwriters without a syndicate for them to
offer and sell to the public;
- through dealers or agents; or
- to investors directly in negotiated sales or in competitively bid
transactions.
The prospectus supplement for each series of securities we or the
selling shareholders sell will describe that offering, including:
- the name or names of any underwriters;
- the purchase price and the proceeds to us or the selling
shareholders from that sale;
- any underwriting discounts and other items constituting
underwriters' compensation;
- any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
- any securities exchanges on which the securities may be listed.
UNDERWRITERS
If underwriters are used in the sale, we and the selling shareholders,
as applicable, will execute an underwriting agreement with those underwriters
relating to the securities that we or the selling shareholders will offer.
Unless otherwise set forth in the prospectus supplement, the obligations of the
underwriters to purchase these securities will be subject to conditions. The
underwriters will be obligated to purchase all of the offered securities if any
are purchased.
The securities subject to the underwriting agreement will be acquired
by the underwriters for their own account and may be resold by them from time to
time in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may be deemed to have received compensation from us or the selling
shareholders, as the case may be, in the form of underwriting discounts or
commissions and may also receive commissions from the purchasers of the offered
securities for whom they act as agent. Underwriters may sell the offered
securities to or through dealers. These dealers may receive compensation in the
form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
We also may sell the securities in connection with a remarketing upon
their purchase, in connection with a redemption or repayment, by a remarketing
firm acting as principal for its own account or as our agent. Remarketing firms
may be deemed to be underwriters in connection with the securities that they
remarket.
We may authorize underwriters to solicit offers by institutions to
purchase the securities subject to the underwriting agreement from us, at the
public offering price stated in the prospectus supplement under delayed delivery
contracts providing for payment and delivery on a specified date in the future.
If we sell securities under delayed delivery contracts, the prospectus
supplement will state that as well as the conditions to which these delayed
delivery contracts will be subject and the commissions payable for that
solicitation.
AGENTS
We and the selling shareholders may also sell any of the securities
through agents designated by us and/or the selling shareholders, as the case may
be, from time to time. We and/or the selling shareholders, as the case may be,
will name any agent involved in the offer or sale of the securities and will
list commissions payable by us and/or the selling shareholders, as the case may
be, to these agents in the applicable prospectus supplement. These agents will
be acting on a best efforts basis to solicit purchases for the period of their
appointment, unless we and/or the selling shareholders, as the case may be,
state otherwise in the prospectus supplement.
20
DIRECT SALES
We and the selling shareholders may sell any of the securities directly
to purchasers. In this case, we and/or the selling shareholders, as the case may
be, will not engage underwriters or agents in the offer and sale of these
securities.
INDEMNIFICATION
We and the selling shareholders may indemnify underwriters, dealers or
agents who participate in the distribution of securities against certain
liabilities, including liabilities under the Securities Act of 1933, and agree
to contribute to payments which these underwriters, dealers or agents may be
required to make.
NO ASSURANCE OF LIQUIDITY
The securities offered hereby may be a new issue of securities with no
established trading market. Any underwriters that purchase securities from us
may make a market in these securities. The underwriters will not be obligated,
however, to make a market and may discontinue market-making at any time without
notice to holders of the securities. We cannot assure you that there will be
liquidity in the trading market for any securities of any series.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
us by Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio.
EXPERTS
The financial statements of The Scotts Company incorporated into this
prospectus by reference to the Current Report on Form 8-K dated June 24, 2002,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INCORPORATION BY REFERENCE
We are "incorporating" certain documents into this prospectus by
reference, which means that we are disclosing important information to you by
referring to documents that contain such information. The information
incorporated by reference is an important part of this prospectus, and
information we file later with the SEC will automatically update and supersede
the information in this prospectus. We incorporate by reference the documents
listed below that we have previously filed with the SEC:
- our Annual Report on Form 10-K for the fiscal year ended September
30, 2001 (including information specifically incorporated by
reference into our Form 10-K from our 2001 Annual Report to
Shareholders and proxy statement for our 2002 annual meeting of
shareholders);
- our Quarterly Report on Form 10-Q/A dated June 5, 2002, for the
fiscal quarter ended December 29, 2001;
- our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 2002;
- our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 29, 2002;
- our Current Report on Form 8-K filed with the SEC on January 30,
2002;
- our Current Report on Form 8-K filed with the SEC on June 24,
2002, which amends certain items in our Form 10-K for the fiscal
year ended September 30, 2001, to reflect retroactively the
disclosures and presentations required by accounting
pronouncements initially adopted by Scotts in our fiscal year
beginning October 1, 2001; and
- our proxy statement for our 2002 annual meeting of shareholders,
as filed with the SEC on December 20, 2001.
