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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 1-11793
THE DIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 51-0374887
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15501 NORTH DIAL BOULEVARD 85260-1619
SCOTTSDALE, ARIZONA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 754-3425
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all Exchange
Act reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 24, 1999, 102,683,910 shares of the Company's Common Stock,
$.01 par value, were outstanding and the aggregate market value of the Common
Stock (based on its closing price per share on such date) held by non affiliates
was approximately $3.4 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement relating to the 1999 Annual
Meeting of Stockholders to be held on June 3, 1999, have been incorporated by
reference into Part III, Items 10, 11 and 12 of this Form 10-K.
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TABLE OF CONTENTS
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PART I
Item 1 Business.................................................... 1
Item 2 Properties.................................................. 8
Item 3 Legal Proceedings........................................... 8
Item 4 Submission of Matters to a Vote of Security Holders......... 8
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 9
Item 6 Selected Financial and Other Data........................... 9
Item 7 Management's Discussion and Analysis of Results of
Operations
and Financial Condition..................................... 11
Item 7A Quantitative and Qualitative Disclosure About Market Risk... 20
Item 8 Financial Statements and Supplementary Data................. 21
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures................................... 44
PART III
Item 10 Directors and Executive Officers of the Registrant.......... 45
Item 11 Executive Compensation...................................... 47
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 47
Item 13 Certain Relationships and Related Transactions.............. 47
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 48
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PART I
Prior to August 15, 1996, the business of the Company was operated as the
consumer products business (the "Consumer Products Business") of Viad Corp (then
known as The Dial Corp) ("Former Parent"). On August 15, 1996, Former Parent
distributed to its stockholders all of the Company's then outstanding common
stock (the "Spin-off") causing the Company to become a separate publicly traded
company. Unless otherwise indicated, (i) all references in this Annual Report on
Form 10-K to the "Company" or "Dial" for periods prior to the Spin-off refer to
the Consumer Products Business of Former Parent and for periods following the
Spin-off refer to the Company and its consolidated subsidiaries, (ii) all
financial information contained in this Form 10-K has been prepared as if the
Company had always been a separate operating company, (iii) the industry data
contained herein are derived from publicly available industry trade journals and
reports, including, with respect to market rank and market share, reports
published by Information Resources, Inc., and other publicly available sources
which the Company has not independently verified but which the Company believes
to be reliable, and (iv) references to years and periods are to fiscal years and
periods and, with respect to comparative industry data, years are to calendar
years. Unless otherwise noted, all market share data as of any particular date
are as of the 52 weeks then ended and are based upon sales in the U.S. market,
which with respect to soap products are measured by ounces sold, with respect to
detergent products are measured by standard cases sold and with respect to air
fresheners and canned meats are measured by units sold.
This Annual Report on Form 10-K contains 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. When used in
this Form 10-K, the words "anticipates," "intends," "plans," "believes,"
"expects," "estimates" and similar expressions are intended to identify
forward-looking statements. Such statements, including, but not limited to, the
Company's potential product introductions, capital spending plans, and year 2000
remediation efforts, are based upon management's beliefs, as well as on
assumptions made by and information currently available to management, and
involve various risks and uncertainties, certain of which are beyond the
Company's control. The Company's actual results could differ materially from
those expressed in any forward-looking statements made by or on behalf of the
Company. Factors that could cause actual results to differ include, but are not
limited to, those factors identified in "Item 7. Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Factors That May
Affect Future Results and Financial Condition" in this Form 10-K.
ITEM 1. BUSINESS
GENERAL
Dial is a consumer products company with net sales of $1.5 billion and
operating income of $184 million in 1998. The Company markets its products
primarily under such well-known household brand names as DIAL(R) soaps, PUREX(R)
detergents, RENUZIT(R) air fresheners and ARMOUR(R) canned meats. Dial believes
that its brand equities have contributed to its products achieving leading
market positions.
For organizational, marketing and financial reporting purposes, the Company
has organized its business into three segments: (i) Domestic Branded, (ii)
International and (iii) Commercial Markets and Other.
DOMESTIC BRANDED
The Company's Domestic Branded business segment is comprised of five
franchises: Dial, Purex, Renuzit, Armour and Specialty Personal Care
(FREEMAN(R), SARAH MICHAELS(R) and NATURE'S ACCENTS(R) ). Within its Domestic
Branded business segment, the Company has chosen to focus its marketing and
product development efforts on the Dial, Purex, Renuzit, Armour, Freeman, Sarah
Michaels and Nature's Accents brands. The Company's Domestic Branded business
segment accounted for 85%, 84% and 79% of the Company's net sales in 1998, 1997
and 1996, respectively. A discussion of the Company's Domestic Branded
franchises follows.
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DIAL
The Company's Dial franchise includes Dial and LIQUID DIAL(R) soaps and
body washes, as well as TONE(R), PURE & NATURAL(R) and BORAXO(R) soaps and
BRECK(R) hair care products. Net sales for the Dial franchise for each of the
years 1998, 1997 and 1996 were 30% of the Domestic Branded business segment. At
December 31, 1998, the Company's Dial and other soap products commanded an
approximate 18% market share, measured in ounces sold, in the $2.1 billion soap
category (as measured by Information Resources, Inc.). This strong market share
position is largely driven by the Company's Dial branded soap products. During
the past 10 years, the market share of Dial branded products has increased from
12% in 1987 to 16% as of December 31, 1998. In 1998, the Company introduced Dial
Antibacterial Hand Sanitizer, an alcohol-based gel that eliminates more than 99%
of germs when applied. As of December 31, 1998, based on ounces sold, Dial was
America's leading bar soap overall, the leading antibacterial bar soap, the
second leading liquid soap overall and the second leading antibacterial liquid
soap.
PUREX
The Company's Purex franchise includes Purex detergents, bleach and fabric
softeners, as well as TREND(R) and DUTCH(R) detergents, BORATEEM(R) bleach,
VANO(R) and STA-FLO(R) starches, 20 MULE TEAM(R) borax, FELS NAPTHA(R) laundry
soap and LA FRANCE(R) brightener. Net sales for the Purex franchise for 1998,
1997 and 1996 were 32%, 34% and 36%, respectively, of the Domestic Branded
business segment. As of December 31, 1998, Purex held the number two market
share position, measured by units sold, in the $4.5 billion domestic laundry
detergent market (as measured by Information Resources, Inc.). From 1986 to
1998, the Company has increased Purex annual sales from $160 million to $417
million. In 1998, the Company launched PUREX MOUNTAIN BREEZE(TM), the first
value-priced detergent to offer a full line fragrance alternative in both dry
and liquid forms.
RENUZIT
The products in the Company's Renuzit franchise consist of a variety of air
fresheners, candles and accessories that all bear the Renuzit name. The Company
established its market presence in the air freshener category with the
acquisition of Renuzit in 1993. Since then, Renuzit sales have grown at a
compounded annual rate of 15%. Net sales for the Renuzit franchise for 1998,
1997 and 1996 were 14%, 14% and 13%, respectively, of the Domestic Branded
business segment. As of December 31, 1998, Renuzit was the second leading brand
in the $950 million domestic air freshener market (as measured by Information
Resources, Inc.).
ARMOUR
The Company's Armour franchise includes Armour and ARMOUR STAR(R) canned
meats, chili, hashes and meat spreads and CREAM(R) corn starch. The Company's
Armour branded products are concentrated in the profitable canned meat market
segment. Net sales for the Armour franchise for 1998, 1997 and 1996 were 18%,
21% and 20%, respectively, of the Domestic Branded business segment. As of
December 31, 1998, Armour was the number two national brand of canned meats and
was the market leader in the growing Vienna sausage segment, with a 48% market
share in that segment (as measured by Information Resources, Inc.).
SPECIALTY PERSONAL CARE
The Specialty Personal Care franchise includes a variety of skin, hair,
bath, body and foot care products sold under the Freeman, Sarah Michaels and
Nature's Accents brand names. The Company acquired The Freeman Cosmetic
Corporation ("Freeman"), a leading manufacturer and marketer of skin, hair,
bath, body and foot care products utilizing natural ingredients, all sold under
the Freeman brand name, on July 1, 1998. The Company acquired Sarah Michaels,
Inc. ("Sarah Michaels"), a leading marketer of premium specialty bath and body
products, including body washes, body mists, luxury soaps, hand and body
lotions, loofahs, sponges and brushes, which are distributed under the Sarah
Michaels brand name, on September 14, 1998. These two acquisitions were combined
with the Company's Nature's Accents line of translucent soaps and specialty care
products, and the Company's subsidiary, ISC International, Ltd., a manufacturer
of translucent
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soaps, to create the Specialty Personal Care franchise. Net sales for the
Specialty Personal Care franchise for 1998, 1997 and 1996 were 6%, 1% and 1%,
respectively, of the Domestic Branded business segment.
INTERNATIONAL
The Company distributes products in more than 40 countries. The Company has
focused its international efforts principally in Argentina, Canada, Mexico,
Puerto Rico and the Caribbean. During 1998, 1997 and 1996 approximately 89%, 84%
and 60%, respectively, of international sales came from these markets. The
Company's International business segment accounted for 11%, 6% and 4% of the
Company's net sales in 1998, 1997 and 1996, respectively.
In the third quarter of 1997, the Company acquired Nuevo Federal S.A., a
manufacturer and marketer of personal care and household products in Argentina
("Nuevo Federal") and in the fourth quarter of 1997, acquired three personal
care soap brands and two laundry bar brands from The Procter & Gamble Company's
Argentinean subsidiary. With these acquisitions, the Company entered what it
believes is one of Latin America's largest consumer markets by establishing a
position in Mercosur, a regional trading bloc with more than 230 million
consumers in Argentina and neighboring countries, including Brazil, Paraguay,
Uruguay and Chile.
As of December 31, 1998, Nuevo Federal held the number two position in
laundry detergents with the ZORRO(R), ENZIMAX(R) and LIMZUL(R) brands, the
number two position in laundry bars with the GRAN FEDERAL(R) and GRAN LLAURO(R)
brands, the number three position in dish detergents with the CRISTAL(R) and
Zorro brands and the number four position in bar soaps with the LIMOL(R), CAMPOS
VERDES(R) and GELATTI(R) brands, in each case in the respective Argentinean
consumer products market (as measured by Information Resources, Inc.).
In Canada, Purex Liquid is the number one liquid laundry detergent overall
and the number one liquid laundry detergent in mass merchandisers, the country's
fastest growing retail channel. Liquid Dial is the number three antibacterial
liquid soap in Canada. In Mexico, where revenues have more than tripled since
the business was acquired in 1991, Liquid Dial is the number one liquid soap
with 85% of this category. Breck haircare products enjoy strong brand
recognition in Mexico, with Breck hairspray having 12% of the hairspray
category. In Puerto Rico, Purex Liquid is a strong second in the liquid laundry
detergent category with 14% of the category.
COMMERCIAL MARKETS AND OTHER
The Company's Commercial Markets business sells the Company's products,
both branded and non branded, through the commercial channel to end users such
as hotels, hospitals and schools. In addition, this business segment includes
sales of chemicals, principally glycerin, fatty acids and sulfonates, that are
by-products of the soap making and detergent making process. The Company's
Commercial Markets and Other business segment accounted for 4%, 6% and 6% of the
Company's net sales in 1998, 1997 and 1996, respectively.
DISCONTINUED AND DIVESTED BRANDS
By February 1998, the Company had discontinued or divested product lines
that were not within its core businesses. Under this strategy, in the third
quarter of 1997, the Company sold certain of its household cleaning brands to
Church & Dwight for approximately $30 million. The sale included the following
brands and related inventories: BRILLO(R) soap pads and related products,
PARSONS'(R) ammonia, BO PEEP(R) ammonia, SNO BOL(R) toilet bowl cleaner,
CAMEO(R) metal polish and RAIN DROPS(R) water softener. The Company's London,
Ohio, plant, where Brillo is manufactured, also was part of the sale. In
addition, in the third quarter of 1997, the Company sold its BRUCE(R) floor care
product trademark and its MAGIC(R) sizing starch brand and related inventories
to other third parties for $4.5 million. In February 1998, the Company sold the
Purex TOSS N' SOFT(R) brand to Church & Dwight for $5.3 million. Sales of these
products in 1998 were insignificant. In 1997 and 1996, these brands as well as
discontinued brands generated net sales of approximately $53 million and $158
million, respectively, or approximately 4% and 11%, respectively, of the
Company's total net sales.
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CUSTOMERS
The Company's products are sold throughout the United States primarily
through supermarkets, mass merchandisers, drug stores, membership club stores
and other outlets. The Company's top 10 customers accounted for approximately
40%, 35% and 38% of net sales in 1998, 1997 and 1996, respectively. Wal-Mart
Stores Inc. and its affiliate, SAM's Club (together "Wal-Mart") was the
Company's largest customer in 1998, 1997, and 1996 accounting for 17%, 17% and
16% of the Company's net sales in 1998, 1997 and 1996, respectively. No other
customer accounted for more than 10% of net sales in 1998, 1997 or 1996. The
Company was named one of Wal-Mart's "Suppliers of the Year" in 1998 for its
Armour brand and in 1996 for inventory management. The Company's payment terms
to customers range from 30 to 60 days.
The Company's products also were sold internationally through the same
outlets, principally in Argentina, Canada, Mexico, Puerto Rico and the
Caribbean.
SALES
The Company's customers are served by a national sales organization of
approximately 200 employees. The sales organization is divided into four regions
for grocery sales plus specialized sales operations which sell to large mass
merchandisers, membership club stores, chain drug stores and vending and
military customers. In addition, certain customers and regions, representing
approximately 15.6% of the Company's 1998 net sales, are served by a national
broker sales organization.
PROMOTION AND ADVERTISING
The Company expends a significant portion of its revenues for trade
discounts and the promotion and advertising of its products. The Company
believes that such expenditures are necessary to maintain and increase market
shares in an industry highly dependent on product image and quality, trade
support and consumer trends. The Company incurred discounts and expenses for
these purposes of $373.3 million, $311.4 million and $377.2 million in 1998,
1997 and 1996, respectively, or 24%, 23% and 27%, respectively, of net sales in
such years.
DISTRIBUTION
Products are shipped by the Company from nine warehouses located at or near
domestic manufacturing and assembly facilities and four domestic regional
distribution centers. The regional warehouses are operated by third parties,
except for one warehouse owned and operated by the Company. Total space is
approximately 2,000,000 square feet at the regional distribution centers and
approximately 1,250,000 square feet at the warehouses located at or near the
manufacturing and assembly facilities. The Company uses outside carriers to
transport its products.
The Company has a just-in-time inventory management program (the
"Continuous Replenishment Program") of continuous, automatic replenishment of
certain of its trade customers' inventories. The primary objective of the
Continuous Replenishment Program is to improve service to customers and reduce
costs by shortening the order-to-delivery pipeline (i.e., by anticipating
customer needs based on historical sales, shipping the product just before those
needs arise and eliminating redundancy, errors and interruption throughout the
replenishment process). Sales under the Continuous Replenishment Program
accounted for approximately 15% of the Company's net sales in each of 1998, 1997
and 1996.
SUPPLIERS
The Company relies on a number of third parties for research and
development, manufacturing and packaging. Many of the Company's arrangements
with respect to new products contain limited mutual exclusivity provisions
designed to permit both the Company and the supplier to profit from the product
enhancement or innovation before the Company uses an alternative supplier or the
supplier sells to one of the Company's competitors. Most of the Company's
outsourcing arrangements can be terminated without material penalties on an
average of three months' notice.
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RAW MATERIALS
The Company believes that ample sources of raw materials are generally
available with respect to all of its major products. Paper, fats and oils,
detergent chemicals and meat are the raw materials that generally have the most
significant impact on the Company's costs. Generally, the Company purchases such
raw materials from a variety of suppliers in the United States. While the
Company believes that it may in certain circumstances be able to respond to
price increases for certain raw materials by increasing sales prices, rapid
increases in the prices of such raw materials could have a short-term material
adverse impact on the Company's financial results. For example, tallow (a key
ingredient in Dial soaps) has experienced price fluctuations within the range of
$0.15 and $0.28 per pound from January 1, 1995, to December 31, 1998. Recently,
the price of tallow has been trading at the lower end of this historical range.
Since the majority of competitors' soap products use significantly less tallow,
the Company may not be able to increase the prices of its Dial soaps in response
to fluctuations in tallow prices. In addition, the antibacterial agent,
Triclosan, which is the active ingredient used in Liquid Dial products, is
sourced from a single supplier. Although the Company has an adequate supply of
Triclosan for its current and foreseeable needs, a significant disruption in
this supply could have a short-term material adverse impact on the Company's
financial results. The Company seeks to mitigate the risk by entering into
contracts to provide up to six to 12-month supplies of tallow, Triclosan and
packaging materials. Long-term hedging opportunities against price increases for
these raw materials are generally not available.
COMPETITION
The Company competes primarily on the basis of brand equity, brand
advertising, customer service, product performance and product quality at
competitive retail price points. The Company competes with numerous,
well-established local, regional, national and international companies, some of
which have greater financial resources than the Company and may be willing to
commit significant resources to protecting their own market shares or to
capturing market share from the Company. The principal competitors of the
Company in the soap category are: The Procter & Gamble Company ("P&G"), Lever
Brothers Co., a division of Unilever PLC ("Lever"), and Colgate-Palmolive
Company ("Colgate"); in the detergent category are: P&G, Colgate, Lever, Church
& Dwight Co., Inc. and USA Detergents, Inc.; in the household and air freshener
categories are: S.C. Johnson & Son, Inc., Clorox Co., P&G, Colgate and Reckitt &
Colman Inc.; in the canned meat category are: Hormel Foods Corp. and the Libby's
division of International Home Foods.; and in the Specialty Personal Care
category are: Johnson & Johnson, Inc., Yardley of London and Del Laboratories,
Inc.
RESEARCH AND DEVELOPMENT
The Company conducts research and development at its facility in
Scottsdale, Arizona. The Company engages primarily in applied research and
development, relying on outside sources for general research and development
activities. Internal research and development is directed at improving existing
products and developing new products, as well as providing technical assistance
and support to the Company's manufacturing activities. The Company's internal
and external research and development expenditures totaled approximately $10.2
million, $9.8 million and $15.2 million in 1998, 1997 and 1996, respectively.
The decrease in research and development spending from 1996 to 1997 resulted
from the Company's divestiture of certain non core businesses.
MARKETING RESEARCH
The Company relies on industry data, purchased syndicated market share
data, various attitude and usage studies prepared by independent marketing firms
on behalf of the Company and direct sales information from its largest customers
to identify consumer needs and anticipate shifts in consumer preferences,
allowing the Company to develop line extensions and new products to meet
changing demands.
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PATENTS AND TRADEMARKS
The Company's trademarks include Dial, Purex, Renuzit, Armour, Armour Star,
Freeman, Sarah Michaels, Tone, Nature's Accents, Pure & Natural, Breck, Trend,
Treet, 20 Mule Team and Boraxo and related trade names. Use of the Armour and
Armour Star trademarks by the Company is permitted by a perpetual license
granted by ConAgra, Inc., and use of the 20 Mule Team trademark is permitted by
a perpetual license granted by U.S. Borax, Inc. ConAgra, Inc., also sells non
canned food products under the Armour trademark.
United States trademark registrations are for a term of 10 years, renewable
every 10 years so long as the trademarks are used in the regular course of
trade. The Company maintains a portfolio of such trademarks representing
substantial goodwill in the businesses using such trademarks. The Company also
has a significant number of registered foreign trademarks and pending foreign
trademark applications.
United States patents are currently granted for a term of 20 years from the
date a patent application is filed. The Company owns a number of patents that
provide competitive advantages in the marketplace.
GOVERNMENT REGULATION
Substantially all of the operations of the Company are, or may become,
subject to various federal laws and agency regulations. These include the Food,
Drug, and Cosmetic Act, which is administered by the Food and Drug
Administration (the "FDA") and regulates the manufacturing, labeling, and sale
of the Company's over-the-counter drug and cosmetic products; the Insecticide,
Fungicide, and Rodenticide Act and the Toxic Substances Control Act, which are
administered by the Environmental Protection Agency and regulate the Company's
disinfectant products and certain of the substances used in the manufacturing of
its products, respectively; the Meat Inspection Act, which is administered by
the Department of Agriculture and regulates the Company's meat products; the
Hazardous Substances Act, which is administered by the Consumer Product Safety
Commission and regulates the labeling of the Company's household products; and
the Fair Packaging and Labeling Act, which is administered by the Federal Trade
Commission (the "FTC") and regulates the packaging and labeling of all the
Company's products. The Company's products also are subject to regulation by
various state laws and various state regulatory agencies. In addition, the
Company is subject to similar laws and regulations imposed by foreign
jurisdictions.
The FDA's regulation of most of the over-the-counter drug products in the
United States (such as the Dial antibacterial products) has not been finalized.
In addition, the FTC continually monitors the advertising practices of consumer
products companies with respect to claims made relating to product functionality
and efficacy.
ENVIRONMENTAL MATTERS
The Company is subject to a variety of environmental and health and safety
laws and regulations in each jurisdiction in which it operates. These laws and
regulations pertain to the Company's present and past operations.
In the United States, the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") authorizes the federal and state
governments and private parties to take action with respect to releases and
threatened releases of hazardous substances and provides a cause of action to
recover the response costs from certain statutorily responsible parties,
including parties who disposed or arranged for disposal of waste. The federal
government may also order responsible parties to take remedial action directly.
Liability under CERCLA may be joint and several among responsible parties. Most
states also have also enacted Superfund-type laws.
Since 1980, the Company has received notices or requests for information
with respect to 27 sites that have been deemed Superfund sites under CERCLA,
five of which are currently active, 14 of which are inactive and eight of which
have been settled. The Company also is engaged in investigatory and remedial
activities with respect to four closed plants previously operated by Former
Parent. As of December 31, 1998,
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the Company had accrued in its financial statements approximately $3 million in
reserves for expenses related to Superfund and clean-up of closed plant sites
and believes these reserves are adequate.
The Company does not currently anticipate that it will incur significant
capital expenditures in connection with matters relating to environmental
control or compliance in 1999. The Company does not anticipate that the costs to
comply with environmental laws and regulations or the costs related to Superfund
sites and the clean-up of closed plant sites will have a material adverse effect
on the Company's capital expenditures, earnings or competitive position;
however, there can be no assurance that other developments, such as the
emergence of unforeseen claims or liabilities or the imposition of increasingly
stringent laws, regulations and enforcement policies will not result in material
costs in the future.
Federal, state, local and foreign environmental compliance may from time to
time require changes in product formulation or packaging. Such changes have not
had, and are not expected to have, a material adverse effect on revenues,
capital expenditures or earnings of the Company.
EMPLOYEES
As of December 31, 1998, the Company employed approximately 3,759
individuals, of whom approximately 1,140 were covered by collective bargaining
agreements.
Four of the Company's seven plants in the United States are unionized.
Certain of the Company's contracts with its various unions are scheduled for
renegotiation in 1999 as follows: (i) Oil, Chemical and Atomic Workers union
(covering approximately 85 employees at the Company's Bristol, Pennsylvania,
plant) in May 1999; (ii) United Food and Commercial Workers union (covering
approximately 300 employees at the Company's Aurora, Illinois, plant) in August
1999; and (iii) the United Food and Commercial Workers union (covering
approximately 420 employees at the Company's Fort Madison, Iowa, plant) in
September 1999. In 1998, the Company successfully renegotiated its contract with
the International Brotherhood of Teamsters (covering approximately 335 employees
at the Company's St. Louis, Missouri, plant and Madison County, Illinois
distribution center), which now expires in August 2001. Although the Company
believes that its relations with its employees are satisfactory, there can be no
assurance that the Company will not face labor disputes in the future or that
such disputes will not be material to the Company.
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ITEM 2. PROPERTIES
The Company's corporate headquarters are located in a leased
130,000-square-foot, single-tenant building in Scottsdale, Arizona, that is
adjacent to its owned technical and administrative building comprising 200,000
square feet.
The Company's principal facilities include the following.
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LOCATION SQ. FEET PURPOSE
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MANUFACTURING FACILITIES
Aurora, Illinois.................. 451,000 Bar soaps
Fort Madison, Iowa................ 447,000 Canned meats and corn starch
St Louis, Missouri................ 272,400 Fabric softeners, dry and liquid
laundry detergents
Bristol, Pennsylvania............. 261,800 Dry detergents
West Hazleton, Pennsylvania....... 214,470 Liquid detergents, fabric softeners
and liquid soaps
Los Angeles, California........... 55,000 Powdered soap and fabric softeners
Compton, California............... 146,400 Shampoos, lotions and facial scrubs
Guatemala......................... 100,000 Translucent bar soaps
Mexico............................ 68,000 Shampoos and liquid soaps
Buenos Aires, Argentina........... 150,000 Bar soaps and dry detergents
Buenos Aires, Argentina........... 15,000 Sulfonic acid
San Juan, Argentina............... 70,000 Dry detergents and bar soaps
San Juan, Argentina............... 33,000 Liquid detergents, air fresheners
and deodorants
DISTRIBUTION CENTERS
Atlanta, Georgia.................. 253,700 Warehousing and distribution of
finished goods
Breinigsville, Pennsylvania....... 631,100 Warehousing and distribution of
finished goods
Corona, California................ 237,400 Warehousing and distribution of
finished goods
Granite City, Illinois............ 812,000 Warehousing and distribution of
finished goods
WAREHOUSE FACILITIES
Dedham, Massachusetts............. 235,000 Warehousing, gift set assembly and
office
Stoughton, Massachusetts.......... 80,000 Warehousing and office
Holbrook, Massachusetts........... 72,000 Warehousing and supplies
</TABLE>
The Company believes that its facilities in the aggregate are adequate and
suitable for their purposes and that manufacturing capacity is sufficient for
current needs. The Company continues to seek ways to cut costs and may close
plants as warranted.
ITEM 3. LEGAL PROCEEDINGS
As in the case with many companies, the Company faces exposure to actual or
potential claims and lawsuits involving its business and assets. The Company is
currently party to a number of lawsuits consisting of ordinary, routine
litigation incidental to the business of the Company, including general and
product liability and workers' compensation claims. The Company believes that
any liabilities resulting from such claims, after taking into account amounts
already provided for, but exclusive of any potential insurance recovery, should
not have a material adverse effect on the Company's financial position, cash
flows or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of its stockholders during
the fourth quarter of 1998.
8
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol DL. The following table sets forth the high and low
closing sale prices as reported on the NYSE for the periods indicated. The
closing sale price of the Common Stock on March 24, 1999, was $33.125 per share.
<TABLE>
<CAPTION>
PRICE RANGE
-------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1997
First Quarter............................................. 16 5/8 13 3/8
Second Quarter............................................ 17 1/2 15 1/8
Third Quarter............................................. 18 1/8 15 3/8
Fourth Quarter............................................ 21 13/16 15 1/8
FISCAL 1998
First Quarter............................................. 25 1/4 19 15/16
Second Quarter............................................ 26 22 5/8
Third Quarter............................................. 25 5/16 19 1/2
Fourth Quarter............................................ 29 11/16 19 15/16
</TABLE>
The Company declared dividends of $0.08 per share of Common Stock in the
first, second, third and fourth quarters of 1997 and 1998. The declaration and
payment of dividends by the Company is subject to the discretion of its Board of
Directors (the "Board"). Any future determination to pay dividends will depend
on the Company's results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant at the
time by the Board. As of March 24, 1999, there were 102,683,910 shares of Common
Stock outstanding, which were held by 38,099 stockholders of record.
ITEM 6. SELECTED FINANCIAL AND OTHER DATA
The following table presents selected financial information derived from
the Company's consolidated financial statements. The selected consolidated
balance sheet data as of December 31, 1998, January 3, 1998, and December 28,
1996, and the consolidated income statement data for each of the three fiscal
years in the period ended December 31, 1998, have been derived from the audited
consolidated financial statements of the Company which are included elsewhere
herein. The selected consolidated balance sheet data as of December 30, 1995,
and December 31, 1994, and consolidated income statement data for the fiscal
years then ended have been derived from the audited consolidated financial
statements of the Company which are not included elsewhere herein. Prior to the
Spin-off, the Company operated as the Consumer Products Business of Former
Parent. The following data should be read in conjunction with the Company's
consolidated financial statements and notes thereto, "Item 7. Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the other financial information included elsewhere in this Form 10-K or
incorporated by reference herein.
