EXHIBIT 4.2
FIRST AMENDMENT TO AND SUPPLEMENTAL INDENTURE
THIS FIRST AMENDMENT TO AND SUPPLEMENTAL INDENTURE ("First
Amendment") is made this 3rd day of January, 2001, by and among Chattem, Inc., a
Tennessee corporation (the "Company"), Signal Investment & Management Co., a
Delaware corporation (the "Guarantor") and SouthTrust Bank (the "Trustee"),
under the following circumstances:
A. The Company has issued its 8 7/8% Senior Subordinated Notes
due 2008 in the original aggregate principal amount of $275,000,000 (herein the
"Notes").
B. The Notes are secured by the Indenture dated March 24, 1998
among the Company, the Guarantor and the Trustee ("Indenture").
C. The Company and the Guarantor, having received the written
approval of the holders of at least a majority in interest in principal amount
of the Notes pursuant to Section 9.02 of the Indenture, and the Trustee desire
to amend the Indenture as provided hereinafter.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained in this First Amendment, the parties
agree:
1. The definition of "Fixed Charge Coverage Ratio" in Section
1.01 of the Indenture shall be deleted in its entirety and in lieu thereof shall
be inserted the following:
"Fixed Charge Coverage Ratio" means with respect to
any Person for any period, the ratio of the
Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed
Charges of such Person and its Restricted
Subsidiaries for such period. In the event that the
referent Person or any of its restricted Subsidiaries
incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma
effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had
occurred at the beginning of the applicable
four-quarter reference period. In addition, for
purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company
or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any
related financing transactions, during the
four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first
day of the four-quarter reference period and
Consolidated Cash Flow for such reference period
shall be calculated without giving effect to clause
(iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated
Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date,
shall be excluded, and (iii) the Consolidated Cash
Flow attributable only to the Company's DEXATRIM-Registered
Trademark- products containing phenylpropanolamine shall
be excluded, and (iv) the Fixed Charges attributable to
discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of
prior to the Calculation
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Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed
Charges shall not be obligations of the referent
Person or any of its Restricted Subsidiaries
following the Calculation Date.
2. Section 4.07 of the Indenture shall be deleted in its
entirety and in lieu thereof shall be inserted the following:
Section 4.07. RESTRICTED PAYMENTS. The Company
shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on
account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries)
or to the direct or indirect holders of the Company's or any
of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of
the Company or dividends or other distributions payable to the
Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger
or consolidation involving the Company) any Equity Interests
of the Company or any direct or indirect parent of the Company
or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire
or retire for value any Indebtedness that is pari passu with
or subordinated to the Notes (other than Notes or the 1994
Notes (as hereinafter defined)
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(including pursuant to the 1994 Notes Offer (as hereinafter
defined)), except a payment of interest or principal at
Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after
giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have
occurred and be continuing or would occur as a
consequence thereof;
(b) the Company would, at the time of such
Restricted Payment and after giving pro forma effect
thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in Section 4.09;
and
(c) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments
made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii) and (iv) of
the next succeeding paragraph), is less than the sum,
without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one
accounting period) from the beginning of the first
fiscal quarter commencing after the date of this
Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial
statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income
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for such period is a deficit, less 100% of such deficit)
plus (ii) 100% of the aggregate net cash proceeds
received by the Company since the date of this Indenture
as a contribution to its common equity capital or from
the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale
of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of
the Company), plus (iii) to the extent that any
Restricted Investment that was made after the date of
this Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment plus (iv) $7.5
million.
The foregoing provisions shall not prohibit
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement,
defeasance or other acquisition of any pari passu or
subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, other Equity Interests of the
Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (iii)
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the defeasance, redemption, repurchase or other acquisition of
pari passu or subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing
Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; and (v) the repurchase,
redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of
its Restricted Subsidiaries') management pursuant to any
management equity subscription agreement or stock option
agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $500,000 in any twelve-month period and no
Default or Event of Default shall have occurred and be
continuing immediately after such transaction.
The Board of Directors may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if such
designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company
and its Restricted Subsidiaries (except to the extent repaid
in cash) in the Subsidiary so designated shall be deemed to be
Restricted Payments at the time of such designation and shall
reduce the amount available for Restricted Payments under the
first paragraph of this covenant. All such outstanding
Investments shall be deemed to constitute Investments in an
amount equal to the fair market value of such Investments at
the time of such designation. Such designation shall only be
permitted if such Restricted Payment would be permitted at
such time and if such Restricted Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary.