Later information that we file with the SEC will update and/or supersede this
information. We are also incorporating by reference all documents that we file
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this prospectus and prior to the
termination of the offering of the debt securities, preferred shares, common
shares, warrants, stock purchase contracts and/or stock purchase units.
Information furnished under Item 9 of any of our Current Reports on Form 8-K is
not incorporated by reference in this prospectus and registration statement. We
furnished information under Item 9 of our Current Report on Form 8-K to the SEC
on August 9, 2002.
21
WHERE YOU CAN FIND MORE INFORMATION
We are required to comply with the reporting requirements of the
Securities Exchange Act of 1934 and must file annual, quarterly and other
reports with the SEC. We are also subject to the proxy solicitation requirements
of the Securities Exchange Act of 1934 and, accordingly, will furnish audited
financial statements to our shareholders in connection with our annual meetings
of shareholders.
Any statements made in this prospectus concerning the contents of any
contract, agreement or other document constitute summaries of the material terms
thereof and are not necessarily complete summaries of all of the terms. Some of
these documents have been filed as exhibits to our periodic filings with the
SEC. Our periodic reports and other information filed with the SEC may be
inspected without charge at the Public Reference Section of the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain
copies of filed documents by mail from the public reference section of the SEC
at Room 1024, 450 Fifth Avenue, N.W., Washington, D.C. 20549 at prescribed
rates. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Filed documents are also available to the public on the
SEC's website at http://www.sec.gov. In addition, we post our filed documents on
our website at http://www.scotts.com, and they are available to be downloaded or
printed free of charge. The information on our website is not part of this
prospectus or any prospectus supplement.
Copies of documents incorporated in this prospectus by reference or
other documents referred to in this prospectus may be obtained upon oral or
written request without charge by contacting The Scotts Company, 14111
Scottslawn Road, Marysville, Ohio 43041, Attention: Treasurer, (937) 644-0011.
22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following table sets forth the estimated (except for the Securities
and Exchange Commission registration fees) fees and expenses payable by the
Company in connection with the sale and distribution of the securities
registered hereby other than underwriting discounts and commissions:
Securities and Exchange Commission registration fees $ 39,269
Printing and engraving costs 50,000
Legal fees and expenses 125,000
Accountants' fees and expenses 25,000
Blue sky qualification fees and expenses 10,000
Transfer agent fees 10,000
Trustee fees and expenses 25,000
Miscellaneous 15,731
--------
Total $300,000
========
The selling shareholders will not bear any costs, expenses or fees in connection
with the sale and distribution of the securities registered hereby other than
any applicable discounts or commissions.
* Except for the Securities and Exchange Commission registration fee, all fees
and expenses are estimated. All of the above fees and expenses will be borne by
the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Division (E) of Section 1701.13 of the Ohio Revised Code governs
indemnification by a corporation and provides as follows:
(E)(1) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, other than
an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if
he had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, he had reasonable cause
to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees, actually
and reasonably incurred by him in connection with the
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defense or settlement of such action or suit, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall
be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such
person is adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation unless, and
only to the extent that, the court of common pleas or the
court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such
expenses as the court of common pleas or such other court
shall deem proper;
(b) Any action or suit in which the only liability
asserted against a director is pursuant to section 1701.95 of
the Revised Code.
(3) To the extent that a director, trustee, officer, employee,
member, manager, or agent has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the action, suit, or proceeding.