9
<PAGE> 12
SELECTED FINANCIAL AND OTHER DATA
(000 OMITTED, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES AND SHAREHOLDERS OF
RECORD)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------
DEC. 31 JAN. 3 DEC. 28 DEC. 30 DEC. 31
1998 1998 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales................................. $1,524,517 $1,362,606 $1,406,400 $1,365,290 $1,511,362
---------- ---------- ---------- ---------- ----------
Cost of products sold..................... 787,401 718,112 739,893 709,888 767,507
Write-down of discontinued product
inventories............................. 27,924 20,400
---------- ---------- ---------- ---------- ----------
Total cost of products sold............... 787,401 718,112 767,817 730,288 767,507
---------- ---------- ---------- ---------- ----------
Gross profit............................ 737,116 644,494 638,583 635,002 743,855
Selling, general and administrative
expenses................................ 553,181 482,324 541,110 523,058 583,847
Restructuring charges and other asset
write-downs............................. 27,076 135,600
---------- ---------- ---------- ---------- ----------
553,181 482,324 568,186 658,658 583,847
---------- ---------- ---------- ---------- ----------
Operating income (loss)................... 183,935 162,170 70,397 (23,656) 160,008
Spin-off transaction costs................ 5,000
Interest and other expenses............... 23,358 28,235 22,974 23,360 12,468
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes......... 160,577 133,935 42,423 (47,016) 147,540
Income taxes (benefit).................... 57,961 50,225 12,511 (19,527) 56,468
---------- ---------- ---------- ---------- ----------
Net income (loss)(1)...................... $ 102,616 $ 83,710 $ 29,912 $ (27,489) $ 91,072
========== ========== ========== ========== ==========
Net income per share(2)
Basic................................... $ 1.04 $ 0.91 $ 0.33
Diluted................................. $ 1.02 $ 0.89 $ 0.33
Basic shares outstanding(2)............... 98,294 91,918 89,705
Equivalent shares....................... 2,185 2,231 1,269
---------- ---------- ----------
Diluted shares.......................... 100,479 94,149 90,974
========== ========== ==========
BALANCE SHEET DATA (AT YEAR END)
Total assets.............................. $1,175,375 $ 883,852 $ 866,126 $ 798,405 $ 887,373
Working capital (deficit)................. (11,535) (11,797) 41,107 45,663 56,188
Parent investment and advances............ 496,230 555,703
Long-term debt............................ 280,223 84,399 269,515 3,320 3,510
Common stock and other equity(2).......... 390,225 320,046 140,657
OTHER DATA
Depreciation and amortization............. 36,489 31,763 30,533 29,118 34,910
Capital expenditures...................... 50,330 46,715 49,468 27,214 37,471
Number of employees (end of year)......... 3,759 3,548 2,812 3,985 3,995
Number of employees (average)............. 3,654 3,180 3,125 3,992 3,983
Dividends on common shares(2)............. 31,497 29,510 14,365
</TABLE>
- ---------------
(1) Includes restructuring charges and asset write-downs and Spin-off
transaction costs of $60 million ($35.3 million after tax) or $0.39 per
share in 1996 and restructuring charges and asset write-downs of $156
million ($94.9 million after tax) in 1995.
(2) Per share, common stock and other equity and dividends on common shares
information is not presented for 1995 and prior years because the Company
was not a publicly held company during such years. Income (loss) per share
is presented for 1996, as the Company's common shares were issued on August
15, 1996. The calculation of income (loss) per share in 1996 assumes that
the common shares and common share equivalents were outstanding for the
entire year. The earnings per share calculation reflects the implementation
of Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
for all periods presented.
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<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
For organizational, marketing, financial reporting purposes and method of
distribution, the Company has organized its business into three segments:
Domestic Branded, International and Commercial Markets and Other in accordance
with Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise" ("SFAS No. 131") which was implemented on December
31, 1998. The following Management's Discussion and Analysis of Results of
Operations and Financial Condition has been conformed to reflect the
implementation of SFAS No. 131.
Beginning with 1998, the Company's fiscal year end is December 31. Prior to
1998, the Company's fiscal year ended on the Saturday closest to the end of
December. Fiscal year 1998 consisted of 52 weeks, fiscal year 1997 consisted of
53 weeks and fiscal year 1996 consisted of 52 weeks.
RESTRUCTURING CHARGES AND WRITE-DOWNS
In the third quarter of 1996, the Company announced an administrative and
line of business reorganization to: (i) streamline its management and
administrative organization, (ii) reduce administrative overhead by 20%, (iii)
sell or discontinue a number of underperforming brands and (iv) exit the then
existing corporate headquarters. The Company recorded restructuring charges and
asset write-downs of $55 million ($35.3 million after tax) in the third quarter
of 1996 for severance costs, discontinuance of product lines and building exit
costs. Approximately $27.9 million of the charge related to inventories and was
included in cost of products sold.
FISCAL 1998 COMPARED WITH FISCAL 1997
Net sales increased $161.9 million, or 11.9%, to $1,524.5 million in 1998
from $1,362.6 million in 1997. Net sales in 1997 included $53 million of net
sales from brands that were divested in the third quarter of 1997. Net sales in
1998 increased primarily as a result of a full-year contribution from Nuevo
Federal, acquired in September 1997; two quarters of sales from Freeman,
acquired in July 1998; and one quarter of sales from Sarah Michaels, acquired in
September 1998.
Domestic Branded net sales increased $145.4 million, or 12.6%, to $1,295.4
million in 1998 from $1,150.1 million in 1997. The increase in net sales was the
result of the inclusion of the Sarah Michaels and Freeman acquisitions, and
sales growth in Dial, up 12.3%; Renuzit, up 12.1%; and Purex, up 5.6%. The
increase in sales was offset in part by a 1.9% decline in Armour sales.
International net sales increased $81.8 million, or 99%, to $164.6 million
from $82.8 million in 1997. The increase in net sales resulted primarily from
the inclusion of a full year of results of Nuevo Federal and sales growth of
30.7% in Canada, 10.0% in Mexico and 7.0% in the Caribbean. In addition, Nuevo
Federal's sales grew 24% in the fourth quarter of 1998 over the same period in
1997. The increase in net sales was offset in part by a 52.3% decline in sales
to Asia.
Commercial Markets and Other net sales decreased $12.8 million, or 16.6%,
to $64.0 million in 1998 from $76.8 million in 1997, primarily as a result of
softness in the pricing of sulfonate chemicals, glycerin and fatty acids.
Gross profit margin increased 1.1% to 48.4% in 1998 from 47.3% in 1997. The
increase resulted primarily from significant improvement in manufacturing
efficiencies and favorable raw material prices.
Selling, general and administrative expenses for 1998 increased $70.9
million, or 14.7%, to $553.2 million from $482.3 million in 1997. The increase
was primarily due to higher marketing expense to support core business
merchandising initiatives, new product launches and core business advertising.
Operating income in 1998 increased $21.8 million, or 13.4%, to $183.9
million from $162.2 million in 1997. The increase was primarily due to increased
sales and gross margin improvements.
11
<PAGE> 14
Interest and other expenses decreased $4.9 million, or 17.3%, to $23.4
million for 1998 compared to $28.2 million in 1997 primarily as a result of
lower average monthly debt balances outstanding.
The Company's consolidated effective income tax rate for 1998 was
approximately 36.1%, down from 37.5% for 1997. The lower effective tax rate in
1998 was primarily due to lower state and foreign taxes.
Net income increased $18.9 million, or 22.6%, to $102.6 million in 1998
from $83.7 million in 1997. The increase was primarily due to increased sales,
gross margin improvements and a lower effective tax rate.
FISCAL 1997 COMPARED WITH FISCAL 1996
Net sales decreased $43.8 million, or 3.1%, to $1,362.6 million in 1997
from $1,406.4 million in 1996. This decrease resulted primarily from the
discontinuation and divestiture of certain noncore businesses and a 15% price
reduction of Purex detergent products initiated in the second quarter of 1996,
offset in part by an increase in sales of the Company's Domestic Branded
business and sales attributable to the Company's acquisitions in Argentina in
September and November 1997.
Net sales in the Domestic Branded business increased 3.5% to $1,150.1
million in 1997 from $1,111.4 million in 1996. The increase in net sales was the
result of growth in Armour, up 10.0%, Renuzit, up 8.1%, and Dial, up 2.0%. After
adjusting for the Purex price reduction, Domestic Branded net sales increased
5.5%.
International net sales increased 45.6% to $82.8 million in 1997 from $56.9
million in 1996. The increase in net sales resulted primarily from the inclusion
of the Nuevo Federal acquisition, as well as net sales growth of 37.5% in Mexico
and 26.7% in Canada.
Net sales in Commercial Markets and Other declined 4.2% to $76.8 million in
1997 from $80.1 million in 1996. The decrease in net sales resulted primarily
from softness in the pricing of glycerin.
Excluding write-downs of inventory of $27.9 million associated with
administrative and line of business reorganizations in 1996, gross profit margin
remained relatively flat in 1997 and 1996 at 47.3% and 47.4%, respectively.
Lower costs in 1997, which resulted from improved procurement, distribution and
manufacturing practices, were offset by the price reduction of Purex detergent
products initiated in 1996.
Selling, general and administrative expense in 1997 decreased $58.8
million, or 10.9%, to $482.3 million from $541.1 million in 1996, and declined
as a percentage of net sales to 35.4% from 38.5%. This was primarily
attributable to lower consumer and trade promotion expenditures and
administrative savings realized from the restructuring in 1996.
Operating income in 1997 increased $91.8 million, or 130.4%, to $162.2
million from $70.4 million in 1996. Operating income in 1996 was impacted by
restructuring charges and inventory and asset write-downs totaling $55.0
million. Excluding these charges, operating income increased $36.8 million, or
29.3%, in 1997, primarily due to the significant reduction of selling, general
and administrative expense and a reduction of cost of products sold.
In 1997, the Company sold to Church & Dwight Co., Inc., for $30.2 million
Brillo soap pads and related products, Parsons' ammonia, Bo Peep ammonia, Sno
Bol toilet bowl cleaner, Cameo metal cleaner and Rain Drops water softener. The
Company's London, Ohio, plant, where Brillo is manufactured, also was part of
the sale. In addition, the Company sold to other third parties for $4.5 million
its Bruce floor care trademark and its Magic Sizing/Starch brand and related
inventories. An aggregate gain of $15.7 million from the sale of these
businesses is included in operating income.
Also included in 1997 operating income were $15.9 million of various
impairment and other operating charges. In the third quarter of 1997, the
Company evaluated the estimated life of the capitalized package design costs,
which was being amortized over five years. In light of the accelerated pace of
package design changes occurring at the Company and in the industry, the
estimated life of capitalized package design costs was reduced to one year.
Accordingly, $9.5 million of capitalized package design costs were considered
impaired and written-off against income. In addition, in 1997, the Company
charged against income $4.5
12
<PAGE> 15
million of additional discontinued product sales returns and $1.9 million in
additional promotion claims on discontinued products.
Interest and other expenses increased $5.3 million, or 22.9%, to $28.2
million in 1997 from $23.0 million in 1996, due to an increase of accretion
costs related to Armour employee benefit liabilities assumed from Former Parent
in the Spin-off, offset in part by lower interest expense resulting from the
repayment of debt with cash flow from operations and the proceeds of the
Company's public equity offering in the fourth quarter of 1997.
The effective tax rate for 1997 was 37.5%, up from 29.5% in 1996. The lower
effective tax rate in 1996 resulted from a one-time tax benefit due to the
revaluation of the Company's deferred tax benefits for the higher effective
state tax rate incurred after the Spin-off.
Net income increased $53.8 million, or 180%, to $83.7 million in 1997 from
$29.9 million in 1996. Excluding the restructuring and Spin-off charges taken in
1996, net income increased $18.5 million, or 28%, in 1997, primarily due to the
significant reduction of selling, general and administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $122.3 million during 1998
compared to cash generated of $160.8 million for 1997, a decrease of $38.5
million. This decrease resulted primarily from an increase in receivables due to
both an overall growth in sales in 1998, as well as seasonal shipments near
year-end 1998 of holiday-oriented Specialty Personal Care products.
Capital expenditures for 1998 were $50.3 million versus $46.7 million for
1997. Capital spending in 1998 concentrated primarily on equipment and
information technology to reduce manufacturing, logistic and administrative
costs and address the year 2000 issue. Capital spending in 1999 is expected to
approximate $55 million and will be concentrated primarily on equipment and
information technology that provide opportunities to reduce manufacturing,
logistic and administrative costs and address the year 2000 issue. However, such
plans are dependent on the availability of funds, as well as identification of
projects with sufficient returns. As a result, there can be no assurance as to
the quantity and the type of capital spending in the future.
On July 1, 1998, the Company acquired Freeman for $78.0 million, which was
financed through short-term borrowings supported by the Company's long-term
Credit Agreement. The Freeman acquisition added $7.7 million to current assets,
$19.6 million to current liabilities and $87.5 million to goodwill. The
acquisition price reflects a $6.0 million reduction in the purchase price for
Freeman as a result of a net worth adjustment received by the Company in January
1999.
On September 14, 1998, the Company acquired Sarah Michaels for $187
million, which was financed through short-term borrowings supported by the
Company's long-term Credit Agreement. The Sarah Michaels acquisition added $43.9
million to current assets, $16.1 million to current liabilities and $125.8
million to goodwill.
On September 23, 1998, the Company completed a $200 million public offering
of 6.5% Senior Notes due 2008. The proceeds of the debt financing were used to
repay outstanding bank borrowings used for the acquisitions of Freeman and Sarah
Michaels. The Indenture governing these Senior Notes imposes restrictions on the
Company with respect to, among other things, its ability to redeem the Senior
Notes, to place liens on certain properties and to enter into certain sale and
leaseback transactions.
The Company received approximately $10.7 million from the disposition of
assets during 1998, the majority of which resulted from two sales. The Purex
Toss 'n Soft brand and related inventories were sold to Church & Dwight for
approximately $5.3 million. In addition, a non operating manufacturing property
was sold for $4.0 million to a third party. No gain or loss was realized on
either of these transactions.
The Company's financing plan includes the sale of accounts receivable to
accelerate cash flow. Accounts receivable sold but not yet collected under this
plan at December 31, 1998, and January 3, 1998, were $90.0 million and $58.9
million, respectively. Under the terms of the plan, the Company retains the risk
of credit loss on the receivables sold.
13
<PAGE> 16
The Company also is party to a $350.0 million revolving credit agreement
(the "Credit Agreement") with various banks. The Credit Agreement, which will
terminate on August 15, 2002, unless extended, contains certain covenants which
impose limitations on the Company with respect to, among other things, its
ability to place liens on property, its ability to merge, consolidate or
transfer all or substantially all its assets, its minimum net worth and the
incurrence of certain indebtedness. The Company had $350.0 million available
under the Credit Agreement at December 31, 1998. The Company, from time to time,
makes short-term bank borrowings. At December 31, 1998, the Company had $82.3
million aggregate principal amount of such short-term borrowings outstanding.
The bank borrowings are classified as long-term debt because they are supported
by the long-term Credit agreement.
As part of its business strategy, the Company routinely reviews and
evaluates the acquisition of domestic and international companies that market
products similar to the Company's product offerings. The Company may seek
additional debt and/or equity financing as necessary to fund any potential
acquisitions.
At December 31, 1998, and January 3, 1998, a total of 4,495,736 and
5,072,785, respectively, of the issued shares were held by the Employee Equity
Trust. At December 31, 1998, and January 3, 1998, a total of 1,176,082 and
101,040 shares, respectively, were held in treasury by the Company. The shares
held at December 31, 1998, included 218,725 shares valued at $5.2 million
purchased by the Company as part of a small shareholder selling/repurchasing
program executed during the first half of 1998 and 831,600 shares valued at
$21.1 million as part of the Company's stock repurchase program.
At December 31, 1998, the Company had approximately $95.4 million in net
deferred tax benefits. The realization of such benefits will require average
annual taxable income of approximately $18.0 million over the next 15 years. The
Company's average income before income taxes over the past three years was
approximately $112.3 million.
YEAR 2000 COMPLIANCE
OVERVIEW
Many existing computer systems and software products, including several
used by the Company, are coded to accept only two digit entries in the date code
field. Beginning in the year 2000, these date code fields will need to accept
four digit entries to distinguish 21st Century dates from 20th Century dates. As
a result, the Company's date critical functions related to the year 2000 and
beyond, such as sales, distribution, manufacturing, purchasing, inventory
control, trade promotion management, planning and replenishment, facilities and
financial systems may be materially adversely affected unless computer systems
and embedded microchips in manufacturing equipment are or become year 2000
compliant. In addition, certain of the Company's business activities may be
materially adversely affected if critical business partners, including
customers, vendors, suppliers, brokers and others, experience disruptions in
service as a result of year 2000 problems.
The Company currently believes that the year 2000 issue will not pose
significant operational problems for the Company. However, if all year 2000
issues are not properly identified, or assessment, remediation and testing are
not effected timely with respect to year 2000 problems that are identified,
there can be no assurance that the year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with customers, vendors, suppliers, brokers or others.
Additionally, there can be no assurance that the year 2000 issues of other
entities will not have a material adverse impact on the Company's systems or
results of operations.
The Company continues to implement changes that it believes are necessary
to assure accurate date recognition and data processing with respect to the year
2000. Activities have been organized into four specific areas: information
technology applications, information technology infrastructure, embedded systems
and business partners.
14
<PAGE> 17
INFORMATION TECHNOLOGY APPLICATIONS
The Company's year 2000 efforts include identifying information technology
applications (such as payroll and order entry) requiring remediation, assessing
what is required to remediate those applications, remediating them to be ready
for the year 2000 by either modifying or replacing them and testing them for
year 2000 readiness. The Company has completed the identification and assessment
of the application systems that it believes are critical to maintaining
operations. These systems are in the process of being replaced or upgraded to
year 2000 compliant versions. The Company currently believes that these efforts
will be completed by mid-1999. The various projects that are underway currently
are meeting their respective milestone dates for completion.
INFORMATION TECHNOLOGY INFRASTRUCTURE
The Company also is following the approach described above for its
information technology infrastructure. This includes the computer and
communications hardware and related operating system software on which the
information systems applications are operated. This equipment is in the process
of being replaced or upgraded to year 2000 compliant versions. The Company
believes that these efforts will be completed by mid-1999. The various projects
that are underway currently are meeting their respective milestone dates for
completion.
EMBEDDED SYSTEMS
The Company is also following the same approach as described above for its
embedded systems. These embedded systems include, among other things,
manufacturing equipment with embedded microchips that may fail as a result of
year 2000 date problems. The Company has identified and completed an assessment
of the embedded systems it believes are critical, and currently believes that
such systems will be remediated and tested by mid-1999.
BUSINESS PARTNERS
The Company is communicating with its critical business partners
(customers, vendors, suppliers, brokers and others) to assess their readiness
and to consider the potential impact on the Company if these business partners
experience significant year 2000 problems. The Company has identified those
entities that it believes are critical to its operations, and is assessing and
attempting to mitigate its risks with respect to the failure of these entities
to be year 2000 compliant by developing a contingency plan. The Company has
assessed, and currently is assessing, its risk in this area. The Company
currently plans to complete its work in this area by April 1999 and also plans
to continue monitoring certain business partners after that date for year 2000
issues.
CONTINGENCY PLAN
A contingency plan is being developed for dealing with the most reasonably
likely worst case scenario, and the Company believes that its contingency plan
will be finalized by mid-1999. The Company currently believes that the most
reasonably likely worst case scenario for the Company involves the failure to
timely complete the replacement or upgrade of critical information systems
applications combined with the failure of embedded microchip technology at the
Company's manufacturing facilities and the failure of critical business partners
to be year 2000 compliant. The Company currently believes that the most
reasonably likely worst case scenario would result in increased costs due to
remediation efforts and additional staffing to support business activities, as
well as difficulties in procuring raw materials and meeting customer demand for
the Company's products, all of which could have a material adverse effect on the
Company and its results of operations.
COSTS
The Company is using both internal and external resources to meet the
timetable established for completion of its year 2000 efforts. The Company
incurred costs of $1.0 million in 1998 and currently is expected to incur costs
of $1.6 million in 1999. In addition, the Company incurred costs of $10.8
million in 1998 and is currently expected to incur costs of $9.3 million in 1999
in capital for the upgrade of its
15
<PAGE> 18
information technology systems. These expenditures will address year 2000
compliance and are expected to provide the Company with improved efficiencies
and cost savings.
The costs of the Company's year 2000 identification, assessment,
remediation and testing efforts and the dates on which the Company believes it
will complete such efforts are based upon management's best estimates, which
were derived using numerous assumptions regarding future events, including the
continued availability of certain resources, third-party remediation plans and
other factors. There can be no assurance that these estimates will prove to be
accurate and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in year 2000 issues, the ability to identify, assess, remediate and test all
relevant computer codes and embedded technology and similar uncertainties. In
addition, variability of definitions of "compliance with year 2000" and the
myriad different products and services, and combinations thereof, sold by the
Company may lead to claims having an impact on the Company which is not
currently estimable. No assurance can be given that the aggregate cost of
defending and resolving such claims, if any, will not materially adversely
affect the Company's results of operations. Although some of the Company's
agreements with manufacturers and others from whom it purchases products for
resale contain provisions requiring such parties to indemnify the Company under
some circumstances, there can be no assurance that such indemnification
arrangements will cover all the Company's liabilities and costs related to
claims by third parties related to the year 2000 issue.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
The Company's future results and financial condition are dependent upon the
Company's ability to successfully develop, manufacture and market consumer
products. Inherent in this process are a number of factors that the Company must
successfully manage to achieve favorable future operating results and financial
condition. Potential risks and uncertainties that could affect the Company's
future operating results and financial condition include, but are not limited
to, the factors discussed below.
INTENSE COMPETITION IN THE CONSUMER PRODUCTS INDUSTRY
The consumer products industry, particularly its detergent, personal care
and air freshener categories, is intensely competitive. Among the Company's most
significant competitors are large companies, including P&G, Lever and Colgate.
These companies have greater financial resources than the Company and may be
willing to commit significant resources to protecting their own market shares or
to capturing market share from the Company. As a result, the Company may need to
incur greater costs than previously incurred for trade and consumer promotions
and advertising to preserve or improve market share and to introduce and
establish new products and line extensions. At the same time, the Company may
need to undertake additional production related cost-cutting measures to enable
it to respond to competitors' price cuts and marketing efforts without reducing
the Company's margins. There can be no assurance that the Company will be able
to make such additional expenditures or implement such cost-cutting measures or
that, if made or implemented, they will be effective.
CONSUMER PRICING PRESSURES
Consumer products, particularly those that are value priced, are subject to
significant price competition. From time to time, the Company may need to engage
in price-cutting initiatives for some of its products to respond to competitive
and consumer pressures. The failure of the Company's sales volumes to grow
sufficiently to improve overall revenues and income as a result of a competitive
price reduction could have a material adverse effect on the financial
performance of the Company.
TRADE CUSTOMER PRICING PRESSURES; COMPETITIVE RETAIL ENVIRONMENT
The Company faces pricing pressures from its trade customers. Because of
the competitive retail environment, retailers have increasingly sought to reduce
inventory levels and obtain pricing concessions from vendors. In addition,
because consumer products companies, including the Company, have historically
offered
16
<PAGE> 19
end-of-quarter discounts to achieve quarterly sales goals, trade customers have
been inclined to delay inventory restocking until quarter-end. Over the past two
years, the Company has reduced end-of-quarter discounts to retailers and has
changed its sales incentive structure to emphasize not only quarterly revenue
targets but also trade spending management and other personal performance
targets. The reduction in discounts has not had, and the Company believes it
will not have, a material adverse effect on sales, although there can be no
assurance in that regard. The Company also is subject to the risk that
high-volume customers could seek alternative pricing concessions or better trade
terms. The Company's performance also is dependent upon the general health of
the retail environment and could be materially adversely affected by changes
therein and by the financial difficulties of retailers.
DEPENDENCE ON KEY CUSTOMERS
The Company's top 10 customers accounted for 40% of net sales in 1998.
Wal-Mart was the Company's largest customer, accounting for 17% of the Company's
net sales in 1998. The loss of, or a substantial decrease in the volume of
purchases by, Wal-Mart or any of the Company's other top customers could have a
material adverse effect on the Company's results of operations.
PRICE VOLATILITY OF RAW MATERIALS; SINGLE SOURCE SUPPLIER
While the Company believes that it may, in certain circumstances, be able
to respond to price increases for certain raw materials by increasing sales
prices, rapid increases in the prices of such raw materials could have a
material adverse impact on financial results. For example, tallow (a key
ingredient in Dial bar soaps) has experienced price fluctuations within the
range of $0.15 and $0.28 per pound from January 1, 1995, to December 31, 1998.
Recently, the price of tallow has been trading near the lower end of this
historical range. Because the majority of the competitors' soap products use
considerably less tallow in their bar soap products, the Company may not be able
to increase the prices of its Dial bar soaps in response to increases in tallow
prices. In addition, the antibacterial agent, Triclosan, which is the active
ingredient used in Liquid Dial products, is sourced from a single supplier.
Although the Company has an adequate supply of Triclosan for its current and
foreseeable needs, a significant disruption in this supply could have a
short-term material adverse impact on the Company's financial results. Although
the Company seeks to enter into contracts to provide up to six-month supplies of
tallow, Triclosan and packaging materials, long-term hedging opportunities
against price increases for these items are generally not available.
DEPENDENCE ON DOMESTIC MARKETS; RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
While a number of the Company's competitors have diversified their revenues
to include a strong international component, the Company is currently dependent
primarily on sales generated in the U.S. (89% of sales in 1998). With respect to
a number of the Company's most significant product categories, including
detergents and bar soaps, the U.S. markets are mature and characterized by high
household penetration. The Company's unit sales growth in these domestic markets
will depend on increasing usage by consumers and capturing market share from
competitors. There can be no assurance that the Company will succeed in
implementing its strategies to achieve such domestic growth.
To reduce its dependence on domestic revenues, the Company has adopted a
strategy to further penetrate international markets. In implementing this
strategy, the Company faces barriers to entry and the risk of competition from
local and other companies that already have established global businesses, risks
generally associated with conducting business internationally, including
exposure to currency fluctuations, limitations on foreign investment,
import/export controls, nationalization, unstable governments and legal systems
and the additional expense and risks inherent in operating in geographically and
culturally diverse locations. Because the Company plans to develop its
International business through acquisitions as well as joint ventures, co-
packaging arrangements and/or other alliances, the Company also may be subject
to risks associated with such acquisitions, ventures, arrangements and
alliances, including those relating to the marriage of different corporate
cultures and shared decision-making. In addition, because the Company's current
international distribution capabilities are extremely limited, the Company also
will need to acquire a distribution network or enter into alliances with
existing distributors before it can effectively conduct operations in new
markets.
17
<PAGE> 20
There can be no assurance that the Company will succeed in increasing its
International business in a profitable manner, and a failure to expand this
business may have a material adverse effect on the Company.
The Company has a significant number of registered foreign trademarks as
well as pending foreign trademark applications. There can be no assurance that
the Company will successfully register any foreign trademarks for which
applications are currently pending or that such trademarks, once registered,
together with any existing registered foreign trademarks, will be protected in
the foreign markets in which they are used.
RISKS OF POTENTIAL ACQUISITIONS
As previously disclosed, the Company recently acquired Freeman and Sarah
Michaels. The Company may acquire or make substantial investments in additional
complementary businesses or products in the future. The Freeman and Sarah
Michaels acquisitions entailed, and any future acquisitions or investments would
entail, various risks, including the difficulty of assimilating the operations
and personnel of the acquired business or products, the potential disruption of
the Company's ongoing business and, generally, the potential inability of the
Company to obtain the desired financial and strategic benefits from the
acquisition or investment. These factors could have a material adverse effect on
the Company's financial results. Future acquisitions and investments by the
Company also could result in substantial cash expenditures, potentially dilutive
issuances of equity securities, the incurrence of additional debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, which could adversely affect the Company's financial results and
condition. The Company engages from time to time in discussions with respect to
potential acquisitions, some of which may be material.
ADVERSE PUBLICITY; PRODUCT RECALLS
Certain news broadcasts by major U.S. television and radio networks have
focused on the use of antibacterial agents to kill germs on various surfaces.
Triclosan, the active ingredient in Liquid Dial, also has been a focus of these
broadcasts. Although none of the broadcasts disputed that Triclosan kills germs
on the skin, some third party experts did question whether it provides any
additional protection beyond that provided by non antibacterial soap products.
Although the Company has test results that it believes prove that Triclosan
provides consumers with additional protection in limiting exposure to
bacteria-related diseases, there can be no assurance that the publicity stemming
from these broadcasts will not adversely affect the Company's sales of its
antibacterial soap products and its results of operations.
Because the Company shares the use of the Armour trademark for food
products with ConAgra Inc., the manufacturer of Armour branded non canned meat
products, the Company faces the risk that consumer preferences and perceptions
with respect to any of the Company's Armour products may be influenced by
adverse publicity affecting any of the Armour branded products of ConAgra, Inc.
From time to time, consumer product companies, including Dial, have had to
recall certain products for various reasons, which costs of recall or other
liabilities could be material to such companies. To date, the Company has not
made any product recalls that have been material to the Company's financial
condition. In addition, adverse publicity regarding any such product recalls
could have a material adverse effect on the Company.
ENVIRONMENTAL CONCERNS REGARDING DETERGENT COMPOUND
Nonlyphenol ethoxylate ("NPE") is an ingredient used in the Company's
liquid and powder detergent products. Certain environmental and regulatory
groups have raised concerns regarding the toxicity of compounds produced from
NPE as it decomposes and the adverse impact on the reproductive health of
certain aquatic animals exposed to those compounds. Although to the best of the
Company's knowledge none of the studies undertaken on NPE have demonstrated a
link between the compound and such effect in the environment or in human beings,
there can be no assurance that subsequent studies will, in fact, demonstrate
such a link or demonstrate other adverse environmental consequences. Current
government regulations do not impose any restrictions on the use of NPE, or
impose any liability on any of the businesses that utilize NPE in
18
<PAGE> 21
the products they manufacture. The Company believes, however, that a number of
governmental agencies in North America and Europe are discussing formal
regulations of NPE in the environment. The Company is in the process of
reformulating its detergents to eliminate this compound as an ingredient. The
additional expense the Company expects to incur as a result of this
reformulation is not expected to have a material adverse impact on the Company's
financial results. In addition, the Company believes that it will not incur any
significant environmental liability as a result of the use of NPE in its
products.
DEPENDENCE ON KEY PERSONNEL
The operation of the Company requires managerial expertise. Of the
Company's key personnel, only the Chief Executive Officer has an employment
contract with the Company. There can be no assurance that any of the Company's
key employees will remain in the Company's employ. The loss of such key
personnel could have a material adverse effect on the Company's operations.