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The amount of all Restricted Payments (other
than cash) shall be the fair market value on the date of the
Restricted Payment of the asset(s) or securities proposed to
be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any non-cash Restricted
Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment
banking firm of national standing if such fair market value
exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee
an Officers' Certificate stating that such Restricted Payment
is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed,
together with a copy of any fairness opinion required by this
Indenture.
For purposes of this Indenture, the "1994
Notes" means the Company's outstanding 12 3/4% Senior
Subordinated Notes due 2004 which were originally issued in
1994, and the "1994 Notes Offer" means the Company's offer to
purchase for cash $7.9 million of the 1994 Notes, pursuant to
the Offer to Purchase and Consent Solicitation Statement dated
December 11, 2000, as such offer to purchase may be amended by
the Company.
3. Section 4.10 of the Indenture shall be deleted in its
entirety and in lieu thereof shall be inserted the following:
Section 4.10 ASSET SALES. The Company shall
not, and shall not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives
consideration at
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the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of
the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Restricted Subsidiary
is in the form of cash or Qualified Proceeds, provided, that
the aggregate fair market value of Qualified Proceeds which
may be received in consideration for Asset Sales pursuant to
this clause (ii) shall not exceed $5.0 million since the Issue
Date; provided, further that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's
most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any
guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted
Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes
of this provision.
Within 365 days after the receipt of any Net
Proceeds from an Asset Sale, the Company may apply such Net
Proceeds, at its option, (a) to permanently repay (and reduce
the commitments under) Senior Indebtedness of the Company or a
Guarantor or (b) to the acquisition of a Permitted Business,
or a majority of the Voting Stock of, a Permitted Business,
the making of a capital
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expenditure or the acquisition of other long-term assets that
are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited
by this Indenture. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of
this paragraph, other than Available BAN Net Proceeds (as
hereinafter defined), shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall be required to make an
offer to all Holders of Notes and all holders of other
Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets (an "Asset Sale Offer")
to purchase the maximum principal amount of Notes and such
other Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date
of purchase, in accordance with the procedures set forth in
this Indenture and such other Indebtedness. To the extent that
any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any
purpose not otherwise prohibited by this Indenture. If the
aggregate principal amount of Notes and such other Indebtedness
tendered into such Asset Sale Offer surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at
zero.
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For purposes of this Indenture, "BAN Sale"
means the Company's sale of the BAN line of deodorant and
anti-perspirant products to The Xxxxxx Xxxxxxx Company, a
wholly-owned subsidiary of Kao Corporation, on September 15,
2000 for a purchase price of $160 million cash plus the right
to receive up to an additional $6.5 million in future payments
based upon levels of BAN sales in 2001 and 2002, and
"Available BAN Net Proceeds" means the Net Proceeds from the
BAN Sale remaining after the repayment of the Senior Credit
Facility.
4. The amendments to the Indenture set forth in Sections 1, 2
and 3 above shall not become operative unless and until the Notes are accepted
for purchase by the Company pursuant to the Offer to Purchase and Consent
Solicitation Statement dated December 11, 2000, as amended.
5. Except as expressly set forth herein, this First Amendment
shall not supersede or otherwise modify the terms and conditions of the
Indenture.
[Signature Page Follows]
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IN WITNESS WHEREOF, this First Amendment to and Supplemental
Indenture has been executed by a duly authorized officer of the Company, the
Guarantor and the Trustee.
Dated as of January 3, 2001.
ATTEST: CHATTEM, INC.
By: By:
--------------------------- ---------------------------------
Secretary A. Xxxxxxxxx Xxxxxx, XX
President
Dated as of January 3, 2001.
ATTEST: SIGNAL INVESTMENT & MANAGEMENT
CO., a Guarantor
By: By:
--------------------------- ---------------------------------
Secretary A. Xxxxxxxxx Xxxxxx, XX
President
Dated as of January 3, 2001.
ATTEST: SOUTHTRUST BANK
By: By:
--------------------------- ---------------------------------
Name: Xxxx Xxxxx
Title: Vice President
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