(4) Any indemnification under division (E)(1) or (2) of this
section, unless ordered by a court, shall be made by the corporation
only as authorized in the specific case, upon a determination that
indemnification of the director, trustee, officer, employee, member,
manager, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in division (E)(1) or (2) of
this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of
directors of the indemnifying corporation who were not and are
not parties to or threatened with the action, suit, or
proceeding referred to in division (E)(1) or (2) of this
section;
(b) If the quorum described in division (E)(4)(a) of
this section is not obtainable or if a majority vote of a
quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney,
or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation
or any person to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in
which such action, suit, or proceeding referred to in division
(E)(1) or (2) of this section was brought.
Any determination made by the disinterested directors under
division (E)(4)(a) or by independent legal counsel under division
(E)(4)(b) of this section shall be promptly communicated to the person
who threatened or brought the action or suit by or in the right of the
corporation under division (E)(2) of this section, and, within ten days
after receipt of such notification, such person shall have the right to
petition the court of common pleas or the court in which such action or
suit was brought to review the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that
is the subject of an action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, the articles or the regulations
of a corporation state, by specific reference to this division, that
the provisions of this division do not apply to the corporation and
unless the only liability asserted against a director in an action,
suit, or proceeding referred to in division (E)(1) or (2) of this
section is pursuant to section 1701.95 of the Revised Code, expenses,
including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by
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the corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an
undertaking by or on behalf of the director in which he agrees to both
of the following:
(i) Repay such amount if it is proved by
clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act
involved an act or omission undertaken with
deliberate intent to cause injury to the corporation
or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the
corporation concerning the action, suit, or
proceeding.
(b) Expenses, including attorney's fees, incurred by
a director, trustee, officer, employee, member, manager, or
agent in defending any action, suit, or proceeding referred to
in division (E)(1) or (2) of this section, may be paid by the
corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, as authorized
by the directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, trustee, officer,
employee, member, manager, or agent to repay such amount, if
it ultimately is determined that he is not entitled to be
indemnified by the corporation.
(6) The indemnification authorized by this section shall not
be exclusive of, and shall be in addition to, any other rights granted
to those seeking indemnification under the articles, the regulations,
any agreement, a vote of shareholders or disinterested directors, or
otherwise, both as to action in their official capacities and as to
action in another capacity while holding their offices or positions,
and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, member, manager, or agent and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
(7) A corporation may purchase and maintain insurance or
furnish similar protection, including, but not limited to, trust funds,
letters of credit, or self-insurance, on behalf of or for any person
who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has
a financial interest.
(8) The authority of a corporation to indemnify persons
pursuant to division (E)(1) or (2) of this section does not limit the
payment of expenses as they are incurred, indemnification, insurance,
or other protection that may be provided pursuant to divisions (E)(5),
(6), and (7) of this section. Divisions (E)(1) and (2) of this section
do not create any obligation to repay or return payments made by the
corporation pursuant to division (E)(5), (6), or (7).
(9) As used in division (E) of this section, "corporation"
includes all constituent entities in a consolidation or merger and the
new or surviving corporation, so that any person who is or was a
director, officer, employee, trustee, member, manager, or agent of such
a constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership,
joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving
corporation as he would if he had served the new or surviving
corporation in the same capacity.
II-3
Section 5.01 of the Registrant's Code of Regulations governs
indemnification by Registrant and provides as follows:
SECTION 5.01. Mandatory Indemnification. The corporation shall
indemnify any officer or director of the corporation who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any
action threatened or instituted by or in the right of the corporation),
by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, member, manager
or agent of another corporation (domestic or foreign, nonprofit or for
profit), limited liability company, partnership, joint venture, trust
or other enterprise, against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he
had no reasonable cause to believe his conduct was unlawful. A person
claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for
indemnification, to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal matter, to have had
no reasonable cause to believe his conduct was unlawful, and the
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
In addition, the Registrant currently provides insurance coverage to
its directors and officers against certain liabilities which might be incurred
by them in such capacity.