TURNOVER; EMPLOYEE RELATIONS
Primarily as a result of the restructuring of its business, the Company
discharged approximately 950 salaried and non salaried employees during 1995 and
1996. In addition, the Company experienced greater aggregate voluntary turnover
of salaried employees in 1996 and 1997 than the industry average. Although the
Company believes that it presently has sufficient staffing, there can be no
assurance that the Company would not be materially adversely affected by any
future significant voluntary turnover of salaried or other employees.
Four of the Company's seven plants in the United States are unionized.
Certain of the Company's contracts with its various unions are scheduled for
renegotiation in 1999 as follows: (i) Oil, Chemical and Atomic Workers union
(covering approximately 85 employees at the Company's Bristol, Pennsylvania,
plant) in May 1999; (ii) United Food and Commercial Workers union (covering
approximately 300 employees at the Company's Aurora, Illinois, plant) in August
1999; and (iii) the United Food and Commercial Workers union (covering
approximately 420 employees at the Company's Fort Madison, Iowa, plant) in
September 1999. In 1998, the Company successfully renegotiated its contract with
the International Brotherhood of Teamsters (covering approximately 335 employees
at the Company's St. Louis, Missouri, plant and Madison County, Illinois,
distribution center), which now expires in August 2001. Although the Company
believes that its relations with its employees are satisfactory, there can be no
assurance that the Company will not face similar labor disputes in the future or
that such disputes will not be material to the Company.
ENVIRONMENTAL MATTERS
The Company is subject to a variety of environmental and health and safety
laws in each jurisdiction in which it operates. These laws and regulations
pertain to the Company's present and past operations.
Since 1980, the Company has received notices or requests for information
with respect to 27 sites that have been deemed "Superfund" sites under the
federal Comprehensive Environmental Response, Compensation and Liability Act,
five of which are currently active, 14 of which are inactive and eight of which
have been settled. The Company also is engaged in investigatory and remedial
activities with respect to four closed plants previously operated by Former
Parent. As of December 31, 1998, the Company has accrued in its financial
statements approximately $3 million in reserves for expenses related to
Superfund sites and the cleanup of closed plant sites, which reserves it
believes are adequate.
The Company does not anticipate that the costs to comply with such laws and
regulations or the costs related to Superfund sites and the cleanup of closed
plant sites will have any material adverse effect on the Company's capital
expenditures, earnings or competitive position; however, there can be no
assurance that other developments, such as the emergence of unforeseen claims or
liabilities or the imposition of increasingly stringent laws, regulations and
enforcement policies will not result in material costs in the future.
19
<PAGE> 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The following discussion of the Company's exposure to various market risks
contains "forward looking statements" that involve risks and uncertainties.
These projected results have been prepared utilizing certain assumptions
considered reasonable in light of information currently available to the
Company. Nevertheless, because of the inherent unpredictability of interest
rates, foreign currency rates and commodity prices, as well as other factors,
actual results could differ materially from those projected in such forward
looking information.
INTEREST RATE RISK
The Company has short-term debt and short-term bank borrowings supported by
a long-term revolving Credit Agreement and a Receivables Purchase and Sale
Program which subject the Company to the risk of loss associated with movements
in market interest rates.
At December 31, 1998, the Company had $10.4 million in short-term
borrowings outstanding, $90 million in receivables sold but not collected and
$280 million in long-term debt outstanding. Of the long-term debt outstanding,
$198 million is fixed-rate debt (6.5%) and, accordingly, does not expose the
Company to risk of earnings loss due to changes in market interest rates (see
Note J to the Company's Consolidated Financial Statements). Both the short-term
debt of $10.4 million and the remaining $82.3 million of short-term borrowings
(which are classified as long-term borrowings because they are supported by the
long-term Credit Agreement) are floating rate obligations. In addition, the
Receivables Purchase and Sale Program allows the Company to sell its trade
receivables prior to collection at a discount that closely approximates the
30-day London Interbank Borrowing Rate ("LIBOR"). Such discount rate reprices
monthly.
If the floating rates were to change by 10% from December 31, 1998, levels,
annual interest expense associated with the floating-rate debt would change by
approximately $500,000 (pretax) and the annual discount paid for the sale of
receivables not yet collected would change by approximately $500,000 (pretax).
FOREIGN CURRENCY
The Company is subject to exposure from fluctuations in foreign currency
exchange rates, primarily U.S. Dollar/Canadian Dollar, U.S. Dollar/Mexican Peso
and U.S. Dollar/Argentinean Peso.
The Argentinean Peso's value has been "pegged" by the Argentinean
government as equal to the U.S. Dollar. Through December 31, 1998, this currency
equivalency applied. However, there can be no assurance in the future that the
Argentinean government will continue this policy or have the ability to ensure
that the value of the Argentinean Peso will continue to equal the U.S. Dollar.
At December 31, 1998, one U.S. Dollar was worth 1.54 Canadian Dollars and
9.90 Mexican Pesos, respectively. For the year ended December 31, 1998, the U.S.
Dollar/Canadian Dollar exchange rate fluctuated between a high of $1.00/C$1.59
to $1.00/C$1.40 and the U.S. Dollar/Mexican Peso exchange rate fluctuated
between $1.00/P$10.62 and a low of $1.00/P$8.02. A hypothetical 10% change in
the exchange rates for the U.S. Dollar to the Canadian Dollar, the Mexican Peso
and the Argentinean Peso from those at December 31, 1998, would result in an
annual currency translation gain or loss of approximately $2.5 million (pretax).
COMMODITY PRICE RISK
In the manufacture of its products the Company utilizes a number of
materials that can be considered commodities, such as tallow, coconut oil and
meat. In addition, the Company uses a variety of products that are priced based
on underlying commodities, such as plastic bottles (resin) and packaging
(cardboard). The Company, in the normal course of business, attempts to enter
into supply agreements that generally fix or set a range of prices of goods to
be purchased. These supply agreements can cover up to six to 12 months of supply
for goods. Financial derivatives to hedge or lock in the prices of these
commodities over the long term generally are not available.
20
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of the Company as of December 31, 1998,
and for each of the fiscal years in the three-year period ended December 31,
1998, together with related notes and the report of Deloitte & Touche LLP are
set forth on the following pages.
21
<PAGE> 24
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of The Dial Corporation has the responsibility for preparing
and assuring the integrity and objectivity of the accompanying financial
statements and other financial information in this report. The financial
statements were prepared using generally accepted accounting principles
consistently applied. The financial statements reflect, where applicable,
management's best estimates and judgments and include disclosures and
explanations that are relevant to an understanding of the financial affairs of
the Company.
The Company's financial statements have been audited by Deloitte & Touche
LLP. Management has made available to Deloitte & Touche LLP all of the Company's
financial records and other relevant data and has made appropriate and complete
written and oral representations and disclosures in connection with the audit.
Management has established and maintains a system of internal control that
is designed to provide reasonable assurance that transactions are authorized and
properly recorded, that assets are protected and that materially inaccurate
financial reporting is prevented and detected. The appropriate segregation of
responsibilities and careful selection of employees are components of the system
of internal controls. The internal control system is independently monitored and
evaluated by an extensive and comprehensive internal auditing program.
The Board of Directors, acting through its Audit Committee, oversees the
adequacy of the Company's internal control environment. The Audit Committee
meets regularly with management representatives and, jointly and separately,
with representatives of Deloitte & Touche LLP and internal auditing management
to review accounting, auditing and financial reporting matters.
/s/ MALCOLM JOZOFF
--------------------------------------
Malcolm Jozoff
Chairman, President and Chief
Executive Officer
/s/ SUSAN J. RILEY
--------------------------------------
Susan J. Riley
Senior Vice President and Chief
Financial Officer
22
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of The Dial Corporation:
We have audited the accompanying consolidated balance sheets of The Dial
Corporation as of December 31, 1998, and January 3, 1998, and the related
consolidated statements of operations and comprehensive income, cash flows and
stockholders' equity for each of the three fiscal years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The Dial Corporation as of
December 31, 1998, and January 3, 1998, and the results of its operations and
its cash flows for each of the three fiscal years in the period ended December
31, 1998, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
Deloitte & Touche LLP
Phoenix, Arizona
January 29, 1999
23
<PAGE> 26
THE DIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 12,405 $ 10,089
Receivables, less allowance of $7,378 and $6,841.......... 56,477 60,448
Inventories............................................... 155,441 124,058
Deferred income taxes..................................... 13,156 25,185
Other current assets...................................... 1,634 7,174
---------- --------
Total current assets.............................. 239,113 226,954
Property and equipment, net................................. 281,302 260,928
Deferred income taxes....................................... 82,227 63,567
Intangibles, net............................................ 545,999 331,482
Other assets................................................ 26,734 921
---------- --------
$1,175,375 $883,852
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable.................................... $ 123,911 $102,235
Short-term borrowings..................................... 10,389 8,500
Income taxes payable...................................... 9,685 14,581
Other current liabilities................................. 106,663 113,435
---------- --------
Total current liabilities......................... 250,648 238,751
Long-term debt.............................................. 280,223 84,399
Pension and other benefits.................................. 245,981 231,634
Other liabilities........................................... 8,298 9,022
---------- --------
Total liabilities................................. 785,150 563,806
---------- --------
Commitments and contingencies (Notes M and R)
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock, $.01 par value, 300,000,000 shares
authorized; 104,355,018 and 102,725,481 shares
issued................................................. 1,044 1,027
Additional capital........................................ 450,767 393,947
Retained income........................................... 105,011 33,892
Accumulated other comprehensive income.................... (8,949) (1,800)
Employee benefits......................................... (129,111) (105,572)
Treasury stock, 1,176,082 and 101,040 shares held......... (28,537) (1,448)
---------- --------
Total stockholders' equity........................ 390,225 320,046
---------- --------
$1,175,375 $883,852
========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE> 27
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
(000 OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------ ---------- ------------
<S> <C> <C> <C>
Net sales............................................. $1,524,517 $1,362,606 $1,406,400
---------- ---------- ----------
Costs and expenses:
Cost of products sold............................... 787,401 718,112 739,893
Write down of discontinued product inventories...... 27,924
---------- ---------- ----------
787,401 718,112 767,817
Selling, general and administrative expenses........ 553,181 482,324 541,110
Restructuring charges and other asset write-downs... 27,076
---------- ---------- ----------
1,340,582 1,200,436 1,336,003
---------- ---------- ----------
Operating income...................................... 183,935 162,170 70,397
---------- ---------- ----------
Spin-off transaction costs............................ 5,000
Interest and other expenses........................... 23,358 28,235 22,974
---------- ---------- ----------
23,358 28,235 27,974
---------- ---------- ----------
Income before income taxes............................ 160,577 133,935 42,423
Income taxes.......................................... 57,961 50,225 12,511
---------- ---------- ----------
NET INCOME............................................ $ 102,616 $ 83,710 $ 29,912
========== ========== ==========
NET INCOME PER SHARE -- BASIC......................... $ 1.04 $ 0.91 $ 0.33
========== ========== ==========
NET INCOME PER SHARE -- DILUTED....................... $ 1.02 $ 0.89 $ 0.33
========== ========== ==========
Basic shares outstanding.............................. 98,294 91,918 89,705
Equivalent shares................................... 2,185 2,231 1,269
---------- ---------- ----------
Diluted shares outstanding............................ 100,479 94,149 90,974
========== ========== ==========
NET INCOME............................................ $ 102,616 $ 83,710 $ 29,912
Other comprehensive income (loss) net of tax:
Foreign currency translation adjustment............. (524) (2,263) 575
Minimum pension liability adjustment................ (6,625) 3,600 (3,712)
---------- ---------- ----------
Other comprehensive income (loss)..................... (7,149) 1,337 (3,137)
---------- ---------- ----------
COMPREHENSIVE INCOME.................................. $ 95,467 $ 85,047 $ 26,775
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE> 28
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------ ---------- ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income............................................. $102,616 $ 83,710 $ 29,912
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 36,489 31,763 30,533
Deferred income taxes................................ 33,235 36,545 (965)
Restructuring charges and asset write-downs.......... 55,000
Change in operating assets and liabilities:
Receivables....................................... (29,152) 9,894 12,766
Inventories....................................... 8,651 17,815 (7,763)
Trade accounts payable............................ 2,440 (3,457) 11,839
Other assets and liabilities, net................. (32,004) (15,422) (31,870)
-------- --------- --------
Net cash provided by operating activities.............. 122,275 160,848 99,452
-------- --------- --------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures................................... (50,330) (46,715) (49,468)
Acquisition of business, net of cash acquired.......... (271,043) (31,575)
Proceeds from sales of property and equipment.......... 10,662 35,853 128
-------- --------- --------
Net cash used by investing activities.................. (310,711) (42,437) (49,340)
-------- --------- --------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Net proceeds from issuance of senior notes............. 192,377
Common stock purchased for treasury.................... (26,166)
Net payments on long-term borrowings................... (2,077) (206,216) (13,488)
Proceeds from sale of common stock..................... 107,990
Net change in short-term borrowings.................... 1,889 8,500 (317)
Net change in receivables sold......................... 31,100 (15,998) (1,808)
Dividends paid on common stock......................... (31,497) (29,510) (14,365)
Cash proceeds from stock options....................... 25,126 12,810 2,779
Cash transfers to parent, net.......................... (14,695)
-------- --------- --------
Net cash provided (used) by financing activities....... 190,752 (122,424) (41,894)
-------- --------- --------
Net increase (decrease) in cash and cash equivalents... 2,316 (4,013) 8,218
Cash and cash equivalents, beginning of year........... 10,089 14,102 5,884
-------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR................. $ 12,405 $ 10,089 $ 14,102
======== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE> 29
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
(000 OMITTED)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK RETAINED PARENT COMMON OTHER
---------------- ADDITIONAL INCOME EMPLOYEE INVESTMENT STOCK IN COMPREHENSIVE
SHARES AMOUNT CAPITAL (DEFICIT) BENEFITS & ADVANCES TREASURY INCOME
------- ------ ---------- --------- --------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 30, 1995.... $ 496,230
Net income.................. 35,855
Payments to parent.......... (14,695)
------- ------ -------- -------- --------- --------- -------- -------
BALANCE AT SPIN-OFF, AUGUST
15, 1996.................... 517,390
Spin-off capitalization..... 95,346 $ 953 $237,664 $ (81,379) (517,390)
------- ------ -------- -------- --------- --------- -------- -------
BALANCE AFTER SPIN-OFF, AUGUST
15, 1996.................... 95,346 953 237,664 (81,379)
Exercise of stock options... 293 3 3,165 (389)
Dividends on common stock... (14,365)
Change in unearned employee
benefits.................. 6,380 (2,038) (257)
Net loss.................... (5,943)
Other comprehensive
income.................... $(3,137)
------- ------ -------- -------- --------- --------- -------- -------
BALANCE, DECEMBER 28, 1996.... 95,639 956 247,209 (20,308) (83,417) (646) (3,137)
Exercise of stock options... 807 8 5,884 10,009 (715)
Net proceeds from stock
offering.................. 6,279 63 107,927
Dividends on common stock... (29,510)
Change in unearned employee
benefits.................. 32,927 (32,164) (87)
Net income.................. 83,710
Other comprehensive
income.................... 1,337
------- ------ -------- -------- --------- --------- -------- -------
BALANCE, JANUARY 3, 1998...... 102,725 1,027 393,947 33,892 (105,572) (1,448) (1,800)
Exercise of stock options... 1,630 17 18,963 13,158 (923)
Common stock purchased for
treasury.................. (26,166)
Dividends on common stock... (31,497)
Change in unearned employee
benefits.................. 37,857 (36,697)
Net income.................. 102,616
Other comprehensive
income.................... (7,149)
------- ------ -------- -------- --------- --------- -------- -------
BALANCE, DECEMBER 31, 1998.... 104,355 $1,044 $450,767 $105,011 $(129,111) $(28,537) $(8,949)
======= ====== ======== ======== ========= ========= ======== =======
<CAPTION>
TOTAL
---------
<S> <C>
BALANCE, DECEMBER 30, 1995.... $ 496,230
Net income.................. 35,855
Payments to parent.......... (14,695)
---------
BALANCE AT SPIN-OFF, AUGUST
15, 1996.................... 517,390
Spin-off capitalization..... (360,152)
---------
BALANCE AFTER SPIN-OFF, AUGUST
15, 1996.................... 157,238
Exercise of stock options... 2,779
Dividends on common stock... (14,365)
Change in unearned employee
benefits.................. 4,085
Net loss.................... (5,943)
Other comprehensive
income.................... (3,137)
---------
BALANCE, DECEMBER 28, 1996.... 140,657
Exercise of stock options... 15,186
Net proceeds from stock
offering.................. 107,990
Dividends on common stock... (29,510)
Change in unearned employee
benefits.................. 676
Net income.................. 83,710
Other comprehensive
income.................... 1,337
---------
BALANCE, JANUARY 3, 1998...... 320,046
Exercise of stock options... 31,215
Common stock purchased for
treasury.................. (26,166)
Dividends on common stock... (31,497)
Change in unearned employee
benefits.................. 1,160
Net income.................. 102,616
Other comprehensive
income.................... (7,149)
---------
BALANCE, DECEMBER 31, 1998.... $ 390,225
=========
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
NOTE A. BASIS OF PREPARATION
On July 25, 1996, the Board of Directors of The Dial Corp ("Former Parent")
declared a dividend to effect the spin-off of its Consumer Products Business
(the "Spin-off"). The dividend was paid on August 15, 1996, to shareholders of
record as of August 5, 1996. Each Dial shareholder received a dividend of one
share of common stock of The Dial Corporation ("the Company"), which, since the
Spin-off, has owned and operated the Consumer Products Business previously
conducted by Former Parent. Concurrently with the Spin-off, the name of Former
Parent was changed to Viad Corp.
The Consolidated Financial Statements present the financial position,
results of operations and cash flows of the divisions and subsidiaries
comprising the Company, as if it had been formed as a separate entity for all
periods presented. Dial's historical cost basis of the assets and liabilities
have been carried over to the new company. Concurrent with the Spin-off, the
Company was capitalized through settlement of Former Parent's investment and
advances account of $517.4 million by the assumption of $280 million of
long-term debt and $80.2 million (net of income taxes) in Armour employee
benefit liabilities, with the net $157.2 million remaining comprising the
Company's stockholders' equity as of the Spin-off date. All intercompany
balances and transactions among the entities comprising the Company have been
eliminated.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements are prepared in accordance with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Beginning with 1998, the Company's fiscal year end is December 31. Prior to
1998, the Company's fiscal year ended on the Saturday closest to the end of
December. Fiscal year 1998 consisted of 52 weeks, fiscal year 1997 consisted of
53 weeks and fiscal year 1996 consisted of 52 weeks.
Revenue Recognition. Sales are recorded at the time products are shipped
to trade customers.
Major Customers. Major customers are defined as those that individually
accounted for more than 10% of the Company's sales. Sales to a major customer
accounted for 17%, 17% and 16% of the Company's net sales in 1998, 1997 and
1996, respectively.
Marketing and Research and Development Costs. All expenditures for
marketing and research and development are charged against earnings in the year
incurred and are reported in the Statement of Consolidated Operations under the
caption "Selling, general and administrative expenses." The Company's internal
and external research and development expenditures totaled approximately $10.2
million, $9.8 million and $15.2 million in 1998, 1997 and 1996, respectively.
Marketing costs include the costs of advertising and various sales promotional
programs.
Cash Equivalents. The Company considers all highly liquid investments with
original maturities of three months or less from the date of purchase to be cash
equivalents.
Inventories. Generally, inventories are stated at the lower of cost (first
in, first out and average cost methods) or market.
Long-Lived Assets. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, the Company reviews the carrying values of its
long-lived assets and identifiable intangibles for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of assets
to be held and used may not be recoverable. For assets to be disposed of, the
Company reports long-lived assets and certain identifiable intangibles at the
lower of carrying amount or fair value less cost to sell.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
Property and Equipment. Property and equipment are stated at cost, net of
accumulated depreciation.
Depreciation is provided principally by use of the straight-line method at
annual rates as follows:
<TABLE>
<S> <C>
Buildings.................................... 2% to 5%
Machinery and other equipment................ 5% to 33%
Leasehold improvements....................... Lesser of lease term or useful life
</TABLE>
Intangibles. Intangibles are carried at cost less accumulated
amortization. Intangibles that arose prior to November 1, 1970, as a result of
the Former Parent's initial investment in the Company are not being amortized.
Goodwill arising on or after November 1, 1970, is amortized on the straight-line
method over the periods of expected benefit but not in excess of 40 years.
Trademarks are amortized on the straight-line method over 40 years. The customer
list that arose from the acquisition of PUREX(R) is being amortized over 30
years.
Pension and Other Benefits. Trusteed, noncontributory pension plans cover
substantially all employees, with benefit levels supplemented in most cases by
defined matching common stock contributions to employees' 401(k) plans. Defined
benefits are based primarily on final average salary and years of service.
Funding policies provide that payments to defined benefit pension trusts shall
be at least equal to the minimum funding required by applicable regulations.
The Company has defined benefit post retirement plans that provide medical
and life insurance for eligible retirees and dependents. The related post
retirement benefit liabilities are recognized over the period that services are
provided by employees.
Net Income Per Common Share. In accordance with SFAS No. 128, basic net
income per common share is computed by dividing net income by the weighted
average number of common shares outstanding during the year before giving effect
to stock options considered to be dilutive common stock equivalents. Diluted net
income per common share is computed by dividing net income by the weighted
average number of common shares outstanding during the year after giving effect
to stock options considered to be dilutive common stock equivalents. Shares held
by the Employee Equity Trust (the "Trust") are not considered outstanding for
net income per share calculations until the shares are released from the Trust.
At December 31, 1998, there were 104,355,018 shares of common stock issued
and 98,683,200 shares outstanding. At December 31, 1998, and January 3, 1998, a
total of 4,495,736 and 5,072,785, respectively, of the issued shares were held
by the Trust. At December 31, 1998, and January 3, 1998, a total of 1,176,082
and 101,040 shares of common stock, respectively, were held in treasury by the
Company. The shares held at December 31, 1998, included 218,725 shares valued at
$5.2 million purchased by the Company as part of a small shareholder
selling/repurchasing program executed during the first half of 1998 and 831,600
shares valued at $21.1 million as part of the Company's stock repurchase
program.
In addition to common stock, the Company is authorized to issue 10,000,000
shares of preferred stock, par value of $.01 per share, none of which has been
issued.
Income per share is presented for 1996 as the Company's common shares were
issued on August 15, 1996. The calculation of income per share assumes that the
common shares and common share equivalents were outstanding for that entire
year.
Reporting on Comprehensive Income. In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income"
("SFAS No. 130") which was adopted in 1998. SFAS No. 130 requires that
enterprises classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained income and additional capital in the
stockholders' equity section of the balance sheet.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
Segments of an Enterprise. In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131") which was adopted in 1998.
SFAS No. 131 establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for disclosures about products and services, geographic areas and major
customers. See Note P to the Consolidated Financial Statements for additional
information concerning the Company's segments of an enterprise disclosures.
New Accounting Pronouncements. In June 1998, the FASB issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires all derivatives
to be recorded on the balance sheet at fair value and provides a comprehensive
and consistent standard for the recognition and measurement of derivatives and
hedging activities. The Company is studying the application of this new
Statement. This Statement shall be effective for annual periods beginning after
June 15, 1999.
NOTE C. ACQUISITION OF BUSINESSES
On July 1, 1998, the Company acquired The Freeman Cosmetic Corporation
("Freeman"), a manufacturer and marketer of natural skin care, hair care, bath,
body and foot care products for a cash purchase price of approximately $78.0
million. The cash purchase price for Freeman reflects a $6.0 million reduction
as a result of a net worth adjustment received by the Company in January 1999.
The Freeman acquisition has been accounted for under the purchase method of
accounting. The purchase price has been preliminary allocated based on estimated
fair value of assets and liabilities at date of acquisition, pending final
determination of certain acquired balances. This preliminary allocation added
$7.7 million to current assets, $19.6 million to current liabilities and has
resulted in acquired goodwill of $87.5 million, which is being amortized on a
straight-line basis over 40 years. The results of Freeman have been included in
the consolidated financial statements since the acquisition date.
On September 14, 1998, the Company acquired Sarah Michaels, Inc. ("Sarah
Michaels"), a manufacturer and marketer of specialty bath and body care products
for a cash purchase price of $187.0 million. The Sarah Michaels acquisition has
been accounted for under the purchase method of accounting. The purchase price
has been preliminary allocated based on estimated fair value of assets and
liabilities at date of acquisition, pending final determination of certain
acquired balances. At December 31, 1998, $5.0 million remains in escrow pending
final valuation of certain acquired assets and liabilities. This preliminary
allocation added $43.9 million to current assets, $16.1 million to current
liabilities and has resulted in acquired goodwill of approximately $125.8
million, which is being amortized on a straight-line basis over 40 years. The
results of Sarah Michaels have been included in the consolidated financial
statements since the acquisition date.
The Company continues to gather and analyze certain information required to
complete the allocation of the purchase price of the acquisitions of Freeman and
Sarah Michaels. Further adjustments to the allocation of the purchase price may
arise as a result of the finalization of the ongoing study.
The following unaudited pro forma combined condensed financial information
for 1998 and 1997 includes the results of operations for the Company and assumes
the acquisition of Sarah Michaels and Freeman were consummated at the beginning
of each period presented, along with adjustments which give effect to events
that are directly attributable to the transaction and are expected to have a
continuing impact. The unaudited pro forma combined condensed financial
information does not give any effect to any potential cost savings which may
arise from the consolidation of the acquisitions with the Company.
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
The unaudited pro forma combined condensed financial information does not
purport to represent the results of operations that would have actually resulted
had the purchases occurred on the indicated dates, nor should it be taken as
indicative of future results of operations.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales.......................................... $1,580,286 $1,496,058
Operating income................................... 181,534 177,391
Net income......................................... 94,474 83,284
Earnings per share -- diluted...................... $ 0.94 $ 0.88
</TABLE>
In September 1997, the Company acquired Nuevo Federal S.A., a manufacturer
and marketer of personal care and household products in Argentina, for a
purchase price of approximately $35 million. Of this amount, $26.8 million was
paid in cash with the remainder of the purchase price comprised of future
payments contingent on the completion of certain transactions which have not yet
occurred. In addition, in November 1997, the Company acquired three leading
personal care soap brands and two laundry bar brands from The Procter & Gamble
Company's Argentinean subsidiary for a purchase price of $4.8 million paid in
cash. These acquisitions, accounted for under the purchase method of accounting,
resulted in acquired goodwill of approximately $27.6 million which is being
amortized on a straight-line basis over 25 years.
NOTE D. RESTRUCTURING CHARGES AND INVENTORY AND ASSET WRITE-DOWNS
In the third quarter of 1996, the Company announced a line of business and
an administrative reorganization to streamline its management and administrative
organization, eliminate approximately 250 positions, sell or discontinue a
number of underperforming brands and exit the then existing corporate
headquarters. The Company recorded restructuring charges and asset write-downs
of $55 million ($33.6 million after tax) in the third quarter of 1996 for
severance costs, discontinuance of product lines and building exit costs.
Approximately $27.9 million of the charge related to inventories and was
included in cost of products sold.
NOTE E. INCOME AND EXPENSE ITEMS
During 1998, the Company received approximately $10.7 million from the
disposition of assets. The Purex Toss 'n Soft brand and related inventories were
sold to Church & Dwight Co., Inc. for approximately $5.3 million. In addition, a
non operating manufacturing property was sold for $4.0 million to a third party.
No gain or loss was realized on the transactions.
In the third quarter of 1997, the Company sold to Church & Dwight Co.,
Inc., for $30.2 million Brillo soap pads and related products, Parsons' ammonia,
Bo Peep ammonia, Sno Bol toilet bowl cleaner, Cameo metal cleaner and Rain Drops
water softener. The Company's London, Ohio, plant, where Brillo was
manufactured, also was part of the sale. In addition, the Company sold to other
third parties for approximately $4.5 million its Bruce floor care trademark and
its Magic sizing starch brand and related inventories. Included in operating
income is an aggregate gain of $15.7 million from the sale of these businesses.
Also included in 1997 operating income is $15.9 million of various
impairment and other operating charges. In the third quarter of 1997, the
Company evaluated the estimated life of the capitalized package design costs,
which were being amortized over five years. In light of the accelerated pace of
package design changes taking place in the Company and the industry, the
estimated life of the capitalized package design costs was changed to one year.
Accordingly, $9.5 million of capitalized package design costs were considered
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
impaired and written-off against income. In addition, the Company charged
against income $4.5 million in discontinued product sales returns and $1.9
million in additional promotion claims on discontinued products.
NOTE F. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
Raw materials and supplies........................... $ 55,791 $ 36,938
Work in process...................................... 7,855 9,373
Finished goods....................................... 91,795 77,747
-------- --------
$155,441 $124,058
======== ========
</TABLE>
NOTE G. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
Land................................................ $ 10,057 $ 10,071
Buildings and leasehold improvements................ 118,630 108,613
Machinery and other equipment....................... 385,616 376,582
Construction in progress............................ 32,093 15,936
--------- ---------
546,396 511,202
Less accumulated depreciation....................... (265,094) (250,274)
--------- ---------
$ 281,302 $ 260,928
========= =========
</TABLE>
NOTE H. INTANGIBLES
Intangibles consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
Goodwill(1).......................................... $488,870 $265,335
Trademarks........................................... 52,718 54,957
Customer list and other intangibles.................. 78,365 78,997
-------- --------
619,953 399,289
Less accumulated amortization........................ (73,954) (67,807)
-------- --------
$545,999 $331,482
======== ========
</TABLE>
- ---------------
(1) Includes $155,259,000 of goodwill arising prior to November 1, 1970, that is
not being amortized.
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
NOTE I. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
Accrued compensation................................. $ 25,038 $ 30,238
Accrued trade promotions............................. 24,390 21,256
Employee benefit liabilities......................... 18,114 16,509
Dividends payable.................................... 7,905 7,799
Other................................................ 31,216 37,633
-------- --------
$106,663 $113,435
======== ========
</TABLE>
NOTE J. DEBT
Short-term debt at December 31, 1998, consisted of a $10,389,000 bank loan
to the Company's Argentinean subsidiary, Nuevo Federal. The loan is denominated
in Argentinean Pesos, bears interest at the bank's short-term rate (9% at
December 31, 1998) and reprices monthly. The loan is subject to call by the bank
at the end of each month.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
$200 million 6.5% Senior Notes due 2008, net of issue
discount........................................... $197,938 $ --
Short-term bank borrowings supported by the long-term
revolving Credit Agreement, with interest rates at
December 31, 1998 ranging from 5.5% to 6%.......... 82,285 84,399
-------- -------
Total long-term debt....................... $280,223 $84,399
======== =======
</TABLE>
On September 23, 1998, the Company issued $200,000,000 of 6.5% Senior Notes
due 2008. The Indenture governing these Senior Notes imposes restrictions on the
Company with respect to, among other things, its ability to redeem the Senior
Notes, place liens on certain properties and enter into certain sale and
leaseback transactions.
In addition, long-term debt consists of short-term bank borrowings
classified as long-term because they are supported by the Company's $350 million
long-term, revolving Credit Agreement. At December 31, 1998, the Company had
$350 million available under the Credit Agreement. Borrowings under the Credit
Agreement are on a revolving basis under commitments available until August 15,
2002. The interest rate applicable to bank borrowings under the Credit Agreement
is, at the Company's option, indexed to the bank prime rate or the London
Interbank Offering Rate ("LIBOR"), plus appropriate spreads over such indices
during the period of the Credit Agreement. The Agreement also provides for
commitment fees. Such spreads and fees will change moderately should the
Company's debt ratings change.
The financial covenants of the Credit Agreement require the Company to
maintain stockholders' equity equal to 80% of such equity as of the Spin-off
date plus 25% of net income subsequent thereto plus certain other additions to
stockholders' equity. The Company also is required to maintain a three-to-one
ratio of long-term debt to income before interest, taxes, depreciation and
amortization. Under the most restrictive of these
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
covenants, approximately $110 million of stockholders' equity was available for
dividends as of December 31, 1998.
Interest expense incurred on long-term debt in 1998, 1997 and 1996 was
$10,526,000, $13,152,000 and $6,500,000, respectively.
Interest paid to lenders other than the Former Parent in 1998, 1997 and
1996 was approximately $9,575,000, $13,567,500 and $5,329,800, respectively.
NOTE K. INCOME TAXES
The deferred income tax assets (liabilities) included in the Consolidated
Balance Sheet at December 31, 1998, and January 3, 1998, are related to the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
Property, plant and equipment........................ $(25,806) $(34,837)
Pension and other employee benefits.................. 77,921 83,599
Reserves, accruals and other......................... 29,773 25,462
Deferred state income taxes.......................... 13,495 14,528
-------- --------
$ 95,383 $ 88,752
======== ========
</TABLE>
The combined provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(000 OMITTED)
<S> <C> <C> <C>
Current:
United States:
Federal.......................................... $21,898 $10,744 $10,262
State............................................ 1,677 2,024 3,081
Foreign............................................. 1,151 912 133
------- ------- -------
24,726 13,680 13,476
------- ------- -------
Deferred:
United States:
Federal.......................................... 31,266 30,133 5,977
State............................................ 1,969 6,412 (6,942)
------- ------- -------
33,235 36,545 (965)
------- ------- -------
Provision for income taxes............................ $57,961 $50,225 $12,511
======= ======= =======
</TABLE>
Income taxes paid in 1998, 1997 and 1996 amounted to $23,109,534,
$4,577,000 and $3,789,000, respectively. Taxes paid in 1997 and 1996 reflect
income tax deductions associated with the 1996 and 1995 restructuring programs.
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
A reconciliation between the statutory federal income tax rate and the
Company's consolidated effective income tax rate for each of the years ended
December 31,1998, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate...................................... 35.0% 35.0% 35.0%
Goodwill amortization....................................... .5 .4 1.1
Spin-off transaction costs.................................. .5
Foreign Sales Corp. benefit................................. (.6) (.7) (1.0)
State income taxes.......................................... 3.2 3.7 3.6
State deferred tax asset adjustment......................... (9.5)
Impact of lower foreign tax rate............................ (1.5) (1.1) (1.4)
Other, net.................................................. (.5) .2 1.2
---- ---- ----
Effective income tax rate................................... 36.1% 37.5% 29.5%
==== ==== ====
</TABLE>
NOTE L. PENSION AND OTHER BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Projected benefit obligation at beginning of year.... $161,399 $154,671
Service cost......................................... 4,230 4,354
Interest cost........................................ 12,239 11,923
Actuarial (gain)/loss................................ 18,131 (840)
Other (recognition of past service costs)............ 2,809
Benefits paid........................................ (9,116) (8,709)
-------- --------
Projected benefit obligation......................... $189,692 $161,399
======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year....... $157,616 $137,325
Actual return on plan assets......................... 6,678 28,421
Company contributions................................ 896 579
Benefits paid........................................ (9,116) (8,709)
-------- --------
Fair value of plan assets............................ $156,074 $157,616
======== ========
</TABLE>
At December 31, 1998, the plans held 501,584 shares of common stock of the
Company.
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $99,455,000, $97,156,000 and $81,083,000,
respectively, as of December 31, 1998, and $7,522,000, $5,866,000 and $862,000,
respectively, as of January 3, 1998.
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
<TABLE>
<CAPTION>
1998 1997
-------- --------
(000 OMITTED)
<S> <C> <C>
RECONCILIATION OF FUNDED STATUS:
Funded status.......................................... $(33,618) $ (3,783)
Unrecognized transition obligation..................... 601 928
Unrecognized prior service cost........................ 4,692 5,142
Unrecognized actuarial (gain)/loss..................... 7,547 (18,779)
-------- --------
Accrued pension cost................................... $(20,778) $(16,492)
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEET:
Prepaid pension cost................................. $ 1,710 $ 4,197
Accrued benefit liability............................ (32,403) (20,717)
Additional minimum liability......................... 9,915 28
-------- --------
Net amount recognized................................ $(20,778) $(16,492)
======== ========
</TABLE>
At December 31, 1998, the plans held 501,584 shares of common stock of the
Company.
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plans assets were $99,455,000, $97,156,000, and $81,083,000,
respectively, as of December 31, 1998, and $7,722,000, $5,866,000 and $862,000,
respectively, as of January 3, 1998.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CALCULATION OF NET PERIODIC PENSION COST:
Service cost....................................... $ 4,230 $ 4,354 $ 4,516
Interest cost...................................... 12,239 11,923 11,419
Expected return on plan assets..................... (13,439) (11,965) (11,250)
Amortization of:
Net transition obligation........................ 327 327 327
Unrecognized past service cost................... 450 446 446
Actuarial loss................................... 238 188 283
-------- -------- --------
Net periodic pension cost.......................... $ 4,045 $ 5,273 $ 5,741
======== ======== ========
Curtailment (Gain)/Loss............................ $ -- $ 86 $ (529)
======== ======== ========
Other Comprehensive (Income)/Loss.................. $ 9,730 $ (6,068) $ 6,109
======== ======== ========
ASSUMPTIONS TO BE DISCLOSED:
Discount rate for obligation....................... 7.00% 7.75% 8.00%
Long-term rate of investment return................ 10.00% 10.00% 9.50%
Salary increase rate............................... 4.00% 4.00% 5.00%
</TABLE>
For the years ended December 31, 1998, January 3, 1998, and December 28,
1996, defined contribution plan expense was $2,026,000, $2,002,000 and
$2,143,000, respectively: multi-employer pension plan costs were $1,259,000,
$1,135,000 and $1,217,000, respectively.
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
Post retirement Benefits Other Than Pensions. The Company and its
subsidiaries have defined benefit post retirement plans that provide medical and
life insurance for eligible employees, retirees and dependents. In addition, the
Company retained the obligations for such benefits for eligible retirees of
Armour and Company (sold in 1983).
Effective January 1, 1992, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Post retirement Benefits Other Than Pensions"
("OPEB"), which requires that estimated OPEB benefits be accrued during the
years the employees provide services.
The status of the plans are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1998 1998
------------ ----------
(000 OMITTED)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year..................... $ 190,117 $ 196,236
Service cost................................................ 2,005 2,276
Interest cost............................................... 13,994 14,453
Plan participants' contributions............................ 1,091 1,159
Amendments.................................................. (2,274) 952
Actuarial loss/(gain)....................................... 10,830 (5,859)
Benefits paid............................................... (17,075) (19,100)
--------- ---------
Benefit obligation at end of year........................... $ 198,688 $ 190,117
========= =========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year.............. $ -- $ --
Employer contribution....................................... 15,984 17,941
Plan participants' contribution............................. 1,091 1,159
Benefits paid............................................... (17,075) (19,100)
--------- ---------
Fair value of plan assets at end of year.................... $ -- $ --
========= =========
Funded status............................................... $(198,688) $(190,117)
Unrecognized net gain....................................... (11,873) (24,373)
Unrecognized prior service cost............................. (13,314) (12,212)
--------- ---------
Accrued benefit cost........................................ $(223,875) $(226,702)
========= =========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS....... $(223,875) $(226,702)
========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------ ---------- ------------
<S> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS:
Discount rate................................... 7.00% 7.75% 8.00%
</TABLE>
The assumed health care rate cost trend used to measure the accumulated
post retirement benefit obligation for retirees below the age of 65 for 1999 is
8.0%, and for retirees above age 65 for 1999 is 6.5%, both gradually declining
to an ultimate rate of 5% in 2002.
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------ ---------- ------------
(000 OMITTED)
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost.................................... $ 2,005 $ 2,276 $ 2,589
Interest cost................................... 13,994 14,453 15,641
Amortization of:
Unrecognized prior service cost............... (1,172) (881) (696)
Actuarial gain................................ (1,670) (2,567) (2,391)
------- ------- -------
Net periodic benefit cost....................... $13,157 $13,281 $15,143
======= ======= =======
Curtailment gain................................ $ -- $ -- $(4,611)
======= ======= =======
</TABLE>
The 1998, 1997 and 1996 components of net periodic post retirement benefit
cost reflect a full years expense of approximately $6.8 million, $5.8 million
and $6.9 million, respectively, incurred on the Armour employee benefit
liabilities assumed in the Spin-off. Expenses of approximately $6.8 million for
the year ended December 31, 1998, $5.8 million for the year ended January 3,
1998, and $2.2 million for the year ended December 28, 1996, which were incurred
after the Spin-off, are included in "Interest and Other Expenses" in the
Statement of Consolidated Operations. For the year ended December 28, 1996,
expenses of $4.7 million incurred prior to the Spin-off were recorded in the
financial statements of Former Parent.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------- ----------
<S> <C> <C>
EFFECT OF ONE-PERCENTAGE-POINT CHANGE IN ASSUME
HEALTH CARE COST TREND RATES:
Effect on the total of service and interest cost
components................................................ $ 1,630 $ (1,357)
Effect on accumulated post retirement benefit obligation.... $16,824 $(14,076)
</TABLE>
NOTE M. LEASES
Certain sales and administration offices and equipment are leased. The
leases expire in periods ranging generally from one to five years, and some
provide for renewal options ranging from one to eight years. Leases that expire
are generally renewed or replaced by similar leases, depending on business needs
at that time. Net rent expense paid in 1998, 1997 and 1996 totaled $8,989,000,
$6,533,000 and $3,797,000, respectively.
At December 31, 1998, the Company's future minimum rental payments with
respect to noncancelable operating leases with terms in excess of one year were
as follows: $8,641,000 (1999), $8,144,000 (2000), $7,407,000 (2001), $6,157,000
(2002), $3,936,000 (2003) and $12,879,000 thereafter.
NOTE N. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
Financial Instruments with Off-Balance-Sheet Risk. At December 31, 1998,
the Company had an agreement to sell undivided participating interests in a
defined pool of trade accounts receivable in an amount not to exceed $90,000,000
as a means of accelerating cash flow. From time to time, as collections reduce
accounts receivable in the pool, the Company sells participating interests in
new receivables. The Company's expenses of selling receivables amounted to
approximately $4,295,000, $4,752,000 and $2,059,000 in 1998, 1997 and 1996,
respectively, and are included in the Statement of Consolidated Operations under
the caption "Interest and Other Expenses." Under the terms of the agreement, the
Company has retained substantially the same risk of credit loss as if the
receivables had not been sold, as the Company is obligated to replace
uncollectible receivables with new accounts receivable. The Company's accounts
receivable sold totaled $90,000,000 and $58,902,000 at December 31, 1998, and
January 3, 1998, respectively. The Company's
38
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
average accounts receivable sold approximated $82,144,000, $70,727,000 and
$42,637,000 during 1998, 1997 and 1996, respectively.
In connection with the Spin-off, the Company assumed an interest rate swap
agreement in the notional amount of $65,000,000. The agreement, which matured in
December 1997, required the Company to pay a fixed rate of 8.87% and receive a
six-month LIBOR rate.
Fair Value of Financial Instruments. The carrying values of cash and cash
equivalents, receivables, accounts payable and bank borrowings approximate fair
values due to the short-term maturities of these instruments.
NOTE O. STOCK OPTIONS
Certain officers and employees hold options to acquire the Company's common
stock, which were granted under Former Parent's stock option plans. These
options were granted over a period of nine years and have been adjusted for
stock splits and the Spin-off. Such options were transferred to the Company as
part of the Spin-off, with the number of shares and option prices adjusted so as
to preserve the economic value of the options to the optionees. Such options
were granted at the market prices on the dates of grant, became exercisable 50%
after one year and 100% after two years and expire after 10 years. No additional
options will be granted under these plans.
In connection with the Spin-off, the Company adopted The Dial Corporation
Stock Incentive Plan ("1996 Plan") which is administered by the Executive
Compensation Committee of the Board of Directors. Under the 1996 Plan, the
aggregate number of shares of common and preferred stock covered by awards to
any one individual cannot exceed 1,000,000 shares for any three-year period
(plus shares necessary to replace options granted by the Former Parent and
transferred to the Company in connection with the Spin-off), and no more than
9,600,000 shares are cumulatively available for options intended to qualify as
"incentive stock options" under the Internal Revenue Code. The term of the
options is 10 years. The Plan provides that options are generally to be granted
at the market price on the date of grant; however, the Executive Compensation
Committee may grant options at less than such market price. The 1996 Plan also
authorizes the issuance of stock appreciation rights and restricted stock.
Under the 1996 Plan, incentive stock options to purchase 232,490 shares and
non qualified options to purchase 55,916 shares were granted at the market price
on the dates of grant during 1998. After one year, one-third of the options
become exercisable when the average closing market price over 20 consecutive
days equals or exceeds 133% of the option price, two-thirds when such price
equals or exceeds 167% of the option price and 100% when such price equals or
exceeds 200% of the option price. All such options become exercisable, in any
event, after five years from the date of grant. It is expected that additional
options will not be granted prior to August 1999.
During 1998, options to purchase 39,100 shares also were granted to non
employee members of the Board of Directors at the market prices on the dates of
grant. Such options are exercisable 50% after one year and 100% after two years.
The options expire after 10 years.
39
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
A summary of the status of the Company's stock option plans as of December
31, 1998, and changes during the fiscal years 1996, 1997 and 1998, are presented
below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- --------
<S> <C> <C>
Outstanding at spin-off............................... 4,298,041 $ 9.63
Granted............................................... 6,226,324 13.11
Exercised............................................. (293,015) 9.25
Canceled.............................................. (61,776) 11.84
----------
Outstanding at December 28, 1996...................... 10,169,574 11.76
Granted............................................... 1,283,352 16.23
Exercised............................................. (1,415,570) 9.57
Canceled.............................................. (1,056,435) 13.23
----------
Outstanding at January 3, 1998........................ 8,980,921 12.60
Granted............................................... 328,106 23.78
Exercised............................................. (2,253,436) 11.62
Canceled.............................................. (701,845) 14.29
---------- ------
Outstanding at end of year............................ 6,353,746 $13.34
========== ======
Options exercisable at end of year.................... 5,393,510 $12.42
========== ======
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF OPTIONS LIFE EXERCISE OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 5.62-$ 6.88 291,024 1.9 $ 6.53 291,024 $ 6.53
$ 8.38-$ 9.23 329,061 3.8 8.95 329,061 8.95
$ 9.64-$11.15 556,974 4.8 10.44 556,974 10.44
$11.91-$12.88 3,155,833 7.6 12.75 3,155,833 12.75
$13.38-$14.50 817,939 7.7 14.27 565,154 14.19
$15.38-$16.94 721,092 8.5 16.08 441,650 16.06
$17.25-$18.31 129,184 8.8 17.49 42,384 17.48
$19.56-$21.81 164,291 9.5 21.45 11,430 20.68
$22.38-$23.16 40,905 9.7 23.08
$23.63-$24.50 52,208 9.3 23.99
$24.84-$25.31 16,210 9.5 25.11
$25.78-$28.72 79,025 9.8 27.67
--------- --- ------ --------- ------
6,353,746 7.1 $13.34 5,393,510 $12.42
========= === ====== ========= ======
</TABLE>
40
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
Average assumptions used in determining the estimated fair value of options
under the Black-Scholes valuation model, and the estimated fair values are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------ ---------- ------------
<S> <C> <C> <C>
Estimated fair value of options, per share........ $6.63 $4.18 $2.27
Expected average risk-free interest rate.......... 4.9% 6.3% 6.3%
Expected life in years............................ 4.6 4.4 4.2
Expected volatility............................... 27.5% 25.0% 20.4%
Expected dividend rate............................ 1.4% 2.0% 2.4%
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
(000 OMITTED)
<S> <C> <C> <C>
Net income as reported............................... $102,616 $83,710 $29,912
======== ======= =======
Pro forma net income................................. $ 96,912 $78,224 $27,298
======== ======= =======
Net income per share-basic-as reported............... $ 1.04 $ 0.91 $ 0.33
======== ======= =======
Pro forma net income per share-basic................. $ 0.99 $ 0.85 $ 0.30
======== ======= =======
Net income per share-diluted-as reported............. $ 1.02 $ 0.89 $ 0.33
======== ======= =======
Pro forma net income per share....................... $ 0.96 $ 0.83 $ 0.30
======== ======= =======
</TABLE>
NOTE P. SEGMENTS OF AN ENTERPRISE
For organizational, marketing and financial reporting purposes, the Company
has organized into three business segments: (i) Domestic Branded, (ii)
International, and (iii) Commercial Markets and Other. The segments were
identified based on the types of products sold, the customer base and method of
distribution.
The Domestic Branded business segment consists of franchises that
manufacture and market non durable consumer packaged goods through grocery
store, drug store and mass merchandiser retail outlets. It is comprised of the
Dial, Purex, Renuzit, Armour and Specialty Personal Care operating franchises.
The Company acquired Freeman, a leading manufacturer and marketer of skin, hair,
bath, body and foot care products utilizing natural ingredients, all sold under
the Freeman brand name on July 1, 1998. The Company also acquired Sarah
Michaels, a leading marketer of premium specialty bath and body products,
including body washes, body mists, luxury soaps, hand and body lotions, loofahs,
sponges and brushes, which are distributed under the Sarah Michaels brand name,
on September 14, 1998. These two acquisitions were combined with the Company's
Nature's Accents line of translucent soaps and specialty care products, and its
subsidiary, ISC International, Ltd., a manufacturer of translucent soaps, to
create the Specialty Personal Care franchise.
The International business segment consists of the Company's sale of
consumer products outside of the United States, principally in Argentina,
Canada, Mexico, Puerto Rico and the Caribbean.
The Company's Commercial Markets and Other business sells the Company's
products, both branded and un-branded, through the commercial channel to end
users such as hotels, hospitals and schools. In addition, Commercial Markets
includes sales of chemicals, principally glycerin, fatty acids and sulfonates,
that are by-products of the soap making and detergent making process.
41
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
Information as to the operations of the Company in different business
segments is set forth below. The accounting policies of the business segments
are the same as those described in the summary of significant accounting
policies (Note B).
<TABLE>
<CAPTION>
COMMERCIAL DISCONTINUED
DOMESTIC MARKETS TOTAL TOTAL & DIVESTED
BRANDED AND OTHER DOMESTIC INTERNATIONAL CONTINUING PRODUCTS
---------- ---------- ---------- ------------- ---------- ------------
(000 OMITTED)
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
1998............... $1,295,410 $64,020 $1,359,430 $164,586 $1,524,016 $ 501
1997............... 1,150,057 76,790 1,226,847 82,783 1,309,630 52,976
1996............... 1,111,366 80,115 1,191,481 56,857 1,248,338 158,062
OPERATING INCOME:
1998............... 161,849 8,421 170,270 13,723 183,993 (58)
1997............... 142,430 9,814 152,244 9,046 161,290 880
1996............... 119,874 14,434 134,308 2,325 136,633 (11,236)
CAPITAL EXPENDITURES:
1998............... 39,039 198 39,237 11,093 50,330
1997............... 40,840 3,139 43,979 2,736 46,715
1996............... 47,502 47,502 1,966 49,468
ACQUISITION OF
BUSINESSES:
1998............... 271,043 271,043 271,043
1997............... 31,575 31,575
ASSETS AT YEAR END:
1998............... 1,034,425 10,005 1,044,430 130,945 1,175,375
1997............... 787,021 9,306 796,327 87,525 883,852
<CAPTION>
RESTRUCTURING
AND OTHER
EXPENSES TOTAL
------------- ----------
(000 OMITTED)
<S> <C> <C>
NET SALES:
1998............... $1,524,517
1997............... 1,362,606
1996............... 1,406,400
OPERATING INCOME:
1998............... 183,935
1997............... 162,170
1996............... $(55,000)(1) 70,397
CAPITAL EXPENDITURES:
1998............... 50,330
1997............... 46,715
1996............... 49,468
ACQUISITION OF
BUSINESSES:
1998............... 271,043
1997............... 31,575
ASSETS AT YEAR END:
1998............... 1,175,375
1997............... 883,852
</TABLE>
- ---------------
(1) See Note D to the Consolidated Financial Statements.
Wal-Mart Stores Inc. (and its affiliate, Sam's Club) was the Company's
largest customer in 1998, 1997 and 1996, accounting for approximately 17%, 17%,
and 16%, respectively, of net sales. No other customer accounted for more than
10% of net sales in 1998, 1997 or 1996. No single foreign country comprised more
than 5% of the Company's total net sales in 1998. Net sales in Argentina were
$85.1 million in 1998. No foreign country comprised more than 5% of the
Company's total net sales in 1997 or 1996.
NOTE Q. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------------- ------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- -------- -------- --------
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $335,022 $316,242 $366,798 $349,268 $383,909 $334,290 $438,788 $362,806
Gross profit.............. $158,516 $146,952 $180,937 $166,231 $188,459 $160,567 $209,204 $170,744
Operating income.......... $ 40,554 $ 36,657 $ 44,752 $ 40,057 $ 47,144 $ 40,985 $ 51,485 $ 44,471
Net income................ $ 22,911 $ 18,323 $ 25,607 $ 20,382 $ 26,728 $ 22,352 $ 27,370 $ 22,653
Net income per share
--Basic................. $ 0.23 $ 0.20 $ 0.26 $ 0.22 $ 0.27 $ 0.25 $ 0.28 $ 0.24
--Diluted............... $ 0.23 $ 0.20 $ 0.25 $ 0.22 $ 0.27 $ 0.24 $ 0.27 $ 0.23
</TABLE>
NOTE R. LITIGATION AND CLAIMS
The Company is party to various legal actions, proceedings and pending
claims. Some of the foregoing involve, or may involve, compensatory, punitive or
other damages in material amounts. Litigation is subject to many uncertainties,
and it is possible that some of the legal actions, proceedings and claims
referred to above
42
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1998, JANUARY 3, 1998
AND DECEMBER 28, 1996
could be decided against the Company. Although the amount of liability at
December 31, 1998, with respect to these matters is not ascertainable, the
Company believes that any resulting liability will not materially affect the
Company's financial position or results of operations.
The Company is subject to various environmental laws and regulations of the
United States, as well as states and other countries in whose jurisdictions the
Company has or had operations and is subject to certain international
agreements. As is the case with many companies, the Company faces exposure to
actual or potential claims and lawsuits involving environmental matters.
Although the Company is party to certain environmental disputes, the Company
believes that any liabilities resulting therefrom, after taking into
consideration amounts already provided for, but exclusive of, any potential
insurance recoveries, will not have a material adverse effect on the Company's
financial position or results of operations. As of December 31, 1998, the
Company had accrued in its financial statements approximately $3 million in
reserves for expenses related to Superfund and clean-up of closed plant sites.
43
<PAGE> 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has never filed a Current Report on Form 8-K to report a change
in accountants because of a disagreement over accounting principles or
procedures, financial statement disclosure or otherwise.
44
<PAGE> 47
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's Directors and Executive Officers is
set forth below and under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement relating to the 1999
Annual Meeting of Stockholders to be held on June 3, 1999 (the "Proxy
Statement"), which is incorporated by reference into this Form 10-K. With the
exception of this foregoing information and other information specifically
incorporated by reference into this Form 10-K, the Proxy Statement is not being
filed as a part hereof.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Chairman of the Board, President and Chief Executive
Malcolm Jozoff(1).................... 59 Officer
Jeffrey B. Dias...................... 47 Senior Vice President-Marketing and New Business
Arthur E. Hanke...................... 51 Senior Vice President-Sales
Daniel J. King....................... 46 Senior Vice President-Product Supply
Jane E. Owens........................ 45 Senior Vice President, General Counsel and Secretary
Susan J. Riley....................... 40 Senior Vice President and Chief Financial Officer
Mark R. Shook........................ 44 Senior Vice President-International/CMD
Bernhard J. Welle.................... 50 Senior Vice President-Human Resources
Joy A. Amundson(1)(2)(3)............. 44 Director
Herbert M. Baum(3)(5)................ 62 Director
Joe T. Ford(1)(4)(5)................. 61 Director
Thomas L. Gossage(1)(2)(5)........... 64 Director
Donald E. Guinn(3)(4)................ 66 Director
Michael T. Riordan(1)(3)(5).......... 48 Director
Barbara S. Thomas(2)(4).............. 49 Director
Salvador M. Villar(2)(4)............. 48 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Executive Compensation Committee.
(4) Member of the Finance Committee.
(5) Member of the Governance Committee.
Malcolm Jozoff. Mr. Jozoff has been Chairman of the Board, President and
Chief Executive Officer of the Company since the Company's formation in 1996.
Prior to joining the Company, Mr. Jozoff served as President and Chief Executive
Officer of the Consumer Products Business of Former Parent, positions to which
he was appointed in May 1996. From 1993 to 1995, he was Chairman and Chief
Executive Officer of Lenox, Inc., a manufacturer of consumer durables. From 1967
to 1992, Mr. Jozoff was employed by The Procter & Gamble Company, a manufacturer
of consumer products, where, in 1990, he achieved the positions of
President -- Health Care Sector, Corporate Group Vice President and member of
the Executive Committee. Mr. Jozoff also is a director of the Columbia Energy
Group.
Jeffrey B. Dias. Mr. Dias joined the Company as Senior Vice
President -- Marketing and New Business in March 1999. From January 1998 to
March 1999, Mr. Dias served as President of The Singer Sewing Company, a
manufacturer of sewing appliances, and from January 1997 until March 1999, he
served as Senior Vice President of The Singer Company N.V., a manufacturer and
retailer of household appliances. From 1978 until 1996, Mr. Dias was employed in
various management positions in the health care, food,
45
<PAGE> 48
beverages and consumer products divisions of The Procter & Gamble Company, a
manufacturer of consumer products, with his last position being Marketing
Director -- Health Care Products -- Worldwide. In 1992, Mr. Dias served as the
Category Manager -- Oral Health Products for Blendax in Germany, a subsidiary of
The Procter & Gamble Company.
Arthur E. Hanke. Mr. Hanke has served as Senior Vice President-Sales of
the Company since January 1999. From September 1998 to January 1999, he served
as Vice President, Corporate Sales of the Company, and from the Spin-off to
September 1998, he served as Vice President, Customer Management of the Company.
From 1991 to the Spin-off, Mr. Hanke served in various capacities for the
Consumer Products Business of Former Parent, including Vice President, Western
Division Grocery Sales, from 1991 to 1993; Vice President, Broker Sales, from
1993 to 1994; and Vice President, Marketing, Detergents, from 1994 to the
Spin-off.
Daniel J. King. Mr. King has served as Senior Vice President-Product
Supply of the Company since September 1996. From the Spin-off to September 1996,
Mr. King served as the Company's Senior Vice President, Customer Service. From
1991 until the Spin-off, Mr. King served as Senior Vice President, Customer
Service of the Consumer Products Business of Former Parent.
Jane E. Owens. Ms. Owens has served as Senior Vice President, General
Counsel and Secretary of the Company since May 1997. From 1992 to May 1997, Ms.
Owens served as Vice President and General Counsel of The Timberland Company, a
manufacturer of footwear, apparel and accessories.