II-4
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
Exhibit
No. Description
------- -----------
1.1* Form of Underwriting Agreement related to Debt Securities
1.2* Form of Underwriting Agreement relating to securities other than Debt
Securities
3.1 Certificate of Amendment by Shareholders to Articles of The Scotts
Company reflecting adoption of amendment to Article FOURTH of
Amended Articles of Incorporation by the shareholders of The Scotts
Company on January 18, 2001, as filed with Ohio Secretary of State
on January 18, 2001 (filed as Exhibit 3(a)(1) to Scotts' Form 10-Q
for the fiscal quarter ended December 30, 2000 and incorporated by
reference)
3.2 Certificate of Amendment by Directors of The Scotts Company reflecting
adoption of Restated Articles of Incorporation by the Board of
Directors of The Scotts Company, as filed with Ohio Secretary of
State on January 29, 2001 (filed as Exhibit 3(a)(2) to Scotts' Form
10-Q for the fiscal quarter ended December 30, 2000 and incorporated
by reference)
3.3 Certificate regarding Adoption of Amendments to the Code of Regulations
of The Scotts Company by the Shareholders on January 18, 2001 (filed
as Exhibit 3(b)(1) to Scotts' Form 10-Q for the fiscal quarter ended
December 30, 2000 and incorporated by reference)
3.4 Code of Regulations of The Scotts Company (reflecting amendments
through January 18, 2001) [for SEC reporting compliance purposes
only] (filed as Exhibit 3(b)(2) to Scotts' Form 10-Q for the fiscal
quarter ended December 30, 2000 and incorporated by reference)
4.1 Form of Indenture for Senior Debt Securities
4.2 Form of Indenture for Subordinated Debt Securities
4.3 Form of share certificate (filed as Exhibit 1.1 to Scotts' Registration
Statement on Form 8-A File No. 001-11593 and incorporated by
reference)
4.4* Form of Preferred Share certificate
4.5* Form of Warrant Agreement
4.6* Form of Purchase Contract Agreement relating to stock purchase
contracts and stock purchase units
4.7* Form of Pledge Agreement for stock purchase contracts and stock
purchase units
5.1 Opinion of Vorys, Sater, Seymour and Pease LLP
12.1 Statements re. Computation of Earnings
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
23.2 Consent of Vorys, Sater, Seymour and Pease LLP (included in Exhibit
5.1)
24.1 Powers of Attorney (included on the signature pages)
25.1** Statement of Eligibility of Trustee on Form T-1 of Trustee under the
Senior Indenture
25.2** Statement of Eligibility of Trustee on Form T-1 of Trustee under the
Subordinated Indenture
II-5
---------
* To be filed as an exhibit to a Current Report on Form 8-K.
** To be filed as an exhibit to a Current Report on Form 8-K or by
post-effective amendment in connection with the offer of our debt
securities.
(b) FINANCIAL STATEMENT SCHEDULES
None
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant hereby undertakes 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 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the bona fide offering thereof.
II-6
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted 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 a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
(5) The undersigned hereby undertakes that:
(a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement 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.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Marysville, State of Ohio, on August 15, 2002.
THE SCOTTS COMPANY
By: /s/ JAMES HAGEDORN
------------------------------------------
JAMES HAGEDORN
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of The Scotts Company (the
"Company"), and each of us, do hereby constitute and appoint Patrick J. Norton
and David M. Aronowitz, or either of them, our true and lawful attorneys and
agents, each with full power of substitution, to do any and all acts and things
in our name and on our behalf in our capacities as directors and officers of the
Company and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys or agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the filing of this
Registration Statement on Form S-3, including specifically but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below for the Company, any and all amendments (including
post-effective amendments) to such Registration Statement; and we do hereby
ratify and confirm all that said attorneys and agents, or their substitute or