Susan J. Riley. Ms. Riley has served as Senior Vice President and Chief
Financial Officer of the Company since September 1997. From 1995 until July
1997, she was Senior Vice President and Chief Financial Officer of Tambrands
Inc. ("Tambrands"). She joined Tambrands in 1987 as Manager, International
Finance and held various positions in Tambrands' international and domestic
operations until she was named Senior Vice President and Chief Financial Officer
in 1995.
Mark R. Shook. Mr. Shook has served as Senior Vice President-International
of the Company since September 1996. From the Spin-off until September 1996, he
was an Executive Vice President and General Manager, Personal Care, of the
Company. From September 1990 to the Spin-off, Mr. Shook was an Executive Vice
President of the Consumer Products Business of Former Parent, serving as General
Manager, Food from September 1990 to September 1993; General Manager, Food and
International, from September 1993 to April 1994; General Manager, Laundry and
International, from April to September 1994; General Manager, Soaps and
Detergents, from September 1994 to July 1995; and General Manager, Personal
Care, from July 1995 to the Spin-off.
Bernhard J. Welle. Mr. Welle has served as Senior Vice President-Human
Resources of the Company since August 1996. From 1987 to August 1996, Mr. Welle
served as Vice President, Human Resources of the Consumer Products Business of
Former Parent.
Joy A. Amundson. Ms. Amundson has been a Director of the Company since
1997, and is Senior Vice President of Abbott Laboratories, a diversified health
care products and services company, and President of Ross Laboratories. She has
held a number of other management positions since joining Abbott in 1982. Ms.
Amundson also is Chairman of the Board of Lutheran General Hospital.
Herbert M. Baum. Mr. Baum has been a Director of the Company since 1997,
and is President and Chief Operating Officer and a Director of Hasbro, Inc., a
manufacturer and marketer of toy products. Mr. Baum served as Chairman and Chief
Executive Officer of Quaker State Corporation from 1993 to January 1999. From
1978 to 1992, Mr. Baum was employed by Campbell Soup Company ("Campbell"). In
1992, he was named President of Campbell-North and South America. Mr. Baum also
is a director of Meredith Corporation, Whitman Corporation, Fleming Companies,
Inc., Pennzoil-Quaker State Company and Midas, Inc.
Joe T. Ford. Mr. Ford has been a Director of the Company since 1996, and
is Chairman and Chief Executive Officer and a Director of ALLTEL Corporation
("ALLTEL"), a telecommunications and
46
<PAGE> 49
information services company. Mr. Ford became Chief Executive Officer of ALLTEL
in 1987 and Chairman of the Board in 1991. Mr. Ford also is a director of
Textron, Inc.
Thomas L. Gossage. Mr. Gossage has been a Director of the Company since
1996. Mr. Gossage retired as Chairman and Chief Executive Officer of Hercules
Incorporated, a worldwide producer of chemicals and related products, in January
1997. Mr. Gossage also is a director of Fluor Corporation and Alliant
Techsystems Inc.
Donald E. Guinn. Mr. Guinn has been a Director of the Company since 1996,
and is Chairman Emeritus of Pacific Telesis Group, a telecommunications holding
company ("PacTel"). Mr. Guinn served as Chairman and Chief Executive Officer of
PacTel from 1984 through his retirement in 1988. He also is a director of
Pacific Mutual Life Insurance Company and its affiliates, Pacific LifeCorp and
Pacific Life Insurance Company, and Bank of America Corporation.
Michael T. Riordan. Mr. Riordan has been a Director of the Company since
1997. From August 1997 to August 1998, Mr. Riordan served as President and Chief
Operating Officer of Fort James Corporation, a paper products manufacturer.
Prior to the merger of Fort Howard Corporation with James River Corporation, he
served as Chairman of the Board, President and Chief Executive Officer of Fort
Howard Corporation from 1992 to 1997. Mr. Riordan also is a director of American
Medical Security Group, Inc.
Barbara S. Thomas. Ms. Thomas has been a Director of the Company since
1997, and is President of Warner-Lambert Consumer Healthcare, the
over-the-counter pharmaceuticals business of the Warner-Lambert Company. Ms.
Thomas has more than 20 years of experience as a consumer goods marketer and
general manager. She was with the Pillsbury Company ("Pillsbury") from 1993 to
1997, serving last as President of Pillsbury Canada Ltd. Prior to joining
Pillsbury, Ms. Thomas was Senior Vice President-Marketing for Nabisco Brands,
Inc. from 1991 to 1993.
Salvador M. Villar. Mr. Villar has been a Director of the Company since
June 1998. He is President and Chief Executive Officer of California Commerce
Bank ("CCB"), the U.S. banking arm of Banco Nacional de Mexico ("Banamex"), and
has been with CCB since 1981. Mr. Villar started his banking career in Mexico as
a commercial lender and later became Vice President of Corporate Lending at
Banamex. Mr. Villar also is Vice Chairman and Chair of the Executive Committee
of Banco Bansud, S.A.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation matters is incorporated
herein by reference to "Executive Compensation," "Option/SAR Grants in Last
Fiscal Year," "Aggregated Stock Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values," "Pension Plans" and "Employment Agreements and Change
of Control Arrangements" in the Proxy Statement; provided, however, that the
"Compensation Committee Report on Executive Compensation" and the "Stock Price
Performance Graph" contained in the Proxy Statement are not incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the Common Stock beneficially owned by each Director
of the Company, by all Executive Officers and Directors of the Company as a
group and by each stockholder known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock is incorporated herein by reference
to "Common Stock Ownership of Certain Beneficial Owners" and "Common Stock
Ownership of Directors and Executive Officers" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last fiscal year, there were no relationships or related
transactions that are required to be disclosed herein.
47
<PAGE> 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(i) Financial Statements.
(1) Management's Report on Responsibility for
Financial Reporting........................... 22
(2) Independent Auditor's Report............. 23
(3) Consolidated Financial Statements:
Consolidated Balance Sheet at December
31, 1998, and January 3, 1998.......... 24
Statement of Consolidated Operations
and Comprehensive Income for the years
ended December 31, 1998, January 3,
1998, and December 28, 1996............ 25
Statement of Consolidated Cash Flows
for the years ended December 31, 1998,
January 3, 1998, and December 28,
1996................................... 26
Statement of Consolidated
Stockholders' Equity for the years
ended December 31, 1998, January 3,
1998, and December 28, 1996............ 27
Notes to Consolidated Financial
Statements............................. 28
(ii) Financial Statement Schedules
</TABLE>
Schedules have been omitted because of the absence of conditions
under which they are required or because the required material
information is included in the consolidated financial statements
or notes to the consolidated financial statements included
herein.
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated October 20, 1998,
reporting that the Company issued a press release relating to its financial
results for the third quarter of 1998, a copy of which was filed as Exhibit 99.
The Company also filed a Current Report on Form 8-K, dated January 26,
1999, reporting that the Company issued a press release relating to its
financial results for the fourth quarter of 1998 and the 1998 fiscal year, a
copy of which was filed as Exhibit 99.
(C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
3(a) Restated Certificate of Incorporation of Incorporated by reference to Exhibit
the Company 3(a) of the Company's Form 10/A (Am. No.
2), dated July 26, 1996 (the "Form 10").
3(b) Bylaws of the Company Incorporated by reference to Exhibit
3(b) of the Company's Form 10-Q for the
quarter ended July 4, 1998.
4 (a) Form of Rights Agreement between the Incorporated by reference to Exhibit 4
Company and the Rights Agent of the Form 10.
4 (b) Indenture, dated September 23, 1996,
between the Company and Norwest Bank
Arizona, N.A.*
4 (c) First Supplemental Indenture, dated
September 23, 1996, between the Company
and Norwest Bank Arizona, N.A.*
10(a) Director's Indemnification Agreement+ Incorporated by reference to Exhibit
10(a) of the Company's Form 10-Q, dated
November 11, 1996 (the "Form 10-Q").
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
10(b) Officer's Indemnification Agreement+ Incorporated by reference to Exhibit
10(b) of the Form 10-Q.
10(c) Supplemental Capital Accumulation Plan Incorporated by reference to Exhibit
Agreement+ 10(c) of the Form 10-Q.
10(d) Supplemental Pension Plan Agreement+ Incorporated by reference to Exhibit
10(d) of the Form 10-Q.
10(e) The Dial Corporation 1996 Stock
Incentive Plan.+*
10(f) Annual Incentive Plan Agreement+ Incorporated by reference to Exhibit
10(f) of the Company's Form 10-K for the
fiscal year ended December 28, 1996 (the
"Form 10-K").
10(g) Form of The Dial Corporation Director's Incorporated by reference to Exhibit
Charitable Award Program+ 10(f) of the Form 10.
10(h) Form of Change of Control Agreements
with certain Executive Officers of the
Company+*
10(i) Credit Agreement Incorporated by reference to Exhibit
10(j) of the Form 10.
10(j) Form of The Dial Corporation Employee Incorporated by reference to Exhibit
Equity Trust 10(k) of the Form 10.
10(k) The Dial Corporation Amended and Incorporated by reference to Exhibit 4.5
Restated Directors Deferred Compensation of the Company's Registration Statement
Plan+ on Form S-8 (File No. 333-67619) (the
"Form S-8").
10(l) The Dial Corporation Amended and Incorporated by reference to Exhibit 4.4
Restated Management Deferred of the Form S-8.
Compensation Plan+
10(m) Restated Employment Agreement, dated Incorporated by reference to Exhibit
August 11, 1997, between the Company and 10(m) of the Company's Form 10-K for the
Malcolm Jozoff + fiscal year ended January 3, 1998.
10(n) Change of Control Agreement, dated
October 28, 1998, between the Company
and Malcolm Jozoff + *
21 List of Significant Subsidiaries of the
Company*
23 Consent of Deloitte & Touche LLP
24 Power of Attorney See Signature Page
27 Financial Data Schedule*
</TABLE>
- ---------------
+ Management contract or compensatory plan or arrangement
* Filed herewith.
49
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned; thereunto duly authorized, in Scottsdale, Arizona, on March
29, 1999.
THE DIAL CORPORATION
By: /s/ MALCOLM JOZOFF
------------------------------------
Malcolm Jozoff
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS that the persons whose signatures appear
below, constitute and appoint Malcolm Jozoff and Susan J. Riley, and each of
them, as their true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for them and in their names, places and steads,
in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, and any and all amendments to the Form 10-K, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as they might or could do in person,
thereby ratifying and confirming all that said attorney-in-fact and agent, or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MALCOLM JOZOFF Chairman of the Board, March 29, 1999
- --------------------------------------------------- President and Chief Executive
Malcolm Jozoff Officer (Principal Executive
Officer)
/s/ SUSAN J. RILEY Senior Vice President and Chief March 29, 1999
- --------------------------------------------------- Financial Officer (Principal
Susan J. Riley Financial Officer and
Principal Accounting Officer)
/s/ JOY A. AMUNDSON Director March 29, 1999
- ---------------------------------------------------
Joy A. Amundson
/s/ HERBERT M. BAUM Director March 29, 1999
- ---------------------------------------------------
Herbert M. Baum
/s/ JOE T. FORD Director March 29, 1999
- ---------------------------------------------------
Joe T. Ford
/s/ THOMAS L. GOSSAGE Director March 29, 1999
- ---------------------------------------------------
Thomas L. Gossage
</TABLE>
50
<PAGE> 53
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD E. GUINN Director March 29, 1999
- ---------------------------------------------------
Donald E. Guinn
/s/ MICHAEL T. RIORDAN Director March 29, 1999
- ---------------------------------------------------
Michael T. Riordan
/s/ BARBARA S. THOMAS Director March 29, 1999
- ---------------------------------------------------
Barbara S. Thomas
/s/ SALVADO M. VILLAR Director March 29, 1999
- ---------------------------------------------------
Salvador M. Villar
</TABLE>
51
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
3 (a) Restated Certificate of Incorporation of Incorporated by reference to Exhibit
the Company 3(a) of the Company's Form 10/A (Am. No.
2), dated July 26, 1996 (the "Form 10").
3 (b) Bylaws of the Company Incorporated by reference to Exhibit
3(b) of the Company's Form 10-Q for the
quarter ended July 4, 1998.
4 (a) Form of Rights Agreement between the Incorporated by reference to Exhibit 4
Company and the Rights Agent of the Form 10.
4 (b) Indenture, dated September 23, 1996,
between the Company and Norwest Bank
Arizona, N.A.*
4 (c) First Supplemental Indenture, dated
September 23, 1996, between the Company
and Norwest Bank Arizona, N.A.*
10(a) Director's Indemnification Agreement+ Incorporated by reference to Exhibit
10(a) of the Company's Form 10-Q, dated
November 11, 1996 (the "Form 10-Q").
10(b) Officer's Indemnification Agreement+ Incorporated by reference to Exhibit
10(b) of the Form 10-Q.
10(c) Supplemental Capital Accumulation Plan Incorporated by reference to Exhibit
Agreement+ 10(c) of the Form 10-Q.
10(d) Supplemental Pension Plan Agreement+ Incorporated by reference to Exhibit
10(d) of the Form 10-Q.
10(e) The Dial Corporation 1996 Stock
Incentive Plan.+*
10(f) Annual Incentive Plan Agreement+ Incorporated by reference to Exhibit
10(f) of the Company's Form 10-K for the
fiscal year ended December 28, 1996 (the
"Form 10-K").
10(g) Form of The Dial Corporation Director's Incorporated by reference to Exhibit
Charitable Award Program+ 10(f) of the Form 10.
10(h) Form of Change of Control Agreements
with certain Executive Officers of the
Company+*
10(i) Credit Agreement Incorporated by reference to Exhibit
10(j) of the Form 10.
10(j) Form of The Dial Corporation Employee Incorporated by reference to Exhibit
Equity Trust 10(k) of the Form 10.
10(k) The Dial Corporation Amended and Incorporated by reference to Exhibit 4.5
Restated Directors Deferred Compensation of the Company's Registration Statement
Plan+ on Form S-8 (File No. 333-67619) (the
"Form S-8").
10(l) The Dial Corporation Amended and Incorporated by reference to Exhibit 4.4
Restated Management Deferred of the Form S-8.
Compensation Plan+
10(m) Restated Employment Agreement, dated Incorporated by reference to Exhibit
August 11, 1997, between the Company and 10(m) of the Company's Form 10-K for the
Malcolm Jozoff + fiscal year ended January 3, 1998.
10(n) Change of Control Agreement, dated
October 28, 1998, between the Company
and Malcolm Jozoff + *
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
21 List of Significant Subsidiaries of the
Company*
23 Consent of Deloitte & Touche LLP
24 Power of Attorney See Signature Page
27 Financial Data Schedule*
</TABLE>
- ---------------
+ Management contract or compensatory plan or arrangement
* Filed herewith.
<PAGE> 1
THE DIAL CORPORATION, as Issuer
and
Norwest Bank Arizona, N.A., as Trustee
INDENTURE
Dated as of September 23, 1998
<PAGE> 2
THE DIAL CORPORATION
Reconciliation and tie between Trust Indenture Act of 1939 and
the Indenture, dated as of September 23, 1998:
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
Section 310(a)(1)........................................................... 609
(a)(2)............................................................... 609
(a)(3)............................................................... Not Applicable
(a)(4)............................................................... Not Applicable
(a)(5)............................................................... 609
(b).................................................................. 608, 610
Section311(a)............................................................... 610, 613
(b).................................................................. 613
(c).................................................................. Not Applicable
Section 312(a).............................................................. 701, 702(a)
(b).................................................................. 702(b)
(c).................................................................. 702(c)
Section313(a)............................................................... 703(a)
(b).................................................................. 703(a)
(c).................................................................. 703(a), 602
(d).................................................................. 703(b)
Section 314(a).............................................................. 704
(a)(4)............................................................... 101,1005
(b).................................................................. Not Applicable
(c)(1)............................................................... 102
(c)(2)............................................................... 102
(c)(3)............................................................... Not Applicable
(d).................................................................. Not Applicable
(e).................................................................. 102
Section315(a)............................................................... 601
(b).................................................................. 602
(c).................................................................. 601
(d).................................................................. 601, 603
(e).................................................................. 514
Section316(a)(last sentence)................................................ 101
(a)(1)(A)............................................................ 502, 512
(a)(1)(B)............................................................ 513
(a)(2)............................................................... Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
(b).................................................................. 508
(c).................................................................. 104(c)
Section317(a)(1)............................................................ 503
(a)(2)............................................................... 504
(b).................................................................. 1003
Section318(a)............................................................... 107
</TABLE>
_______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES.................................................................................................... 1
RECITALS OF THE COMPANY.................................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.................................................................................. 1
"Act"................................................................................................... 2
"Additional Amounts".................................................................................... 2
"Affiliate"............................................................................................. 2
"Authenticating Agent".................................................................................. 2
"Authorized Newspaper".................................................................................. 2
"Bearer Security"....................................................................................... 3
"Board of Directors".................................................................................... 3
"Board Resolution"...................................................................................... 3
"Book-Entry Security"................................................................................... 3
"Business Day".......................................................................................... 3
"Commission"............................................................................................ 3
"Common Stock".......................................................................................... 3
"Company"............................................................................................... 3
"Company Request" or "Company Order".................................................................... 4
"Conversion Event"...................................................................................... 4
"Corporate Trust Office"................................................................................ 4
"corporation"........................................................................................... 4
"Coupon"................................................................................................ 4
"Currency".............................................................................................. 4
"CUSIP number".......................................................................................... 4
"Defaulted Interest".................................................................................... 4
"Depositary"............................................................................................ 4
"Dollars" or "$"........................................................................................ 5
"ECU"................................................................................................... 5
"Event of Default"...................................................................................... 5
"Exchange Act".......................................................................................... 5
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
"Foreign Currency"...................................................................................... 5
"Government Obligations"................................................................................ 5
"Holder"................................................................................................ 5
"Indenture"............................................................................................. 6
"Indexed Security"...................................................................................... 6
"interest".............................................................................................. 6
"Interest Payment Date"................................................................................. 6
"Legal Holidays"........................................................................................ 6
"Maturity".............................................................................................. 6
"Office or Agency"...................................................................................... 6
"Officers' Certificate"................................................................................. 6
"Opinion of Counsel".................................................................................... 7
"Original Issue Discount Security"...................................................................... 7
"Outstanding,........................................................................................... 7
"Paying Agent".......................................................................................... 8
"Person"................................................................................................ 8
"Place of Payment,...................................................................................... 8
"Predecessor Security".................................................................................. 8
"Preferred Stock"....................................................................................... 9
"Repayment Date,........................................................................................ 9
"Repayment Price,....................................................................................... 9
"Redemption Date,....................................................................................... 9
"Redemption Price,...................................................................................... 9
"Registered Security"................................................................................... 9
"Regular Record Date"................................................................................... 9
"Responsible Officer"................................................................................... 9
"Security".............................................................................................. 10
"Security Register".................................................................................... 10
"Senior Indebtedness".................................................................................. 10
"Significant Subsidiary"............................................................................... 10
"Special Record Date".................................................................................. 10
"Stated Maturity"...................................................................................... 10
"Subordinated Securities".............................................................................. 10
"Subsidiary"........................................................................................... 10
"Trustee".............................................................................................. 11
"Trust Indenture Act".................................................................................. 11
"United States"........................................................................................ 11
"United States Person"................................................................................. 11
Section 102. Compliance Certificates and Opinions........................................................ 11
Section 103. Form of Documents Delivered to Trustee...................................................... 12
Section 104. Acts of Holders; Record Dates............................................................... 13
</TABLE>
-ii-
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 105. Notices, Etc., to Trustee and Company....................................................... 15
Section 106. Notice to Holders; Waiver................................................................... 15
Section 107. Conflict with Trust Indenture Act........................................................... 16
Section 108. Effect of Headings and Table of Contents.................................................... 16
Section 109. Successors and Assigns...................................................................... 17
Section 110. Separability Clause......................................................................... 17
Section 111. Benefits of Indenture....................................................................... 17
Section 112. Governing Law............................................................................... 17
Section 113. Legal Holidays.............................................................................. 17
Section 114. Immunity of Stockholders, Directors, Officers and Agents of
the Company............................................................................ 18
ARTICLE TWO
SECURITY FORMS
Section 201. Forms of Securities......................................................................... 18
Section 202. Securities in Book-Entry Form............................................................... 19
Section 203. Form of Legend for Book-Entry Securities.................................................... 20
Section 204. Form of Trustee's Certificate of Authentication............................................. 20
ARTICLE THREE
THE SECURITIES
Section 301. Amount Unlimited; Issuable in Series........................................................ 21
Section 302. Currency; Denominations..................................................................... 25
Section 303. Execution, Authentication, Delivery and Dating.............................................. 26
Section 304. Temporary Securities........................................................................ 28
Section 305. Registration, Registration of Transfer and Exchange......................................... 29
Section 306. Mutilated, Destroyed, Lost and Stolen Securities............................................ 34
Section 307. Payment of Interest; Interest Rights Preserved.............................................. 35
Section 308. Persons Deemed Owners....................................................................... 37
Section 309. Cancellation................................................................................ 38
Section 310. Computation of Interest..................................................................... 38
</TABLE>
ARTICLE FOUR
-iii-
<PAGE> 7
SATISFACTION AND DISCHARGE
<TABLE>
<S> <C>
Section 401. Satisfaction and Discharge of Indenture..................................................... 38
Section 402. Application of Trust Money.................................................................. 40
ARTICLE FIVE
REMEDIES
Section 501. Events of Default........................................................................... 41
Section 502. Acceleration of Maturity; Rescission and Annulment.......................................... 42
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee................................................................................ 44
Section 504. Trustee May File Proofs of Claim............................................................ 45
Section 505. Trustee May Enforce Claims Without Possession of
Securities............................................................................. 45
Section 506. Application of Money Collected.............................................................. 46
Section 507. Limitation on Suits......................................................................... 46
Section 508. Unconditional Right of Holders to Receive Principal,
Premium, if any, and Interest and Additional Amounts, if
any.................................................................................... 47
Section 509. Restoration of Rights and Remedies.......................................................... 47
Section 510. Rights and Remedies Cumulative.............................................................. 48
Section 511. Delay or Omission Not Waiver................................................................ 48
Section 512. Control by Holders.......................................................................... 48
Section 513. Waiver of Past Defaults..................................................................... 48
Section 514. Undertaking for Costs....................................................................... 49
Section 515. Waiver of Usury, Stay or Extension Laws..................................................... 49
ARTICLE SIX
THE TRUSTEE
Section 601. Certain Duties and Responsibilities......................................................... 50
Section 602. Notice of Defaults.......................................................................... 50
Section 603. Certain Rights of Trustee................................................................... 51
Section 604. Not Responsible for Recitals or Issuance of Securities...................................... 53
Section 605. May Hold Securities......................................................................... 53
Section 606. Money Held in Trust......................................................................... 53
Section 607. Compensation and Reimbursement.............................................................. 53
Section 608. Disqualification; Conflicting Interests..................................................... 54
Section 609. Corporate Trustee Required; Eligibility..................................................... 54
Section 610. Resignation and Removal; Appointment of Successor........................................... 55
</TABLE>
-iv-
<PAGE> 8
<TABLE>
<S> <C>
Section 611. Acceptance of Appointment by Successor...................................................... 56
Section 612. Merger, Conversion, Consolidation or Succession to
Business............................................................................... 58
Section 613. Preferential Collection of Claims Against Company........................................... 58
Section 614. Appointment of Authenticating Agent......................................................... 58
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.................................. 60
Section 702. Preservation of Information; Communications to Holders...................................... 61
Section 703. Reports by Trustee.......................................................................... 61
Section 704. Reports by Company.......................................................................... 62
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, Etc., Only on Certain Terms........................................ 62
Section 802. Rights and Duties of Successor Corporation.................................................. 62
Section 803. Officers' Certificate and Opinion of Counsel................................................ 63
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent of Holders.......................................... 63
Section 902. Supplemental Indentures with Consent of Holders............................................. 65
Section 903. Execution of Supplemental Indentures........................................................ 67
Section 904. Effect of Supplemental Indentures........................................................... 67
Section 905. Conformity with Trust Indenture Act......................................................... 67
Section 906. Reference in Securities to Supplemental Indentures.......................................... 67
Section 907. Notice of Supplemental Indentures........................................................... 68
</TABLE>
ARTICLE TEN
COVENANTS
-v-
<PAGE> 9
<TABLE>
<S> <C>
Section 1001. Payment of Principal, Premium and Interest................................................. 68
Section 1002. Maintenance of Office or Agency............................................................ 68
Section 1003. Money for Securities Payments to Be Held in Trust.......................................... 70
Section 1004. Corporate Existence........................................................................ 71
Section 1005. Statement as to Compliance................................................................. 71
Section 1006. Waiver of Certain Covenants................................................................ 72
Section 1007. Additional Amounts......................................................................... 72
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Applicability of Article................................................................... 73
Section 1102. Election to Redeem; Notice to Trustee...................................................... 73
Section 1103. Selection by Trustee of Securities to Be Redeemed.......................................... 74
Section 1104. Notice of Redemption....................................................................... 74
Section 1105. Deposit of Redemption Price................................................................ 76
Section 1106. Securities Payable on Redemption Date...................................................... 76
Section 1107. Securities Redeemed in Part................................................................ 77
ARTICLE TWELVE
SINKING FUNDS
Section 1201. Applicability of Article................................................................... 78
Section 1202. Satisfaction of Sinking Fund Payments with Securities...................................... 78
Section 1203. Redemption of Securities for Sinking Fund.................................................. 78
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
Section 1301. Applicability of Article................................................................... 79
</TABLE>
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
-vi-
<PAGE> 10
<TABLE>
<S> <C>
Section 1401. Applicability of the Article; Company's Obligation to
Effect Defeasance or Covenant Defeasance.............................................. 80
Section 1402. Defeasance and Discharge................................................................... 80
Section 1403. Covenant Defeasance........................................................................ 81
Section 1404. Applicability of the Article; Company's Obligation to
Effect Defeasance or Covenant Defeasance.............................................. 81
Section 1405. Deposited Money and Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.................................................. 83
Section 1406. Reinstatement.............................................................................. 85
Section 1407. Effect on Subordination Provisions......................................................... 85
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
Section 1501. Purposes for Which Meetings May Be Called.................................................. 86
Section 1502. Call, Notice and Place of Meetings......................................................... 86
Section 1503. Persons Entitled to Vote at Meetings....................................................... 86
Section 1504. Quorum; Action............................................................................. 87
Section 1505. Determination of Voting Rights; Conduct and Adjournment
of Meetings............................................................................ 88
Section 1506. Counting Votes and Recording Action of Meetings............................................ 89
ARTICLE SIXTEEN
SUBORDINATION OF SECURITIES
Section 1601. Securities Subordinate to Senior Indebtedness.............................................. 89
ARTICLE SEVENTEEN
SECURITIES IN FOREIGN CURRENCIES
Section 1701. Applicability of Article................................................................... 90
</TABLE>
-vii-
<PAGE> 11
INDENTURE, dated as of September 23, 1998, between THE DIAL CORPORATION, a
Delaware corporation (the "Company"), having its principal office at 15501 North
Dial Boulevard, Scottsdale, Arizona 85260-1619, and Norwest Bank Arizona, N.A.,
as Trustee hereunder (the "Trustee"), having its offices at Corporate Trust
Department 9015, 3300 N. Central Avenue, Fifteenth Floor, Phoenix, AZ 85012.
RECITALS OF THE COMPANY
The Company deems it advisable to issue from time to time for its lawful
purposes its unsecured debentures, notes or other evidences of indebtedness
(hereinafter called the "Securities") in one or more series as in this Indenture
provided, and has duly authorized the execution and delivery of this Indenture
to provide for the issuance from time to time of the Securities, unlimited as to
principal amount, to bear interest at the rates or formulas, to mature at such
times and to have such other provisions as shall be fixed as hereinafter
provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have, when capitalized, the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
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(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and except as otherwise herein expressly provided, the term "generally accepted
accounting principles" or "GAAP" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the time of application thereof;
(d) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(e) all references to "dollars," "$," "U.S. dollars," "United States
dollars" or "cash" shall refer to the lawful currency of the United States of
America; and
(f) the definitions included herein may be modified, expanded, deleted or
otherwise amended in a supplemental indenture after the date hereof or pursuant
to Section 301 hereof.
Certain terms used principally in certain Articles hereof are defined in
those Articles.
"Act" , when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Amounts" means any additional amounts which are
required hereby or by any Security or pursuant to a Board Resolution, under
circumstances specified herein or therein, to be paid by the Company in respect
of certain taxes, assessments or other governmental charges imposed on Holders
specified therein and which are owing to such Holders.
"Affiliate" means, with respect to any specified Person, any
other Person which, directly or indirectly, is in control of, is controlled by
or is under common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authenticating Agent" means any authenticating agent
appointed by the Trustee pursuant to Section 614.
"Authorized Newspaper" means a newspaper, in an official
language of the place of publication or in the English language, customarily
published on each day that is a Business Day in the place of publication,
whether or not published on days that
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are Legal Holidays in the place of publication, and of general circulation in
each place in connection with which the term is used or in the financial
community of each such place. Where successive publications are required to be
made in Authorized Newspapers, the successive publications may be made in the
same or in different newspapers in the same city meeting the foregoing
requirements and in each case on a day that is a Business Day in the place of
publication.
"Bearer Security" means any Security in the form established
pursuant to Section 201 which is payable to bearer.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
or consented to by the Board of Directors and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Book-Entry Security" means a Security bearing the legend
specified in Section 203 evidencing all or part of a series of Securities,
authenticated and delivered to the Depositary for such series or its nominee,
and registered in the name of such Depositary or nominee.
"Business Day" when used with respect to any Place of Payment
means, unless otherwise specified with respect to any Securities pursuant to
Section 301, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in the Place of Payment are authorized or
obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of the Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, capital
stock issued by such Person other than Preferred Stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
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"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by any one of its Chairman of the
Board, its Vice Chairman, its Chief Executive Officer, its President, its Chief
Financial Officer or a Vice President (whether or not designated by a number or
a word or words added before or after the title "Vice President"), and by any
one of its Treasurer, Assistant Treasurer, Secretary or Assistant Secretary and
delivered to the Trustee.
"Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the government of the country or the confederation which issued
such Foreign Currency and for the settlement of transactions by a central bank
or other public institutions of or within the international banking community,
(ii) the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Union or (iii) any
currency unit or composite currency other than the ECU for the purposes for
which it was established.
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall be
administered, which office as of the date of this Indenture is the address of
the Trustee set forth in Section 105.
"corporation" means a corporation, association, limited
liability company, joint-stock company or business trust.
"Coupon" means any interest coupon appertaining to a Bearer
Security.
"Currency, " with respect to any payment, deposit or other
transfer in respect of the principal of or any premium or interest on or any
Additional Amounts with respect to any Security, means Dollars or the Foreign
Currency, as the case may be, in which such payment, deposit or other transfer
is required to be made by or pursuant to the terms hereof or such Security and,
with respect to any other payment, deposit or transfer pursuant to or
contemplated by the terms hereof or such Security, means Dollars.
"CUSIP number" means the alphanumeric designation assigned to
a Security by Standard & Poor's Corporation, CUSIP Service Bureau.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities of any
series issuable or issued in whole or in part in the form of one or more
Book-Entry Securities, The Depository Trust Company and its successors, or
another Person designated as Depositary by the Company pursuant to Section 301,
which must be a clearing agency registered under the Exchange Act, and if at any
time there is more than one such Person, "Depositary" shall mean the Depositary
with respect to the Securities of that series.
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"Dollars" or "$" means a dollar or other equivalent unit of
legal tender for payment of public or private debts in the United States of
America.
"ECU" means the European Currency Unit as defined and revised
from time to time by the Council of the European Community.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any statute successor thereto.
"Foreign Currency" means any currency, currency unit or
composite currency, including, without limitation, the ECU, issued by the
government of one or more countries other than the United States of America or
by any recognized confederation or association of such governments.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the other government or
governments in the confederation which issued the Foreign Currency in which the
principal of or any premium or interest on the relevant Security or any
Additional Amounts in respect thereof shall be payable, in each case where the
payment or payments thereunder are supported by the full faith and credit of the
United States of America or such other government or governments, as the case
may be, or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America or such other
government or governments, in each case where the timely payment or payments
thereunder are unconditionally guaranteed as a full faith and credit obligation
by the United States of America or such other government or governments, as the
case may be, and which, in the case of (i) or (ii), are not callable or
redeemable at the option of the issuer or issuers thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of or other amount with respect to any such Government Obligation
held by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of or other
amount with respect to the Government Obligation evidenced by such depository
receipt.
"Holder" means in the case of any Registered Security, the
Person in whose name such Security is registered in the Security Register and,
in the case of any Bearer Security, the bearer thereof and, in the case of any
Coupon, the bearer thereof.
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"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
and shall include the terms of particular series of Securities established as
contemplated by Section 301; provided, however, that, if at any time more than
one Person is acting as Trustee under this instrument, "Indenture" shall mean,
with respect to any one or more series of Securities for which such Person is
Trustee, this instrument as originally executed or as it may from time to time
be supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof and shall include the terms of
those particular series of Securities for which such Person is Trustee
established as contemplated by Section 301, exclusive, however, of any
provisions or terms which relate solely to other series of Securities for which
such Person is not Trustee, regardless of when such terms or provisions were
adopted, and exclusive of any provisions or terms adopted by means of one or
more indentures supplemental hereto executed and delivered after such Person had
become such Trustee but to which such Person, as such Trustee, was not a party.
"Indexed Security" has the meaning specified in Section
301(k).
"interest, " when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, shall
mean interest payable after Maturity.
"Interest Payment Date, " when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"Maturity, " when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption, notice of
option to elect repayment or otherwise.
"Office or Agency" with respect to any Securities, means an
office or agency of the Company maintained or designated as a Place of Payment
for such Securities pursuant to Section 1002 or any other office or agency of
the Company maintained or designated for such Securities pursuant to Section
1002 or, to the extent designated or required by Section 1002 in lieu of such
office or agency, the Corporate Trust Office of the Trustee.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, Vice Chairman, the Chief Executive Officer, the
President, Chief Financial Officer or a Vice President (whether or not
designated by a number or a word or words
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<PAGE> 17
added before or after the title "Vice President"), and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be an employee of or counsel for the Company or the Trustee, and who shall
be reasonably acceptable to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502.
"Outstanding, " when used with respect to any Securities,
means, as of the date of determination, all such Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
or repayment at the option of the Holder money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust
by the Company (if the Company shall act as its own Paying Agent) for
the Holders of such Securities and any Coupons appertaining thereto
except, in the case of Securities as to which the Company had effected
satisfaction and discharge pursuant to Article Four, to the extent
provided in Article Four; provided, that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee
has been made; and Securities, except to the extent provided in Section
1402 and 1403, with respect to which the Company has effected defeasance
and/or covenant defeasance, as provided in Article Fourteen;
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof reasonably satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; and
(iv) Securities converted or exchanged into Common Stock or other
debt securities pursuant to or in accordance with this Indenture if the
terms of such Securities provide for convertibility pursuant to Section
301;
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<PAGE> 18
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by Section 313 of the Trust Indenture Act, (i) the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon acceleration of the
Maturity thereof pursuant to Section 502, (ii) the principal amount of any
Indexed Security of any series that may be counted in making such determination
or calculation and that shall be deemed outstanding for such purpose shall be
equal to the principal face amount of such Indexed Security at original
issuance, unless otherwise established as contemplated by Section 301 with
respect to such Security, (iii) the principal amount of a Security denominated
in Foreign Currency that shall be deemed outstanding for such purpose shall be
the Dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the Dollar equivalent on the date of original issuance of such
Security of the amount determined as provided in (i) above) of such Security,
and (iv) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or any premium or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, business trust,
partnership, joint venture, joint-stock company, limited liability company,
association, company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Payment, " when used with respect to the Securities
of any series, means the place or places where the principal of and any premium
and interest on the Securities of that series are payable as established as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such
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particular Security, and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen Coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen Coupon
appertains.
"Preferred Stock" means, with respect to any Person, capital
stock issued by such Person that is entitled to a preference or priority over
any other capital stock issued by such Person upon any distribution of such
Person's assets, whether by dividend or upon liquidation.
"Repayment Date, " when used with respect to any Security to
be repaid at the option of the Holder, means the date fixed for such repayment
by or pursuant to this Indenture.
"Repayment Price, " when used with respect to any Security to
be repaid at the option of the Holder, means the price at which it is to be
repaid by or pursuant to this Indenture.
"Redemption Date, " when used with respect to any Security to
be redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price, " when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" shall mean any Security established
pursuant to Section 201 which is registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on any Registered Security of any series means the date, if any,
specified in or pursuant to this Indenture or such Security as the "Regular
Record Date."
"Responsible Officer, " when used with respect to the Trustee,
means any officer within the Corporate Trust Department (or any successor
department) including, without limitation, any vice president (whether or not
designated by a number or a word or words added before or after the title "Vice
President"), any trust officer, any assistant secretary, the controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
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"Security" has the meaning stated in the first recital of this
Indenture and, more particularly, means any Security or Securities authenticated
and delivered under this Indenture; provided, however, that, if at any time
there is more than one Person acting as Trustee under this Indenture,
"Securities" with respect to such Person shall mean Securities authenticated and
delivered under this Indenture, exclusive, however, of Securities of any series
as to which such Person is not Trustee.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" has the meaning determined pursuant to
Section 301(v).
"Significant Subsidiary" means, with respect to any Person,
any Subsidiary of such Person which is a "significant subsidiary" as defined in
Rule 1-02(w) of Regulation S-X promulgated under the Securities Act of 1933, as
amended (as in effect on the date of the Indenture).
"Special Record Date" for the payment of any Defaulted
Interest on the Securities of any series means a date fixed by the Trustee
pursuant to Section 307.
"Stated Maturity, " when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security or a Coupon representing such installment of interest
as the fixed date on which the principal of such Security or such installment of
principal or interest is, or such Additional Amounts are, due and payable.
"Subordinated Securities, " means any Securities which,
pursuant to Section 301(v), are by their terms expressly subordinated in right
of payment to Senior Indebtedness.
"Subsidiary" means (i) any corporation of which at least a
majority of the total voting power of whose outstanding voting stock is owned,
directly or indirectly, at the date of determination by the Company and/or one
or more other Subsidiaries of the Company, (ii) any partnership in which the
Company and/or one or more other Subsidiaries of the Company owns, directly or
indirectly, at the date of determination at least a majority interest in the
equity capital or profits of such partnership, or (iii) any other Person in
which the Company and/or one or more other Subsidiaries of the Company, directly
or indirectly, at the date of determination (x) owns at least a majority
ownership interest or (y) has the power to elect or direct the election of at
least a majority of the directors or other governing body of such Person. For
the purposes of this definition, "voting stock," with respect to any
corporation, means capital
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<PAGE> 21
stock of any class or series of such corporation, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors of the corporation.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"United States, " except as otherwise provided in or pursuant
to this Indenture or any Security, means the United States of America (including
the states thereof and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"United States Person" means, unless otherwise specified with
respect to any Debt Securities pursuant to Section 301, any citizen or resident
of the United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States, any estate the income of
which is subject to United States federal income taxation regardless of its
source, or any trust whose administration is subject to the primary supervision
of a United States court and which has one or more United States fiduciaries who
have the authority to control all substantial decisions of the trust.
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished. Each such certificate or
opinion shall be given in the form of an Officers' Certificate, if to be given
by an officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements of the Trust Indenture Act and
any other requirements set forth in this Indenture.
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Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than pursuant to Section 1005)
shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture or any Security, they may, but need not, be
consolidated and form one instrument.
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Section 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided in or pursuant to this Indenture to be given or taken
by Holders of the Outstanding Securities of all series or one or more series, as
the case may be, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing. If, but only if, Securities of a series are issuable as
Bearer Securities, any request, demand, authorization, direction, notice,
consent, waiver or other action provided in or pursuant to this Indenture to be
made, given or taken by Holders of Securities of such series may, alternatively,
be embodied in and evidenced by the record of Holders of Securities of such
series voting in favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders of Securities of such series duly called and
held in accordance with the provisions of Article Fifteen, or a combination of
such instruments and any such record. Except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent, or of the holding by any
Person of a Security, shall be sufficient for any purpose of this Indenture and
(subject to Section 601) conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section. The record of any meeting of
Holders of Securities shall be proved in the manner provided in Section 1506.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust Indenture
Act, by Board Resolution, fix any date not more than 60 days nor less than 10
days prior to the date of any of the following actions as the record date for
the purpose of determining the Holders of Registered Securities of any series
entitled to give or take any request, demand, authorization, direction, notice,
consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders of Registered Securities of such
series. If not set by the Company prior to the first solicitation of a Holder of
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<PAGE> 24
Registered Securities of such series made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be. With regard to any
record date for action to be taken by the Holders of one or more series of
Registered Securities, only the Holders of Registered Securities of such series
on such date (or their duly designated proxies) shall be entitled to give or
take, or vote on, the relevant action.
(d) The ownership, principal amount and serial numbers of Registered
Securities held by any Person, and the date of commencement and the date of
termination of holding the same, shall be proved by the Security Register.
(e) The ownership, principal amount and serial numbers of Bearer Securities
held by any Person, and the date of commencement and the date of termination of
holding the same, may be proved by the production of such Bearer Securities or
by a certificate executed, as depositary, by any trust company, bank, banker or
other depositary reasonably acceptable to the Company, wherever situated, if
such certificate shall be deemed by the Company and the Trustee to be
satisfactory, showing that at the date therein mentioned such Person had on
deposit with such depositary, or exhibited to it, the Bearer Securities therein
described; or such facts may be proved by the certificate or affidavit of the
Person holding such Bearer Securities, if such certificate or affidavit is
deemed by the Company and the Trustee to be satisfactory. The Trustee and the
Company may assume that such ownership of any Bearer Security continues until
(i) another certificate or affidavit bearing a later date issued in respect of
the same Bearer Security is produced, or (ii) such Bearer Security is provided
to the Trustee by some other Person, or (iii) such Bearer Security is no longer
Outstanding. The ownership, principal amount and serial numbers of Bearer
Securities held by the Person so executing such instrument or writing and the
date of the commencement and the date of the termination of holding the same may
also be proved in any other manner which the Company and the Trustee deem
sufficient.
(f) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, any Security
Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
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(g) For purposes of this Indenture, any action by the Holders which may be
taken in writing may be taken by electronic means or as otherwise reasonably
acceptable to the Trustee.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its offices at Corporate
Trust Department 9015, 3300 N. Central Avenue, Fifteenth Floor,
Phoenix, Arizona 85012, Attention: Corporate Trust Department, or at
any other address previously furnished in writing by the Trustee to the
Holders or the Company or any other obligor on the Securities; or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing to or
with the Company addressed to it at the address of its principal office
specified in the first paragraph of this instrument to the Attention of
the Treasurer with a copy to the Company's Chief Financial Officer or
at any other address previously furnished in writing to the Trustee by
the Company. Any such communication shall be effective upon receipt.
Section 106. Notice to Holders; Waiver.
Except as otherwise expressly provided in or pursuant to this Indenture,
where this Indenture provides for notice to Holders of any event,
(a) such notice shall be sufficiently given (unless otherwise herein
expressly provided) to each Holder of Registered Securities affected by such
event if in writing and mailed, first-class postage prepaid, at his address as
it appears in the Security Register, not later than the latest date (if any),
and not earlier than the earliest date (if any), prescribed for the giving of
such notice; and
(b) such notice shall be sufficiently given to Holders of Bearer
Securities, if any, affected by such event if published in an Authorized
Newspaper in The City of New York and in such other city or cities as may be
specified in such Securities on a Business Day, such publication to be not
earlier than the earliest date and not later than the latest date prescribed for
the giving of such notice. Any such notice shall be deemed to have been given on
the date of such publication or, if published more than once, on the date of the
first such publication.
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In any case where notice to Holders of Registered Securities is given
by mail, neither the failure to mail such notice, nor any defect in any notice
so mailed, to any particular Holder of Registered Securities shall affect the
sufficiency of such notice with respect to other Holders of Registered
Securities. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been received by such Holder of Registered
Securities, whether or not such Holder of Registered Securities actually
receives such notice. In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable to give such
notice by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither the failure to give notice by
publication to Holders of Bearer Securities as provided above, nor any defect in
any notice so published, shall affect the sufficiency of any notice mailed to
Holders of Registered Securities as provided above.
Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the Trust Indenture Act provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or excluded, as the case may
be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture, any Security or any Coupon shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture, any Security or any Coupon, express or
implied, shall give to any Person, other than the parties hereto, any Security
Registrar, any Paying Agent, any Authenticating Agent and their successors
hereunder and the Holders of the Securities or Coupons, and, solely in the case
of Securities which, pursuant to Section 301(v), are by their terms expressly
subordinated in right of payment to Senior Indebtedness, the holders of such
Senior Indebtedness, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 112. Governing Law.
This Indenture, the Securities and any Coupons shall be deemed to be a
contract under the laws of the State of New York, and for all purposes shall be
governed by and construed in accordance with the laws of such state, without
regard to principles of conflicts of laws. This Indenture is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Repayment
Date, sinking fund payment date, Stated Maturity or Maturity, as the case may
be, of any Security shall not be a Business Day at any Place of Payment for such
Security, then notwithstanding any other provision of this Indenture, any
Security or any Coupon (other than a provision of any Security or any Coupon
established as contemplated by Section 301 and which specifically states that
such provision shall apply in lieu of this Section 113), payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date,
Redemption Date, Repayment Date, sinking fund payment date or at the Stated
Maturity or Maturity, as the case may be, and no interest shall accrue on such
payment for
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the period from and after such Interest Payment Date, Redemption Date, Repayment
Date, sinking fund payment date, Stated Maturity or Maturity, as the case may
be, to the next succeeding Business Day. For purposes of this Section 113, the
sole Place of Payment with respect to any Book-Entry Securities for which the
Depositary is The Depository Trust Company or its successor shall be deemed to
be the Borough of Manhattan, The City of New York.
Section 114. Immunity of Stockholders, Directors, Officers
and Agents of the Company.
No recourse under or upon any obligation, covenant or agreement contained
in this Indenture, or in any Security, or because of any indebtedness evidenced
thereby, shall be had against any past, present or future stockholder, employee,
officer or director, as such, of the Company or of any predecessor or successor,
either directly or through the Company or any predecessor or successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the
Securities by the Holders and as part of the consideration for the issue of the
Securities.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms of Securities.
Each Registered Security, Bearer Security, Coupon and temporary or
permanent Book-Entry Security issued pursuant to this Indenture shall be in
substantially the forms as shall be established by or pursuant to one or more
Board Resolutions (as set forth in a Board Resolution or, to the extent
established pursuant to rather than as set forth in a Board Resolution, an
Officers' Certificate detailing such establishment) or in one or more indentures
supplemental hereto, shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or any indenture supplemental hereto, and may have such letters,
numbers or other marks of identification or designation and such legends or
endorsements placed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Securities may be
listed, or to conform to usage.
Unless otherwise provided in or pursuant to this Indenture or any
Securities, the Securities shall be issuable in registered form without Coupons.
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The definitive Securities and definitive Coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities or Coupons.
Section 202. Securities in Book-Entry Form.
If Securities of or within a series are issuable in book-entry form, as
specified as contemplated by Section 301, then, notwithstanding clause (i) of
Section 301 and the provisions of Section 302, any such Security shall represent
such of the Outstanding Securities of such series as shall be specified therein
and may provide that it shall represent the aggregate amount of Outstanding
Securities of such series from time to time endorsed thereon and that the
aggregate amount of Outstanding Securities of such series represented thereby
may from time to time be increased or decreased to reflect exchanges. Any
endorsement of a Security in book-entry form to reflect the amount, or any
increase or decrease in the amount, of Outstanding Securities represented
thereby shall be made by the Trustee in such manner and upon instructions given
by such Person or Persons as shall be specified in such Security or in the
Company Order to be delivered to the Trustee pursuant to Section 303 or 304.
Subject to the provisions of Section 303 and, if applicable, Section 304, the
Trustee shall deliver and redeliver any Security in permanent book-entry form in
the manner and upon instructions given by the Person or Persons specified in
such Security or in the applicable Company Order. If a Company Order pursuant to
Section 303 or 304 has been, or simultaneously is, delivered, any instruction by
the Company with respect to endorsement, delivery or redelivery of a Security in
book-entry form shall be in writing but need not comply with Section 102 and
need not be accompanied by Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to any
Security represented by a Security in book-entry form if such Security was never
issued and sold by the Company and the Company delivers to the Trustee the
Security in book-entry form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the penultimate
sentence of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise specified
as contemplated by Section 301, payment of principal of (and premium, if any),
any interest on, and any Additional Amounts in respect of any Security in
temporary or permanent book-entry form shall be made to the Person or Persons
specified therein.
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Notwithstanding the provisions of Section 308 and except as provided in the
preceding paragraph, the Company, the Trustee and any agent of the Company and
the Trustee shall treat as the Holder of such principal amount of Outstanding
Securities represented by a permanent Book-Entry Security (a) in the case of a
permanent Book-Entry Security in registered form, the Holder of such permanent
Book-Entry Security in registered form or (b) in the case of a Book-Entry
Security in bearer form, the Person or Persons specified pursuant to Section
301.
Section 203. Form of Legend for Book-Entry Securities.
Any Book-Entry Security authenticated and delivered hereunder shall bear
a legend in substantially the following form and such other legends as may be
required by the applicable Depositary or as shall be deemed necessary or
desirable by the Company:
"This Security is a Book-Entry Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee of a Depositary. This Security is not
exchangeable for Securities registered in the name of a Person other
than the Depositary or its nominee except in the circumstances
described in the Indenture, and unless and until it is exchanged in
whole or in part for Securities in definitive certificated form, this
Security may not be transferred except as a whole by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or nominee of such successor
Depositary."
Section 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
"TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
Norwest Bank Arizona, N.A., as Trustee
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By:______________________
Authorized Signatory"
ARTICLE THREE
THE SECURITIES
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. With respect to any
series of Securities which may be designated and authenticated and delivered
under this Indenture, there shall be established in or pursuant to one or more
Board Resolutions (and to the extent established pursuant to rather than as set
forth in a Board Resolution, in an Officers' Certificate detailing such
establishment) or established in one or more indentures supplemental hereto,
prior to the issuance of Securities of any such series (except as provided in
the last paragraph of this Section 301), any or all of the following, as
applicable (each of which (except for the matters set forth in clauses (a), (b)
(with respect to any limit upon the aggregate principal amount of the Securities
which may be authenticated and delivered under this Indenture), (r) and (u)
below), if so provided, may be determined from time to time by the Company with
respect to unissued Securities of the series when issued from time to time):
(a) the title of the Securities (which shall distinguish the
Securities of the series from Securities of any other series) or series
of which they are a part;
(b) the aggregate principal amount of the Securities and any
limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 304, 305, 306, 906 or 1107, upon repayment
in part of any Security of such series pursuant to Article Thirteen or
upon surrender in part of any Security for conversion or exchange into
Common Stock or other securities pursuant to its terms, and except for
any Securities which, pursuant to Section 303, are deemed never to have
been authenticated and delivered hereunder), which limit, unless
otherwise expressly established, may be changed from time to time by or
pursuant to a Board
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Resolution, Officers' Certificate or indentures supplemental hereto
without the consent of any Holders;
(c) the Person to whom any interest on a Registered Security of
the series shall be payable, if other than the Person in whose name
that Security (or one or more Predecessor Securities) is registered at
the close of business on the Regular Record Date for such series;
(d) the date or dates, or the method or methods, if any, by
which such date or dates shall be determined, on which the principal of
(and premium, if any, on) such Securities will be payable;
(e) the price or prices (expressed as a percentage of the
aggregate principal amount thereof) at which the Securities will be
issued;
(f) the rate or rates (which may be fixed, floating or
adjustable) or the method of determination thereof, at which the
Securities of the series will bear interest, if any, the date or dates
from which such interest shall accrue or method by which such date or
dates shall be determined, the Interest Payment Dates on which any such
interest shall be payable, the Regular Record Date, if any, for any
such interest payable on any Interest Payment Date, or the method by
which such date or dates shall be determined, whether and under what
circumstances Additional Amounts on such Securities or any of them
shall be payable and the basis upon which interest shall be calculated
if other than that of a 360-day year of twelve 30-day months;
(g) the place or places where the principal of and any premium
and interest on Securities of the series shall be payable, any
Registered Securities of the series may be surrendered for registration
of transfer and exchange, where Securities of that series that are
convertible or exchangeable may be surrendered for conversion or
exchange, as applicable, and where notices or demands to or upon the
Company in respect of the Securities of the series and the Indenture
may be served;
(h) the period or periods within which, the price or prices at
which, the Currencies, currency units or composite currencies in which,
and the other terms and conditions upon which Securities of the series
may be redeemed, in whole or in part, at the option of the Company;
(i) the obligation, if any, of the Company to redeem, repay or
purchase any of such Securities of the series pursuant to any sinking
fund or analogous provisions or at the option of a Holder thereof, and
the period or periods within which, the price or prices at which and
the other terms and conditions upon which
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Securities of the series will be redeemed, repaid or purchased, in
whole or in part, pursuant to any such obligation;
(j) if other than denominations of $1,000 and any integral
multiple thereof the denominations in which any Registered Securities
of the series shall be issuable, and if other than the denominations of
$5,000 and any integral multiple thereof, the denominations in which
Securities of the series that are Bearer Securities shall be issuable;
(k) if other than the Currency of the United States of America,
the foreign currency, currencies, currency units or composite
currencies in which the principal of or any premium or interest on such
Securities will be payable (and the manner in which the equivalent of
the principal amount thereof in the Currency of the United States of
America is to be determined for any purpose, including for the purpose
of determining the principal amount deemed to be outstanding at any
time);
(l) if the amount of payments of principal of or any premium or
interest on any Securities of the series ("Indexed Securities") may be
determined with reference to an index, pursuant to a formula, or
pursuant to other methods (which index, formula or method may be based,
without limitation, on one or more currencies, currency units,
composite currencies, commodities, equity indices or other indices),
the manner in which such amounts will be determined;
(m) if the principal of or any premium or interest on such
Securities of the series is to be payable, at the election of the
Company or a Holder thereof, in one or more currencies, currency units
or composite currencies other than those in which the Securities are
stated to be payable, the currencies, currency units or composite
currencies in which payment of any such amount as to which such
election is made will be payable, and the periods within which and the
terms and conditions upon which such election is to be made;
(n) if other than the entire principal amount thereof, the
portion of the principal amount of Securities of the series which shall
be payable upon declaration of acceleration of the Maturity thereof
pursuant to this Indenture or, if applicable, the portion of the
principal amount of Securities of the series that is convertible into
or exchangeable for other securities or the method by which such
portion shall be determined;
(o) the application, if any, of Section 1402 and/or 1403 to the
Securities of the series (and, in the case of Section 1403, if
applicable, any additional covenants subject to covenant defeasance)
and any provisions in modification of, in addition
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to or in lieu of any of the provisions in Sections 1402 and 1403; and,
if either Section 1402 or 1403 is made applicable with respect to the
Securities of the series, whether such defeasance or covenant
defeasance must be affected with respect to all Outstanding Securities
of the series or whether such defeasance or covenant defeasance may be
affected with respect to Securities within the series;
(p) the obligation, if any, of the Company to permit the
conversion or exchange of the Securities of the series into the
Company's Common Stock or other securities, as the case may be, and the
terms and conditions upon which such conversion or exchange shall be
effected (including, without limitation, the initial conversion price
or rate, the conversion period, the conversion agent, any adjustment of
the applicable conversion price or rate and any requirements relative
to the reservation of such shares or securities for purposes of
conversion);
(q) whether any of the Securities of the series will be issued
in whole or in part in book-entry form and, in such case, the initial
Depositary with respect to such Book-Entry Security or Securities and
the circumstances under which any such Securities may be registered in
the name of a Person other than such Depositary or its nominee, if
other than as set forth in Section 305;
(r) whether Securities of the series are to be issuable as
Registered Securities, as Bearer Securities or alternatively as Bearer
Securities and Registered Securities, and whether the Bearer Securities
are to be issuable with Coupons, without Coupons or both, and any
restrictions applicable to the offer, sale or delivery of the Bearer
Securities and the terms, if any, upon which Bearer Securities of the
series may be exchanged for Registered Securities of the series and
vice versa;
(s) if any of the Securities of the series are to be issuable as
Bearer Securities, the date as of which any such Bearer Security shall
be dated, if other than the date of original issuance of the first of
such Securities to be issued;
(t) provisions, if any, granting special rights to the Holders
of Securities of the series upon the occurrence of such events as may
be specified;
(u) any deletions from, modifications of or additions to the
Events of Default or covenants of the Company provided for with respect
to Securities of the series whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants set
forth herein;
(v) the terms, if any, pursuant to which the Securities of the
series will be made subordinate in right of payment to all Senior
Indebtedness of the Company, and the definition of any such Senior
Indebtedness (in the absence of an express
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statement that the Securities of such series are subordinate in right
of payment to all Senior Indebtedness, the Securities of such series
shall not be subordinate to Senior Indebtedness);
(w) the application, if any, of judgments in respect of any
specified currency, to the Securities;
(x) whether the payment of principal, premium and interest, if
any, Additional Amounts, if any, and other amounts due hereunder, and
performance of the Company's other obligations hereunder, will be
guaranteed by one or more guarantors, including subsidiaries of the
Company; and
(y) any other terms of the series, whether or not consistent
with the provisions of this Indenture.
All Securities of any one series and all Coupons, if any, appertaining to
Bearer Securities of such series shall be substantially identical except, in the
case of Registered Securities, as to denomination and except as may otherwise be
provided by the Company in the Board Resolution or pursuant to the Board
Resolution and set forth in the Officers' Certificate or in any indenture or
indentures supplemental hereto pertaining to such series of Securities. The
terms of the Securities may provide, without limitation, that the Securities
shall be authenticated and delivered by the Trustee on original issue from time
to time upon telephonic or written order of persons designated in the Board
Resolution, Officers' Certificate or supplemental indenture (telephonic
instructions to be promptly confirmed in writing by such person) and that such
persons are authorized to determine, consistent with such Board Resolution,
Officers' Certificate or supplemental indenture, such terms as are specified in
such Board Resolution, Officers' Certificate or supplemental indenture. All
Securities of any one series need not be issued at the same time and, unless
otherwise so provided by the Company as contemplated by this Section 301, a
series may be reopened without consent of any Holder from time to time for
issuances of additional Securities of such series. The terms of any Security may
be established prior to the issuance thereof but not after the issuance of other
Securities of the same series.
Section 302. Currency; Denominations.