substitutes, or any of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ CHARLES M. BERGER Chairman of the Board August 15, 2002
------------------------------------
CHARLES M. BERGER
/s/ JAMES HAGEDORN President, Chief Executive Officer August 15, 2002
------------------------------------ and Director (Principal Executive Officer)
JAMES HAGEDORN
/s/ PATRICK J. NORTON Executive Vice President, CFO and August 15, 2002
------------------------------------ Director (Principal Financial Officer)
PATRICK J. NORTON
/s/ CHRISTOPHER L. NAGEL Senior Vice President of Finance, August 15, 2002
------------------------------------ Corporate North America (Principal
CHRISTOPHER L. NAGEL Accounting Officer)
Signature Title Date
--------- ----- ----
/s/ ARNOLD W. DONALD Director August 15, 2002
------------------------------------
ARNOLD W. DONALD
/s/ JOSEPH P. FLANNERY Director August 15, 2002
------------------------------------
JOSEPH P. FLANNERY
/s/ ALBERT E. HARRIS Director August 15, 2002
------------------------------------
ALBERT E. HARRIS
/s/ JOHN KENLON Director August 15, 2002
------------------------------------
JOHN KENLON
/s/ KATHERINE HAGEDORN LITTLEFIELD Director August 15, 2002
------------------------------------
KATHERINE HAGEDORN LITTLEFIELD
/s/ KAREN G. MILLS Director August 15, 2002
------------------------------------
KAREN G. MILLS
/s/ JOHN M. SULLIVAN Director August 15, 2002
------------------------------------
JOHN M. SULLIVAN
/s/ L. JACK VAN FOSSEN Director August 15, 2002
------------------------------------
L. JACK VAN FOSSEN
/s/ JOHN WALKER, PH.D. Director August 15, 2002
------------------------------------
JOHN WALKER, PH.D.
INDEX OF EXHIBITS
Exhibit
No. Description
------- -----------
1.1* Form of Underwriting Agreement related to Debt Securities
1.2* Form of Underwriting Agreement relating to securities other than Debt
Securities
3.1 Certificate of Amendment by Shareholders to Articles of The Scotts
Company reflecting adoption of amendment to Article FOURTH of
Amended Articles of Incorporation by the shareholders of The Scotts
Company on January 18, 2001, as filed with Ohio Secretary of State
on January 18, 2001 (filed as Exhibit 3(a)(1) to Scotts' Form 10-Q
for the fiscal quarter ended December 30, 2000 and incorporated by
reference)
3.2 Certificate of Amendment by Directors of The Scotts Company reflecting
adoption of Restated Articles of Incorporation by the Board of
Directors of The Scotts Company, as filed with Ohio Secretary of
State on January 29, 2001 (filed as Exhibit 3(a)(2) to Scotts' Form
10-Q for the fiscal quarter ended December 30, 2000 and incorporated
by reference)
3.3 Certificate regarding Adoption of Amendments to the Code of Regulations
of The Scotts Company by the Shareholders on January 18, 2001 (filed
as Exhibit 3(b)(1) to Scotts' Form 10-Q for the fiscal quarter ended
December 30, 2000 and incorporated by reference)
3.4 Code of Regulations of The Scotts Company (reflecting amendments
through January 18, 2001) [for SEC reporting compliance purposes
only] (filed as Exhibit 3(b)(2) to Scotts' Form 10-Q for the fiscal
quarter ended December 30, 2000 and incorporated by reference)
4.1 Form of Indenture for Senior Debt Securities
4.2 Form of Indenture for Subordinated Debt Securities
4.3 Form of share certificate (filed as Exhibit 1.1 to Scotts' Registration
Statement on Form 8-A File No. 001-11953 and incorporated by
reference)
4.4* Form of Preferred Share certificate
4.5* Form of Warrant Agreement
4.6* Form of Purchase Contract Agreement relating to stock purchase
contracts and stock purchase units
4.7* Form of Pledge Agreement for stock purchase contracts and stock
purchase units
5.1 Opinion of Vorys, Sater, Seymour and Pease LLP
12.1 Statements re. Computation of Earnings
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
23.2 Consent of Vorys, Sater, Seymour and Pease LLP (included in Exhibit
5.1)
24.1 Powers of Attorney (included on the signature pages)
25.1** Statement of Eligibility of Trustee on Form T-1 of Trustee under the
Senior Indenture
25.2** Statement of Eligibility of Trustee on Form T-1 of Trustee under the
Subordinated Indenture
----------
* To be filed as an exhibit to a Current Report on Form 8-K.
** To be filed as an exhibit to a Current Report on Form 8-K or by
post-effective amendment in connection with the offer of our debt
securities.