In the absence of any such provisions with respect to the Securities of
any series, the principal of, any premium and interest on and any Additional
Amounts with respect to the Securities shall be payable in Dollars. In the
absence of any such provisions with respect to the Securities of any series, the
Registered Securities denominated in Dollars shall be issuable in registered
form without Coupons, other than Registered Securities issued in book-entry form
(which may be of any denomination), and shall be issuable in
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denominations of $1,000 and any integral multiple thereof. Bearer Securities
denominated in Dollars shall be issuable in registered form without Coupons,
other than Bearer Securities issued in book-entry form (which may be of any
denomination), and shall be issuable in denominations of $5,000 and any integral
multiple thereof. Securities not denominated in Dollars shall be issuable in
such denominations as are established with respect to such Securities in or
pursuant to this Indenture.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities and Coupons, if any, shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its
President, its Chief Financial Officer or one of its Vice Presidents, under its
corporate seal or a facsimile thereof which may, but need not, be attested by
its Treasurer, one of its Assistant Treasurers, its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
or Coupons, if any, may be manual or facsimile signatures of the present or any
future such authorized officer and may be imprinted or otherwise reproduced on
the Securities or Coupons.
Securities and any Coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities or Coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series, together with any
Coupons appertaining thereto, executed by the Company, to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities to or upon the order of the
Company or pursuant to such procedures acceptable to the Trustee and to such
recipients, as the case may be, as specified from time to time by a Company
Order. If all the Securities of any series are not to be issued at one time and
if the terms of such Securities established as contemplated by Section 301 so
permit, such Company Order may set forth procedures acceptable to the Trustee
for the completion and authentication of such Securities from time to time. In
authenticating Securities of any series and any Coupons appertaining thereto,
and accepting the additional responsibilities under this Indenture in relation
to such Securities and any Coupons appertaining thereto, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected in
relying upon:
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(a) any Board Resolution, Officers' Certificate and/or indenture
supplemental hereto by or pursuant to which the forms and terms of such
Securities are established as contemplated by Sections 201 and 301;
(b) an Officers' Certificate stating that the forms and terms of such
Securities and Coupons, if any, have been established pursuant to
Sections 201 and 301 and comply with this Indenture; and
(c) an Opinion of Counsel substantially to the effect that:
(i) the forms and the terms of such Securities and Coupons, if
any, have been duly authorized and established in conformity with
the provisions of this Indenture,
(ii) all conditions precedent provided for in this Indenture
relating to the Trustee's authentication of such Securities and
Coupons, if any, have been complied with, and
(iii) such Securities and Coupons, if any, when authenticated
and delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such Opinion of
Counsel, will constitute valid and legally binding obligations of
the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles
and to such other matters as such counsel may specify.
The Trustee shall not be required to authenticate such Securities if the issue
of such Securities pursuant to this Indenture will affect the Trustee's own
rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Company Order, Board Resolution,
indentures supplemental hereto, Officers' Certificate and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents (with such
modifications as may be appropriate) are delivered at or prior to the
authentication upon original issuance of the first Security of such series to be
issued and reasonably contemplate such authentication of each such Security.
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Each Registered Security shall be dated the date of its authentication
unless otherwise established therefor as contemplated by Section 301. Each
Bearer Security shall be dated as of the date specified in or pursuant to this
Indenture.
No Security or Coupon appertaining thereto, if any, shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee or an
Authenticating Agent by manual signature, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder and is entitled to the benefits of
this Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 309, together with a written statement (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
stating that such Security has never been issued and sold by the Company, for
all purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture. Except as permitted by Section 306 or 307 or as may
otherwise be provided in or pursuant to this Indenture, the Trustee shall not
authenticate and deliver any Bearer Security unless all Coupons appertaining
thereto then matured have been detached and canceled.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities of such series which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued, in registered form or, if authorized in or pursuant to this
Indenture, in bearer form with one or more Coupons or without Coupons and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities. In the case of Securities of any series,
such temporary Securities may be in book-entry form.
Except in the case of temporary Securities in book-entry form, which shall
be exchanged in accordance with the provisions thereof, if temporary Securities
of any series are issued, the Company will cause definitive Securities of that
series to be prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities of such series
shall be exchangeable for definitive Securities of such series upon surrender of
the temporary Securities of such series at the Office or Agency of the Company
in a Place of Payment for that series, without charge to the
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Holder. Upon surrender for cancellation of any one or more temporary Securities
of any series (accompanied by any unmatured Coupons appertaining thereto), the
Company shall execute, and the Trustee shall authenticate and deliver in
exchange therefor, one or more definitive Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor;
provided, however, that no definitive Bearer Security, except as provided in or
pursuant to this Indenture, shall be delivered in exchange for a temporary
Registered Security; and provided, further, that a definitive Bearer Security
shall be delivered in exchange for a temporary Bearer Security only in
compliance with the conditions set forth in or pursuant to this Indenture. Until
so exchanged, the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series and tenor.
Section 305. Registration, Registration of Transfer and
Exchange.
With respect to the Registered Securities of each series, the Company shall
cause to be kept at the Corporate Trust Office of the Trustee or in any Office
or Agency of the Company in a Place of Payment a register (the register
maintained in such office and in any other Office or Agency of the Company in a
Place of Payment being herein sometimes collectively referred to as the
"Security Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of the Registered
Securities and of transfers of the Registered Securities. The Security Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. The Trustee, at its Corporate Trust
Office, is hereby appointed "Security Registrar" for the purpose of registering
the Securities and transfers of the Securities as herein provided.
The Company shall have the right to remove and replace, from time to time,
the Security Registrar for any series of Securities; provided that no such
removal or replacement shall be effective until a successor Security Registrar
with respect to such series of Securities shall have been appointed by the
Company and shall have accepted such appointment. In the event the Trustee shall
not be or shall cease to be Security Registrar with respect to a series of
Securities, it shall have the right to examine the Security Register for such
series at all reasonable times. There shall be only one Security Register for
each series of Securities.
Upon surrender for registration of transfer of any Registered Security of
any series at the Office or Agency of the Company in a Place of Payment for
Securities of that series, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor,
containing identical terms and provisions, bearing a number not
contemporaneously outstanding.
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At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series, any authorized
denominations and of a like aggregate principal amount and tenor, containing
identical terms and provisions, upon surrender of the Securities to be exchanged
at such Office or Agency. Whenever any Registered Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Registered Securities which the Holder making the exchange is
entitled to receive.
If, but only if, permitted by the applicable Board Resolution and set forth
in the applicable Officers' Certificate, or in any indenture supplemental
hereto, with respect to Securities of any series, at the option of the Holder,
Bearer Securities of such series may be exchanged for Registered Securities of
such series containing identical terms, denominated as authorized in or pursuant
to this Indenture and in the same aggregate principal amount, upon surrender of
the Bearer Securities to be exchanged at any Office or Agency for such series,
with all unmatured Coupons and all matured Coupons in default thereto
appertaining. If the Holder of a Bearer Security is unable to produce any such
unmatured Coupon or Coupons or matured Coupon or Coupons in default, such
exchange may be effected if the Bearer Securities are accompanied by payment in
funds acceptable to the Company and the Trustee in an amount equal to the face
amount of such missing Coupon or Coupons, or the surrender of such missing
Coupon or Coupons may be waived by the Company and the Trustee if there is
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Bearer
Security shall surrender to any Paying Agent any such missing Coupon in respect
of which such a payment shall have been made, such Holder shall be entitled to
receive the amount of such payment; provided, however, that, except as otherwise
provided in Section 1002, interest represented by Coupons shall be payable only
upon presentation and surrender of those Coupons at an Office or Agency for such
series located outside the United States. Notwithstanding the foregoing, in case
a Bearer Security of any series is surrendered at any such Office or Agency for
such series in exchange for a Registered Security of such series and like tenor
after the close of business at such Office or Agency on (a) any Regular Record
Date and before the opening of business at such Office or Agency on the relevant
Interest Payment Date, or (b) any Special Record Date and before the opening of
business at such Office or Agency on the related date for payment of Defaulted
Interest, such Bearer Security shall be surrendered without the Coupon relating
to such Interest Payment Date or proposed date of payment, as the case may be
(or, if such Coupon is so surrendered with such Bearer Security, such Coupon
shall be returned to the Person so surrendering the Bearer Security), and
interest or Defaulted Interest, as the case may be, shall not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but shall be
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payable only to the Holder of such Coupon when due in accordance with the
provisions of this Indenture.
If provided in or pursuant to this Indenture with respect to Securities of
any series, at the option of the Holder, Registered Securities of such series
may be exchanged for Bearer Securities upon such terms and conditions as may be
provided in or pursuant to this Indenture with respect to such series.
Whenever any Securities are surrendered for exchange as contemplated by the
immediately preceding two paragraphs, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Company or
the Security Registrar for such Security) be duly endorsed, or be accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 306, 906 or 1107, not involving any transfer
and other than exchanges of interests in Book-Entry Securities for definitive
Securities pursuant to the second succeeding paragraph.
Except as otherwise provided in or pursuant to this Indenture, neither the
Company nor the Trustee shall be required (a) to issue, register the transfer of
or exchange Securities of any series, if such Security may be among those
selected for redemption, during a period beginning at the opening of business 15
days before selection of the Securities of that series to be redeemed under
Section 1103 and ending at the close of business on (i) if such Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (ii) if such Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Securities are also issuable as Registered Securities and
there is no publication, the mailing of the relevant notice of redemption; (b)
to register the transfer of or exchange any Registered Security, or portion
thereof, so selected for redemption in whole or in part,
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except in the case of any Registered Security to be redeemed in part, the
portion thereof not to be redeemed; (c) to exchange any Bearer Security so
selected for redemption except, to the extent provided with respect to such
Bearer Security, that such Bearer Security shall be simultaneously surrendered
for redemption with written instruction for payment consistent with the
provisions of this Indenture; or (d) to issue, register the transfer of or
exchange any Security which, in accordance with its terms, has been surrendered
for repayment at the option of the Holder, except the portion, if any, of such
Security not so repaid.
Notwithstanding the foregoing, no Book-Entry Security shall be registered
for transfer or exchange, or authenticated and delivered, whether pursuant to
this Section, Sections 304, 306, 906 or 1107 or otherwise, in the name of a
Person other than the Depositary for such Book-Entry Security or its nominee
until (a) the Depositary with respect to a Book-Entry Security notifies the
Company that it is unwilling or unable to continue as Depositary for such
Book-Entry Security or the Depositary ceases to be a clearing agency registered
under the Exchange Act and no successor Depositary for such Securities shall
have been appointed within 90 days of such notification or of the Company
becoming aware of the Depositary ceasing to be so registered, as the case may
be; (b) the Company, in its sole discretion, executes and delivers to the
Trustee a Company Order that all Book-Entry Securities of such series shall be
so transferable and exchangeable; (c) there shall have occurred and be
continuing an Event of Default with respect to the Securities of such series; or
(d) upon the occurrence of such other condition as may be established as
contemplated by Section 301 for Securities of such series. Upon the occurrence
in respect of any Book-Entry Security of any series of any one or more of the
conditions specified in clauses (a), (b), (c) or (d) of the preceding sentence,
the Company shall without unnecessary delay deliver to the Trustee certificated
Securities of such series in such form and denominations as are required by or
pursuant to this Indenture, containing identical terms and in aggregate
principal amount equal to the aggregate principal amount of such Book-Entry
Securities and shall cause the Trustee to authenticate and deliver such
certificated Securities to such Persons as the Depositary with respect to such
series shall direct.
Except as provided in the preceding paragraph, any Security authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, any Book-Entry Security, whether pursuant to this Section, Section 304, 306,
906 or 1107 or otherwise, shall also be a Book-Entry Security and bear the
legend specified in Section 203.
Subject to the second preceding paragraph, if the Securities are Book-
Entry Securities, the Depositary or its nominee, as registered owner of a
Book-Entry Security, shall be the Holder of such Book-Entry Security for all
purposes under this Indenture, and owners of beneficial interests in a Book-
Entry Security shall hold such interests pursuant
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to the applicable procedures of the Depositary. Accordingly, any such owner's
beneficial interest in a Book-Entry Security will be shown only on, and the
transfer of such interest shall be effected only through, records maintained by
the Depositary or its nominee.
If any beneficial owner of an interest in a Book-Entry Security is entitled
to exchange such interest for Securities of such series of like tenor, terms and
principal amount and which are not Book-Entry Securities, whether pursuant to
the third preceding paragraph or as otherwise specified as contemplated by
Section 301 and provided that any applicable notice provided in the Book-Entry
Security shall have been given, then without unnecessary delay but in any event
not later than the earliest date on which such interest may be so exchanged, the
Company shall deliver to the Trustee definitive Securities in aggregate
principal amount equal to the principal amount of such beneficial owner's
interest in such Book-Entry Security, executed by the Company. On or after the
earliest date on which such interests may be so exchanged, such Book-Entry
Security shall be surrendered by the Depositary or such depository as shall be
specified in the Company Order with respect thereto to the Trustee, as the
Company's agent for such purpose, to be exchanged, in whole or from time to time
in part, for definitive Securities without charge and the Trustee shall
authenticate and deliver, in exchange for each portion of such Book-Entry
Security, an equal aggregate principal amount of definitive Securities of the
same series of authorized denominations and of like tenor and terms as the
portion of such Book-Entry Security to be exchanged which, unless the Securities
of the series are not issuable both as Bearer Securities and as Registered
Securities, as specified as contemplated by Section 301, shall be in the form of
Bearer Securities or Registered Securities, or any combination thereof;
provided, however, that no such exchanges may occur during a period beginning at
the opening of business 15 days before any selection of Securities to be
redeemed and ending on the relevant Redemption Date if the Security for which
exchange is required may be among those selected for redemption; and provided,
further, that no Bearer Security delivered in exchange for a portion of a
Book-Entry Security shall be mailed or otherwise delivered to any location in
the United States. If a Registered Security is issued in exchange for any
portion of a Book-Entry Security after the close of business at the Office or
Agency where such exchange occurs on (a) any Regular Record Date and before the
opening of business at such Office or Agency on the relevant Interest Payment
Date or (b) any Special Record Date and before the opening of business at such
Office or Agency on the related proposed date for payment of Defaulted Interest;
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of such Registered Security, but will be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such Book-Entry Security
is payable in accordance with the provisions of this Indenture.
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Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated Coupon
appertaining to it is surrendered to the Trustee or the Company, together with,
in proper cases, such security or indemnity as may be required by the Company or
the Trustee to save each of them or any agent of each of them harmless, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security, with Coupons appertaining thereto corresponding to the
Coupons, if any, of the same series and of like tenor, terms and principal
amount and bearing a number not contemporaneously outstanding, with Coupons
corresponding to the Coupons, if any, appertaining to the surrendered Security.
If there shall be delivered to the Trustee (a) evidence to their
satisfaction of the destruction, loss or theft of any Security or Coupon and (b)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security or Coupon has been acquired by a bona
fide purchaser, the Company shall execute and, upon the Company's request, the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security or in exchange for the Security to which a destroyed, lost or
stolen Coupon appertains (with all appurtenant Coupons not destroyed, lost or
stolen), a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding, with Coupons
corresponding to the Coupons, if any, appertaining to such destroyed, lost or
stolen Security or to the Security to which such destroyed, lost or stolen
Coupon appertains.
Notwithstanding the provisions of the previous two paragraphs, in case any
such mutilated, destroyed, lost or stolen Security or Coupon has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, pay such Security or Coupon; provided, however, that
payment of principal of, any premium or interest on or any Additional Amounts
with respect to any Bearer Securities shall, except as otherwise provided in
Section 1002, be payable only at an Office or Agency for such Securities located
outside the United States and, unless otherwise provided in or pursuant to this
Indenture, any interest on Bearer Securities and any Additional Amounts with
respect to such interest shall be payable only upon presentation and surrender
of the Coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
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Every new Security of any series, together with any Coupons appertaining
thereto, issued pursuant to this Section in lieu of any destroyed, lost or
stolen Security, or in exchange for the Security to which a destroyed, lost or
stolen Coupon appertains, shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
and Coupons appertaining thereto or the destroyed, lost or stolen Coupon shall
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Securities
of that series and Coupons, if any, duly issued hereunder.
The provisions of this Section, as amended or supplemented pursuant to this
Indenture with respect to particular Securities or generally, are exclusive and
shall preclude (to the extent lawful) all other rights and remedies with respect
to the replacement or payment of mutilated, destroyed, lost or stolen Securities
or Coupons.
Section 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise established as contemplated by Section 301 with respect
to any Securities of any series, interest on any Registered Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest; provided, however, that each installment of
interest on any Registered Security may at the Company's option be paid by (a)
mailing a check for such interest, payable to or upon the written order of the
Person entitled thereto pursuant to Section 308, to the address of such Person
as its appears on the Security Register, or (b) wire transfer to an account
maintained by the payee located inside the United States.
Unless otherwise provided as contemplated by Section 301 with respect to
the Securities of any series, payment of interest may be made, in the case of a
Bearer Security, by transfer to an account maintained by the payee with a bank
located outside the United States. Unless otherwise provided in or pursuant to
this Indenture, in case a Bearer Security of any series is surrendered in
exchange for a Registered Security of such series after the close of business at
an Office or Agency for such Security on any Regular Record Date therefor and
before the opening of business at such Office or Agency on the next succeeding
Interest Payment Date therefor, such Bearer Security shall be surrendered
without the Coupon relating to such Interest Payment Date and interest shall not
be payable on such Interest Payment Date in respect of the Registered Security
issued in exchange for such Bearer Security, but shall be payable only to the
Holder of such Coupon when due in accordance with the provisions of this
Indenture.
Except as otherwise established as contemplated by Section 301 with respect
to Securities of any series, any interest on any Registered Security which is
payable, but is
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not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in paragraph (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Registered Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Registered Security and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money in cash equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as provided in this clause. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall not be more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of such Securities at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names such Securities
(or their respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (b). In case a Bearer Security
is surrendered at the Office or Agency for such Security in exchange
for a Registered Security after the close of business at such Office or
Agency on any Special Record Date and before the opening of business at
such Office or Agency on the related proposed date for payment of
Defaulted Interest, such Bearer Security shall be surrendered without
the Coupon relating to such Defaulted Interest and Defaulted Interest
shall not be payable on such proposed date of payment in respect of the
Registered Security issued in exchange for such Bearer Security, but
shall be payable only to the Holder of such Coupon when due in
accordance with the provisions of this Indenture.
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(b) The Company may pay any Defaulted Interest on the Securities
of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and interest to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Registered Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
any premium and (subject to Section 305 and 307) any interest on such Registered
Security and for all other purposes whatsoever, whether or not any payment with
respect to such Registered Security shall be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the bearer of any Bearer Security or the bearer of any Coupon as the
absolute owner of such Security or Coupon for the purpose of receiving payment
thereof or on account thereof and for all other purposes whatsoever, whether or
not any payment with respect to such Security or Coupon shall be overdue, and
neither the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
No owner of any beneficial interest in any Book-Entry Security held on its
behalf by a Depositary shall be deemed the Holder of, or have any direct rights
with respect to such Book-Entry Security for any purpose under this Indenture.
None of the Company, the Trustee, any Paying Agent or the Security Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of a Book-Entry
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any Book-Entry Security,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any Depositary, as a Holder, with respect to
such Book-Entry Security or
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impair, as between such Depositary and owners of beneficial interests in such
Book-Entry Security, the operation of customary practices governing the exercise
of the rights of such Depositary (or its nominee) as Holder of such Book-Entry
Security.
Section 309. Cancellation.
All Securities and Coupons surrendered for payment, redemption, repayment
at the option of the Holder, registration of transfer or exchange, conversion,
or for credit against any sinking fund payment shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities and any Coupons so delivered shall
be promptly canceled by the Trustee. If the Company shall so acquire any of the
Securities, however, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
Section 310. Computation of Interest.
Except as otherwise established as contemplated by Section 301 in respect
of Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Order cease to be of further effect
with respect to Securities of any series specified in such Company Order and any
Coupons appertaining thereto (except as to any surviving rights as provided in
the last paragraph of this Section 401 and rights to receive the principal,
premium, if any, interest, if any, and Additional Amounts, if any, with respect
to Securities of such series), and the Trustee, upon receipt of Company Order,
and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture as to such series,
when
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(a) either
(i) all Securities of such series theretofore authenticated
and delivered and all Coupons appertaining thereto (other than (A)
Coupons appertaining to Bearer Securities of such series surrendered in
exchange for Registered Securities of such series and maturing after
such exchange whose surrender is not required or has been waived as
provided in Section 305; (B) Securities and Coupons of such series
which have been destroyed, lost or stolen and which have been replaced
or paid as provided in Section 306; (C) Coupons appertaining to
Securities and Coupons of such series called for redemption and
maturing after the relevant Redemption Date whose surrender has been
waived as provided in Section 1106; and (D) Securities and Coupons of
such series for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(ii) all Securities of such series and in the case of (A) or
(B) below, if applicable, any Coupons appertaining thereto, not
theretofore delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated
Maturity within one year, or
(C) if redeemable at the option of the Company, are
to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at
the expense, of the Company,
and the Company, in the case of (A), (B) or (C) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose money in the Currency in which such Securities
are payable in an amount sufficient to pay and discharge the entire
indebtedness on such Securities and any Coupons appertaining thereto
not theretofore delivered to the Trustee for cancellation, including
the principal of, any premium and interest on, and any Additional
Amounts with respect to, such Securities and any Coupons appertaining
thereto, to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date thereof, as the case may be;
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(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company with respect to the Outstanding
Securities of such series and any Coupons appertaining thereto; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture with respect to such series have been
complied with.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of such series as to which it is Trustee and if the other conditions
thereto are met.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to Securities of any series pursuant to this Section 401, (a) the
obligations of the Company to the Trustee under Section 607, (b) the
obligations of the Company to any Authenticating Agent under Section 614, (c) if
money shall have been deposited with the Trustee pursuant to subclause (ii) of
clause (a) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003, in each case with respect to such Securities
and (d) the obligations of the Company and the Trustee with respect to the
Securities of such series under Section 305, 306, 402, 1002 and 1003, with
respect to the payment of Additional Amounts, if any, with respect to such
Securities as contemplated by Section 1007, with respect to any rights of the
Holders of such Securities to require the Company to repay such Securities as
contemplated by Section 1301, and with respect to any rights of the Holders to
convert or exchange such Securities into Common Stock or other securities, shall
survive.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all cash
deposited with the Trustee pursuant to Section 401, shall be held in trust and
applied by it, in accordance with the provisions of the Securities of the
relevant series, the Coupons, if any, appertaining thereto, and this Indenture,
to the payment, either directly or through any Paying Agent (other than the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal (and premium, if any), interest and
Additional Amounts for whose payment such cash has been deposited with or
received by the Trustee, but such cash need not be segregated from other funds
except to the extent required by law.
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ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default," wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body),
unless such event is specifically deleted or modified in or pursuant to the
supplemental Indenture, Board Resolution or Officers' Certificate establishing
the terms of such series pursuant to Section 301 of this Indenture:
(a) default in the payment of principal of or premium, if any, on,
any Security of that series when due (whether at Stated Maturity, on
any Redemption Date or Repayment Date or otherwise); or
(b) default in the payment of any interest on, or any Additional
Amounts payable in respect of, any Security of that series or any
Coupon appertaining thereto as and when the same shall become due and
payable, and the continuance of such default for a period of 30 days;
or
(c) default in the deposit of any sinking fund payment, when and
as due by the terms of a Security of that series; or
(d) default in the performance or breach of any covenant or
agreement of the Company in this Indenture (other than any such default
or breach which is elsewhere in this Section specifically dealt with or
which is included herein solely for the benefit of a series of
Securities other than that series), and continuance of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(e) default under any bond, debenture, note, mortgage, indenture
or other instrument under which there may be issued or by which there
may be secured or evidenced any indebtedness for money borrowed for
which the Company or a Significant Subsidiary is directly responsible
or liable as obligor or guarantor having an aggregate principal amount
outstanding of at least $50,000,000, whether such indebtedness exists
at the date of this Indenture or shall thereafter be created,
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which default shall have resulted in such indebtedness being declared
due and payable prior to the date on which it would otherwise have
become due and payable, without such indebtedness being discharged or
such acceleration having been rescinded or annulled; or
(f) the entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Company or a
Significant Subsidiary in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law
or (ii) a decree or order adjudging the Company or such Significant
Subsidiary a bankrupt or insolvent, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or such Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days;
(g) the commencement by the Company or a Significant Subsidiary of
a voluntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the written
consent by it to the entry of a decree or order for relief in respect
of the Company or a Significant Subsidiary, as the case may be, in an
involuntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law, or the written consent
by it to the filing or commencement of any case or proceeding in
respect of the Company or a Significant Subsidiary under any applicable
bankruptcy, insolvency, reorganization or other similar law, or the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due; or
(h) any other Event of Default established as contemplated by
Section 301 with respect to Securities of that series.
Section 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities of that series may declare the principal of
(or, if any of the Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount of such
Securities as may be specified in the terms thereof) and accrued interest on all
of the Securities of that series to be immediately due
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and payable by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) and interest shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient in cash to pay:
(i) all interest on the Securities of that series and any
Coupons appertaining thereto which has become due otherwise
than by such declaration of acceleration and any Additional
Amounts with respect thereto,
(ii) the principal of (and premium, if any, on) the
Securities of that series which has become due otherwise than
by such declaration of acceleration,
(iii) to the extent that payment of such interest is
lawful, interest upon overdue principal of, premium and
interest, if any, on and Additional Amounts, if any, with
respect to the Securities of such series at the rate or rates
prescribed therefor in such Securities or this Indenture (it
being understood that, if no rate of interest on overdue
amounts is specifically provided, then any such overdue
principal, premium, interest and Additional Amounts shall, to
the extent lawful, bear interest at the rate of interest borne
by such Securities), and
(iv) all amounts owing the Trustee pursuant to Section 607
in respect of Securities of that series; and
(b) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of, premium and
interest, if any, of Securities of that series which have become due
solely by such declaration of acceleration, have been cured or waived
as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any interest on, or any
Additional Amounts payable in respect of any Security or any Coupon
appertaining thereto when such interest or Additional Amounts, as the
case may be, becomes due and payable and such default continues for a
period of 30 days; or
(b) default is made in the payment of the principal of or premium,
if any, on any Security when due (whether at Stated Maturity, on any
Redemption Date or Repayment Date or otherwise,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities and any Coupons appertaining thereto, the whole
amount then due and payable on such Securities and any Coupons appertaining
thereto for principal and any premium and interest and Additional Amounts and,
to the extent that payment of such interest shall be legally enforceable,
interest and Additional Amounts on any overdue principal, premium, interest, and
Additional Amounts at the rate or rates prescribed therefor in such Securities
(it being understood, that if no rate of interest on overdue amounts is
specifically provided, then any such overdue principal, premium, interest and
Additional Amounts shall, to the extent lawful, bear interest at the rate of
interest borne by such Securities), and, in addition thereto, such further
amount as shall be sufficient to cover the amounts due the Trustee pursuant to
Section 607 in respect of such Securities.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and Coupons and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon such Securities
and any Coupons appertaining thereto, wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
Coupons appertaining thereto by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
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Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of any Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Securities of any series, of
principal, and premium, if any, interest and Additional Amounts owing
and unpaid in respect of such Securities and any Coupons and to file
such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee pursuant to Section 607 and of
the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official), in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay the Trustee any amount due it pursuant to Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or any of the
Securities or Coupons may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or Coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the amounts due
the Trustee pursuant to Section 607, be for the ratable benefit
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of the Holders of the Securities or Coupons in respect of which such judgment
has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or otherwise
on behalf of the Holders or the Trustee pursuant to this Article or through any
proceeding or any arrangement or restructuring in anticipation or in lieu of any
proceeding contemplated by this Article shall be applied, subject to applicable
law, in the following order, at the date or dates fixed by the Trustee and, in
the case of the distribution of such money on account of principal or any
premium, interest or Additional Amounts, upon presentation of the Securities or
Coupons, or both, as the case may be, and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 607;
SECOND: Solely in the case of any money collected in respect of
Subordinated Securities, to the payment of amounts then due and unpaid to the
Holders of the applicable Senior Indebtedness to the extent required pursuant to
the subordination provisions relating to such Subordinated Securities:
THIRD: To the payment of the amounts then due and unpaid for principal of
and any premium, interest and Additional Amounts payable on the Securities and
any Coupons appertaining thereto in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities and Coupons
for principal and any premium interest and Additional Amounts, respectively; and
FOURTH: To the payment of the remainder, if any, to the Company.
Section 507. Limitation on Suits.
Subject to Section 508, no Holder of any Security of any series or any
Coupons appertaining thereto shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of that
series;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request
to the Trustee
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to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Security to affect, disturb or prejudice the rights of
any other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders of Securities of another series or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all of such Holders.
Section 508. Unconditional Right of Holders to Receive
Principal, Premium, if any, and Interest and
Additional Amounts, if any.
Notwithstanding any other provision in this Indenture, the Holder of any
Security or Coupon shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 305
and 307) any interest on or any Additional Amounts with respect to such Security
or such Coupon, as the case may be, on the respective Maturity or Maturities
expressed in such Security and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
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Section 510. Rights and Remedies Cumulative.
To the extent permitted by applicable law, except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities or Coupons in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not, to the extent permitted by law, prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities or
Coupons appertaining thereto to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture or with the Securities of any series or be
unduly prejudicial to Holders of Securities of such series not joining
therein, and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
Subject to Section 502, the Holders of not less than a majority in
principal amount of the Outstanding Securities of any series may on behalf of
the Holders of all the Securities of such series and any Coupons appertaining
thereto waive any past default hereunder with respect to such series and its
consequences, except a default
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(a) in the payment of the principal of or any premium or interest
on, or any Additional Amounts with respect to, any Security of such
series, or
(b) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security of any
series by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee in respect of the Securities of such
series, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Company or the Trustee, to
any suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the Outstanding Securities of such series,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on, or Additional Amounts, if
any, with respect to any Security on or after the respective Maturities
expressed in such Security (including, in the case of redemption, on or after
the Redemption Date and, in the case of repayment, on or after the Repayment
Date) or for the enforcement of the right, if any, to convert or exchange any
Security into Common Stock or other securities in accordance with its terms).
Section 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
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suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act and this Indenture. The Trustee shall be under no
obligation, subject to the duty of the Trustee during a default to act with the
required standard of care, to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Securities of any
series, unless such Holders shall have offered the Trustee reasonable security
or indemnity against costs, expenses and liabilities which might be incurred by
it in compliance with such request. Whether or not therein expressly so
provided, every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
Section 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit to all Holders of
Securities of such series, in the manner and to the extent provided in Trust
Indenture Act Section 313(c), notice of such default hereunder, unless such
default shall have been cured or waived; provided, however, that, except in the
case of a default in the payment of the principal of (or premium, if any) or
interest on or any Additional Amounts with respect to any Security of such
series, or in the payment of any sinking fund installment with respect to the
Securities of such series, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
committee of Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the Holders of the
Securities and Coupons of such series; and provided, further, that in the case
of any default of the character specified in Section 501(d) with respect to
Securities of such series, no notice to Holders shall be given until at least 60
days after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to the Securities of such series.
Subject to Trust Indenture Act Section 315(b), the Trustee shall not be deemed
to have, or be required to take, notice of any default or Event of Default
(other than a default described in paragraph (a), (b), or (c) of Section 501)
except upon (a) written notification from the Company or (b) written
notification from a Holder and, in the absence of such notice, the Trustee may
conclusively presume that there is no default or Event of Default except as
aforesaid.
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Subject to Section 601 of this Indenture, such notification shall not be deemed
to include receipt of information obtained in any report or other documents
furnished under Section 704 of this Indenture, which reports and documents the
Trustee shall have no duty to examine.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601 hereof and to the provisions of
Sections 315(a) through 315(d) of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon receipt by it of any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security, together with any Coupons appertaining thereto, to the
Trustee for authentication and delivery pursuant to Section 303 which shall be
evidenced as provided therein) and any resolution of the Board of Directors may
be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
a Board Resolution, an Opinion of Counsel or an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders of any series or any Coupons appertaining thereto pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice,
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request, direction, consent, order, bond, debenture, note, coupon, other
evidence of indebtedness or other paper or document;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence of the Trustee;
(i) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it;
(j) in the absence of bad faith on its part, the Trustee may conclusively
rely on the statements in certificates and opinions furnished to it and
conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Indenture;
(k) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(l) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of a majority in principal amount of the Outstanding Securities of any
series, relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture with respect to the Securities of such
series; and
(m) no provision of this Indenture shall require the Trustee to determine
the maximum interest rate permissible under applicable law.
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Section 604. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, and in any Coupons shall be taken as the
statements of the Company, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or Coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility and Qualification on Form T-1 supplied to the Company
are true and accurate subject to the qualifications set forth therein. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other Person that may be an agent of the Trustee or of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities or Coupons and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such
other Person.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(a) to pay to the Trustee annually reasonable compensation for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by it
in accordance with any provision of this Indenture (including the
reasonable compensation and the
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expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(c) to indemnify the Trustee and each predecessor Trustee for,
from and against and to hold it harmless against, any loss, liability
or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder;
provided that the Trustee and each predecessor Trustee shall promptly
notify the Company of the commencement of any action, or proceeding for
which it intends to seek indemnity hereunder, will permit the Company
to conduct the defense thereof on its behalf and will not compromise or
settle any such action, suit or proceeding without the prior approval
of the Company.
The Company's payment obligations pursuant to this Section 607 shall
survive the discharge of this Indenture. When the Trustee renders services or
incurs expenses or makes disbursements or advances after the occurrence of an
Event of Default specified in Section 501(f) or (g), the compensation for such
services and such expenses, disbursements and advances are intended to
constitute expenses of administration under any bankruptcy, insolvency,
reorganization or other similar law.
Section 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
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Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may, or any Holder who has been a
bona fide Holder of a Security of the applicable series for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder of a Security
who has been a bona fide Holder of a Security for at least six months;
(ii) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any Holder of a Security who has been a bona fide Holder of a
Security for at least six months; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by or pursuant to Board Resolution may
remove the Trustee with respect to all Securities or the Securities of any
series, or (B) subject to Section 514, any Holder who has been a bona fide
Holder of a Security of any series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to the Securities of
such series and the appointment of a successor Trustee or Trustees with respect
thereto.
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(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by or pursuant to a
Company Request, Company Order or Board Resolution, shall promptly appoint a
successor Trustee or Trustees with respect to the Securities of that or those
series (it being understood that any such successor Trustee may be appointed
with respect to the Securities of one or more or all of such series and that at
any time there shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable requirements of Section
611. If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by the Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 611, become the successor Trustee with
respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
of such appointment shall include the name of the successor Trustee with respect
to the Securities of such series and the address of its Corporate Trust Office.
Notices of resignation, removal and appointment may be combined into a single
notice.
Section 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring
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Trustee and, subject to Section 1003, shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
such one or more series shall execute and deliver an indenture supplemental
hereto wherein each successor Trustee shall accept such appointment and which
(i) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (ii)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(iii) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraphs (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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Section 612. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities. In case
any Securities shall not have been authenticated by such predecessor Trustee,
any such successor Trustee may authenticate and deliver such Securities, in
either its own name or that of its predecessor Trustee, with the full force and
effect which this Indenture provides for the certificate of authentication of
the Trustee.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption or repayment
thereof or pursuant to Section 306, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Any such appointment
shall be evidenced by an instrument in writing signed by a Responsible Officer
of the Trustee, a copy of which instrument shall be promptly furnished to the
Company. Wherever reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a bank or trust company or corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to
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act as Authenticating Agent, having a combined capital and surplus of not less
than $50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee for such series and to the Company. The Trustee for any
series of Securities may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating Agent and to the
Company. Upon receiving such a notice of resignation or upon such a termination,
or in case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee for such series may
appoint a successor Authenticating Agent which shall be acceptable to the
Company and shall (a) mail written notice of such appointment by first-class
mail, postage prepaid, to all Holders of Registered Securities, if any, of the
series with respect to which such Authenticating Agent will serve, as their
names and addresses appear in the Security Register, and (b) if Securities of
that series are issued as Bearer Securities, publish notice of such appointment
at least once in an Authorized Newspaper in the place where such successor
Authenticating Agent has its principal office if such office is located outside
the United States. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
If at any time there shall be an Authenticating Agent appointed with
respect to one or more series of Securities, then in lieu of the Trustee's
certificate of authentication, an alternative certificate of authentication
shall be borne by such Securities substantially in the following form:
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"TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
By:______________________,
as Trustee
By:______________________,
as Authenticating Agent
By:______________________,
Authorized Signatory"
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not later than 15 days after each Regular Record Date
for Securities of each series at the time Outstanding, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders of
Registered Securities as of such Regular Record Date, or if there is no Regular
Record Date for interest for such series of Securities, semi-annually, upon such
dates as are set forth in the Board Resolution, Officers' Certificates indenture
supplemental hereto authorizing such series; and
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(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
provided, however, that so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
Section 702. Preservation of Information; Communications to
Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities or Coupons, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act, regardless of the source from which such information
was derived, and that the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under the Trust Indenture Act.
Section 703. Reports by Trustee.
(a) Within 60 days after each May 15, commencing with the first May 15
after the first issuance of Securities pursuant to this Indenture, the Trustee
shall transmit to the Holders such reports concerning the Trustee and its
actions under this Indenture as may be required pursuant to Trust Indenture Act
Section 313(a) in the manner provided pursuant to Section 313(c), and such other
reports as may be required under such Act in the manner and at the times
provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to
the Holders, be filed by the Trustee with the Company and, to the extent
required, with each stock exchange upon which any Securities are listed and with
the Commission. The Company will notify the Trustee when any Securities are
listed on any stock exchange.
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Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with or merge with or into any other
Person, and the Company shall not sell, lease, assign, transfer or otherwise
convey all or substantially all of its assets to another Person, unless:
(a) (i) in the case of a merger, the Company shall be the surviving
corporation or (ii) the Person (if other than the Company) surviving the merger,
formed by such consolidation or which acquires such assets shall be an entity
organized and existing under the laws of the United States of America, any state
thereof or the District of Columbia, and shall expressly assume the due and
punctual payment of the principal of and any premium and interest on and any
Additional Amounts with respect to all of the Securities, according to their
tenor, and the due and punctual performance and observance of all of the other
covenants and conditions of this Indenture and the Securities to be performed or
observed by the Company by an indenture supplemental hereto, complying with
Article Nine hereof, satisfactory to the Trustee, executed and delivered to the
Trustee by such Person; and
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or the lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing.
Section 802. Rights and Duties of Successor Corporation.
In case of any such merger in which the Company is not the surviving
corporation or any such consolidation, sale, lease, assignment, transfer, or
conveyance and upon any such assumption by the successor entity, such successor
entity shall succeed to and be substituted for, and may exercise every right and
power of, the Company under this Indenture and the Securities, with the same
effect as if it had been named herein as the
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party of the first part, and the predecessor Person, except in the event of a
lease, shall be relieved of any further obligation under this Indenture and the
Securities. Such successor entity thereupon may cause to be signed, and may
issue either in its own name or in the name of the Company, any or all of the
Securities issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee; and, upon the order of such successor
entity, instead of the Company, and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Company to the Trustee for authentication, and
any Securities which such successor entity thereafter shall cause to be signed
and delivered to the Trustee for that purpose. All the Securities of any series
so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Securities of such series theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Securities had
been issued at the date of the execution hereof.
In case of any such merger in which the Company is not the surviving
corporation or any such consolidation, sale, lease, assignment, transfer or
conveyance, such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
Section 803. Officers' Certificate and Opinion of Counsel.
Any consolidation, merger, sale, conveyance, assignment, transfer or
lease permitted under Section 801 is also subject to the condition that the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
to the effect that any such consolidation, merger, sale, conveyance, transfer,
assignment or lease, and the assumption by any successor Person, and any such
supplemental indenture, comply with the provisions of this Article and that all
conditions precedent herein provided for relating to such transaction have been
complied with.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution (which Board Resolution may provide general terms for such
action and may provide that the specific terms of such action may be determined
in accordance with or pursuant to a Company Order), and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
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(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Securities as obligor under this Indenture;
(b) to add to the covenants of the Company for the benefit of the
Holders of the Securities of all or any series (and if such covenants
are to be for the benefit of the Securities of less than all series,
stating that such covenants are expressly being included solely for the
benefit of the Securities of such series) or to surrender any right or
power herein conferred upon the Company;
(c) to add any additional Events of Default (and if such Events of
Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are expressly being
included solely for the benefit of the Securities of such series);
provided, however, that in respect of any such additional Events of
Default such supplemental indenture may provide for a particular period
of grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Trustee upon such default or may limit the rights of Holders of a
majority in aggregate principal amount of that or those series of
Securities to which such additional Events of Default apply to waive
such default;
(d) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance
of Securities in bearer form, registrable or not registrable as to
principal, and with or without Coupons, to change or eliminate any
restrictions on the payment of principal of, any premium or interest on
or any Additional Amounts with respect to Bearer Securities, to permit
Bearer Securities to be issued in exchange for Registered Securities,
to permit Bearer Securities to be exchanged for Bearer Securities of
other authorized denominations or to permit or facilitate the issuance
of Securities in uncertificated form, provided that any such action
shall not adversely affect the interests of the Holders of Securities
of any series or any Coupons appertaining thereto in any material
respect;
(e) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that
any such addition, change or elimination (i) shall neither (A) apply to
any Security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such provision
nor (B) modify the rights of the Holder of any such Security with
respect to such provision or (ii) shall become effective only when
there is no such Security Outstanding;
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(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee;
(g) to secure the Securities;
(h) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance,
covenant defeasance or satisfaction and discharge of the Securities of
any series pursuant to this Indenture; provided that any such action
shall not adversely affect the interests of the Holders of Securities
of such series or any other series of Securities or any Coupons
appertaining thereto in any material respect;
(i) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause
(i) shall not adversely affect the interests of the Holders of
Securities of any series or any Coupons appertaining thereto in any
material respect;
(j) to add a guarantor or guarantors for any series or all series
of the Securities;
(k) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act; or
(l) to establish the form or terms of Securities of any series and
any related Coupons as contemplated by Sections 201 and 301, including
the provisions and procedures relating to Securities convertible into
or exchangeable for Common Stock or other securities, as the case may
be.
Section 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by Board Resolution (which Board
Resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to a Company Order), and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this
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Indenture or of modifying in any manner the rights of the Holders of Securities
of such series and any related Coupons under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(a) change the Stated Maturity of the principal of, or premium, if
any, or any installment of principal of or interest on any Security, or
the date, if any, on which any Security is subject to repayment at the
option of the Holder, or reduce the principal amount thereof or the
rate of interest thereon or any Additional Amounts with respect thereto
or any premium payable thereon, or change the obligation of the Company
to pay Additional Amounts pursuant to Section 1007 (except as
contemplated by Section 801(a) and permitted by Section 901(a)), or
reduce the amount of the principal of an Original Issue Discount
Security or other Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502 or the amount provable in bankruptcy pursuant to Section 504, or
change any Place of Payment where or Currency in which any Security or
any premium or interest on, or any Additional Amounts with respect to
any Security is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Maturity thereof (as
such Maturity, may be extended, if applicable, in accordance with the
terms of such Security or Coupon appertaining thereto), or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver with respect to such series (of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture, or reduce the
requirements of Section 1504 for quorum or voting, or
(c) modify any of the provisions of this Section, Section 513 or
Section 1006, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of the Securities of one or more particular series, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed
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not to affect the rights under this Indenture of the Holders of Securities of
any other series.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Persons entitled to consent to any indenture
supplement hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
and of any Coupon appertaining thereto shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act, as then in effect at the
time of execution thereof.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series
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so modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such series.
Section 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 106, setting forth in general terms the
substance of each supplemental indenture.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the Holders of
Securities of each series that it will duly and punctually pay the principal of
(and premium, if any) and interest on and any Additional Amounts payable in
respect or the Securities of that series in accordance with the terms of the
Securities of that series, any Coupons appertaining thereto and this Indenture.
Unless otherwise specified as contemplated by Section 301 with respect to any
series of Securities, any interest due on and any Additional Amounts payable in
respect of Bearer Securities on or before Maturity, other than Additional
Amounts, if any, payable in respect of principal of (or premium, if any, on)
such a Security, shall be payable only upon presentation and surrender of the
several Coupons for such interest installments as are evidenced thereby as they
severally mature. Unless otherwise specified with respect to Securities of any
series pursuant to Section 301, at the option of the Company, all payments of
principal may be paid by check to the registered Holder of the Registered
Security or other person entitled thereto against surrender of such Security.
Section 1002. Maintenance of Office or Agency.
If Securities of a series are issuable only as Registered Securities, the
Company will maintain in each Place of Payment for the Securities of that series
an Office or Agency where Securities of that series may be presented or
surrendered for payment or, if applicable, conversion, where Securities of that
series may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities of that
series and this Indenture may be served. If Securities of a series are issuable
as Bearer Securities, the Company shall maintain, subject to any laws or
regulations applicable thereto, an Office or Agency in a Place of Payment for
such
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series which is located outside the United States where Securities of such
series and any Coupons appertaining thereto may be presented and surrendered for
payment or, if applicable, conversion; provided, however, that if the Securities
of such series are listed on the London Stock Exchange or the Luxembourg Stock
Exchange or any other stock exchange located outside the United States and such
stock exchange shall so require, the Company shall maintain a Paying Agent in
London, Luxembourg or any other required city located outside the United States,
as the case may be, so long as the Securities of such series are listed on such
exchange. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such Office or Agency. If at any
time the Company shall fail to maintain any such required Office or Agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, except that Bearer Securities or such series and any
Coupons appertaining thereto may be presented and surrendered for payment at the
place specified for the purpose with respect to such Securities as provided in
or pursuant to this Indenture, and the Company hereby appoints the Trustee as
its agent to receive all such presentations, surrenders, notices and demands.
Except as otherwise provided in or pursuant to this Indenture, no payment
of principal, premium, interest or Additional Amounts with respect to Bearer
Securities shall be made at any Office or Agency in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, if
amounts owing with respect to any Bearer Securities shall be payable in Dollars,
payment of principal of, any premium or interest on and any Additional Amounts
with respect to any such Securities may be made at the Corporate Trust Office of
the Trustee or its agent or any Office or Agency designated by the Company in
the Borough of Manhattan, The City of New York, if, but only if, payment of the
full amount of such principal, premium, interest or Additional Amounts at all
offices outside the United States maintained for such purpose by the Company in
accordance with this Indenture is illegal or effectively precluded by exchange
controls or other similar restrictions.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an Office or Agency
in each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other Office or
Agency. Unless otherwise provided in or pursuant to this Indenture, the Company
hereby designates as the Place for Payment of each series of Securities the
Borough of Manhattan, The City of New York, and initially appoints the Corporate
Trust
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Office of the Trustee or its agent as the Company's Office or Agency in the
Borough of Manhattan, The City of New York for such purpose and as Security
Registrar. The Company may subsequently appoint a different Office or Agency in
the Borough of Manhattan, The City of New York and a different Security
Registrar for the Securities of any series.
Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to the Securities of any series, it will, before 9:00 A.M. (Arizona time) on
each due date of the principal of or any premium or interest on, or any
Additional Amounts with respect to, any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum in the Currency or Currencies in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay the principal and any premium and
interest or Additional Amounts so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities of any series and any related Coupons, it will, on or prior to each
due date of the principal of or any premium or interest on, or any Additional
Amounts with respect to, any Securities of that series, deposit with a Paying
Agent a sum (in the Currency or Currencies in which the Securities of such
series are payable (except as otherwise specified pursuant to Section 301 for
the Securities of such series)) sufficient to pay such amount, such sum to be
held in trust for the benefit of the Persons entitled thereto, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent for the Securities of any series,
other than the Trustee, to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (a) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent; (b) give the Trustee
notice of any default by the Company (or any other obligor upon the Securities
of such series) in the making of any payment of principal of (or premium, if
any) or interest, if any, on the Securities of such series; and (c) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
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The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or any premium or
interest on or any Additional Amounts with respect to any Security of any series
or any Coupon appertaining thereto and remaining unclaimed for two years after
such principal, premium or interest or Additional Amount has become due and
payable shall be paid to the Company upon Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once in an Authorized Newspaper in
each Place of Payment for such series or mailed to Holders of Registered
Securities entitled to such money notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication or mailing, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 1004. Corporate Existence.
Subject to Article Eight, the Company shall, with respect to itself and
each of its Significant Subsidiaries, do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and related rights and franchises (charter and statutory); provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer necessary or desirable in the conduct of the business of
the Company; and provided, further, however, that the foregoing shall not
prohibit a sale, transfer or conveyance of a Subsidiary or any of its assets in
compliance with the terms of this Indenture.
Section 1005. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, a written
statement (which need not be contained in or accompanied by an Officers'
Certificate) signed by the principal
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executive officer, the principal financial officer or the principal accounting
officer of the Company, stating whether or not, to the best of his or her
knowledge, the Company is in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture and if the Company shall
be in default, specifying all such defaults and the nature and status thereof of
which he or she may have knowledge.
Section 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Section 1005 with respect to the Securities
of any series or with the covenants established as contemplated by Section 301
with respect to the Securities of any series, except to the extent the terms of
such Securities established as contemplated by Section 301 make this Section
1006 inapplicable to any such term, provision or condition of any such covenant,
if before or after (subject to Section 502) the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Securities
of such series shall, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such term, provision or
condition, but no such waiver shall extend to or affect such term, provision or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
Section 1007. Additional Amounts.
If any Securities of a series provide for the payment of Additional
Amounts, the Company agrees to pay to the Holder of any such Security or any
Coupon appertaining thereto Additional Amounts as provided in or pursuant to
this Indenture or such Securities. Whenever in this Indenture there is
mentioned, in any context, the payment of the principal of or any premium or
interest on, or in respect of, any Security of any series or any Coupon or the
net proceeds received on the sale or exchange of any Security of any series,
such mention shall be deemed to include mention of the payment of Additional
Amounts provided by the terms of such series established hereby or pursuant
hereto to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof pursuant to such terms, and express mention
of the payment of Additional Amounts, if applicable, in any provision hereof
shall not be construed as excluding Additional Amounts in those provisions
hereof where such express mention is not made.
Except as otherwise provided in or pursuant to this Indenture or the
Securities of any series, if the Securities of a series provide for the payment
of Additional Amounts, at least 10 days prior to the first Interest Payment Date
with respect to such series of Securities (or if the Securities of such series
shall not bear interest prior to Maturity, the
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first day on which a payment of principal or premium is made), and at least 10
days prior to each date of payment of principal or premium or interest if there
has been any change with respect to the matters set forth in the below-mentioned
Officers' Certificate, the Company shall furnish to the Trustee and the
principal Paying Agent or Paying Agents, if other than the Trustee, an Officers'
Certificate instructing the Trustee and such Paying Agent or Paying agents
whether such payment of principal of and premium, if any, or interest, if any,
on the Securities of such series shall be made to Holders of Securities of such
series or the Coupons appertaining thereto who are not United States persons
without withholding for or on account of any tax, assessment or other
governmental charge described in the Securities of such series. If any such
withholding shall be required, then such Officers' Certificate shall specify by
country the amount, if any, required to be withheld on such payments to such
Holders of Securities or Coupons, and the Company agrees to pay to the Trustee
or such Paying Agent the Additional Amounts required by the terms of such
Securities. The Company covenants to indemnify the Trustee and any Paying Agent
for, and to hold them harmless against, any loss, liability or expense
reasonably incurred without negligence or bad faith on their part arising out of
or in connection with actions taken or omitted by any of them in reliance on any
Officers' Certificate furnished pursuant to this Section.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms established as
contemplated by Section 301 and (except as otherwise expressly established as
contemplated by Section 301 in respect of Securities of such series) in
accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution or by action taken pursuant to a Board Resolution. In case of
any redemption at the election of the Company of less than all the Securities of
any series, the Company shall, at least 45 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall
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furnish the Trustee with an Officers' Certificate evidencing compliance with
such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all of the Securities of such series of a specified tenor and with identical
terms are to be redeemed), the particular Securities to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series not previously called for redemption,
by such method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Securities of that series or any integral multiple
thereof) of the principal amount of Securities of such series of a denomination
larger than the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company upon its request in writing
of the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
Unless otherwise specified in or pursuant to this Indenture or the
Securities of any series, if any Security selected for partial redemption is
converted or exchanged for Common Stock or other securities in part before
termination of the conversion or exchange right with respect to the portion of
the Security so selected, the converted or exchanged portion of such Security
shall be deemed (so far as may be) to be the portion selected for redemption.
Securities which have been converted or exchanged during a selection of
Securities to be redeemed shall be treated by the Trustee as Outstanding for the
purpose of such selection.
Section 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, unless a shorter period is specified in the Securities to be redeemed, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register. Failure to give notice by mailing in the manner herein
provided to the Holder of any Registered Securities designated for redemption as
a whole or in part, or any defect in the notice to any such Holder, shall not
affect the validity of the proceedings for the redemption of any other
Securities or portion thereof.
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Any notice that is mailed to the Holder of any Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not such Holder receives the notice.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Securities of any series are
to be redeemed, the identification (and, in the case of partial
redemption of any Securities, the principal amounts) of the particular
Securities to be redeemed,
(d) in the case of a Security to be redeemed in part, the
principal amount of such Security to be redeemed and that after the
Redemption Date upon surrender of such Security, the holder will
receive, without a charge, a new Security or Securities in the
aggregate principal amount equal to the unredeemed portion thereof.
(e) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
(f) the place or places where such Securities, together (in the
case of Bearer Securities) with all Coupons appertaining thereto, if
any, maturing after the Redemption Date, are to be surrendered for
payment of the Redemption Price and , if applicable, any accrued
interest and Additional Amounts pertaining thereto,
(g) that the redemption is for a sinking fund, if such is the
case,
(h) that, unless otherwise specified in such notice, Bearer
Securities of any series, if any, surrendered for redemption must be
accompanied by all Coupons maturing subsequent to the date fixed for
redemption or the amount of any such missing Coupon or Coupons will be
deducted from the Redemption Price, unless security or indemnity
satisfactory to the Company, the Trustee and any Paying Agent is
furnished,
(i) if Bearer Securities of any series are to be redeemed and any
Registered Securities of such series are not to be redeemed, and if
such Bearer Securities may be exchanged for Registered Securities not
subject to redemption on the Redemption Date pursuant to Section 305 or
otherwise, the last date, as determined by the Company, on which such
exchanges may be made,
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(j) in the case of Securities of any series that are convertible
or exchangeable into Common Stock or other securities, the conversion
or exchange price or rate, the date or dates on which the right to
convert or exchange the principal of the Securities of such series to
be redeemed will commence or terminate, as applicable, and the place or
places where such Securities may be surrendered for conversion or
exchange, and
(k) the CUSIP number of such Securities, if any (or any other
numbers used by a Depositary to identify such Securities.
A notice of redemption given or published as contemplated by Section 106
need not identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money, in the Currency or Currencies in which the Securities of such series are
payable, sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on all the
Securities which are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest, if any) such Securities shall, if the same were interest-bearing,
cease to bear interest and the Coupons for such interest appertaining to any
Bearer Securities so to be redeemed, except to the extent provided below, shall
be void. Upon surrender of any such Security and any Coupons appertaining
thereto for redemption in accordance with said notice, such Security shall be
paid by the Company at the Redemption Price, together with, unless otherwise
provided in or pursuant to the Indenture, any accrued and unpaid interest to the
Redemption Date; provided, however, that, except as otherwise provided in or
pursuant to this Indenture or the Bearer Securities of such series, installments
of interest on Bearer Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable only upon presentation and surrender of Coupons
for such interest (at an Office or Agency located outside the United States
except as provided in Section 1002), and provided, further, that,
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except as otherwise provided in or pursuant to this Indenture or the Registered
Securities of any series, installments of interest whose Stated Maturity is on
or prior to the Redemption Date shall be payable to the Holders of such
Registered Securities, or one or more Predecessor Securities, registered as such
at the close of business on the relevant Regular Record Dates according to their
terms and the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant Coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price, or, at the option of the
Company, after payment to the Trustee for the benefit of the Company of, an
amount equal to the face amount of all such missing Coupons, or the surrender of
such missing Coupons may be waived by the Company and the Trustee if there is
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to the Trustee or any Paying Agent any such missing Coupons in
respect of which a deduction shall have been made from the Redemption Price,
such Holder shall be entitled to receive the amount so deducted; provided,
however, that any interest or Additional Amounts represented by Coupons shall be
payable only upon presentation and surrender of those Coupons at an Office or
Agency for such Security located outside of the United States except as
otherwise provided in Section 1002.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security or, if no rate of interest on overdue amounts is prescribed in such
Security, at the rate of interest borne by such Security.
Section 1107. Securities Redeemed in Part.
Any Registered Security which is to be redeemed only in part shall be
surrendered at any Office or Agency for such Security (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Registered Security or Registered
Securities of the same series and of like tenor, of any authorized denomination
as requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
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ARTICLE TWELVE
SINKING FUNDS
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption of
Securities of any series as provided for by the terms of Securities of such
series and this Indenture.
Section 1202. Satisfaction of Sinking Fund Payments with
Securities.
The Company may, in satisfaction of all or any part of any mandatory
sinking fund payment with respect to the Securities of a series (a) deliver
Outstanding Securities of a series (other than any previously called for
redemption or which have been surrendered for repayment at the option of the
Holders) together in the case of any Bearer Securities of such series with all
unmatured Coupons appertaining thereto, and (b) apply as a credit Securities of
such series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, as
provided for by the terms of such series; provided that such Securities so
delivered or applied as a credit have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities so delivered or applied as a
credit for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.
Section 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash in the Currency or Currencies in
which the Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series) and the
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portion thereof, if any, which is to be satisfied by delivering and crediting
Securities of that series pursuant to Section 1202 , and the optional amount, if
any, to be added in cash to the next ensuing mandatory sinking fund payment, and
will also deliver to the Trustee any Securities to be so delivered and credited.
If such Officers' Certificate shall specify an optional amount to be added in
cash to the next ensuing mandatory sinking fund payment, the Company shall
thereupon be obligated to pay the amount therein specified. Not less than 30 and
not more than 60 days before each such sinking fund payment date the Trustee
shall select the Securities to be redeemed upon such sinking fund payment date
in the manner specified in Section 1103 and cause notice of the redemption
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1105, 1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
Section 1301. Applicability of Article.
Securities of any series which are repayable at the option of
the Holders thereof before their Stated Maturity shall be repaid in accordance
with the terms of the Securities of such series. The repayment of any principal
amount of Securities pursuant to such option of the Holder to require repayment
of Securities before their Stated Maturity, for purposes of Section 309, shall
not operate as a payment, redemption or satisfaction of the indebtedness
represented by such Securities unless and until the Company, at its option,
shall deliver or surrender the same to the Trustee with a directive that such
Securities be canceled. Notwithstanding anything to the contrary contained in
this Section 1301, in connection with any repayment of Securities, the Company
may arrange for the purchase of any Securities by an agreement with one or more
investment bankers or other purchasers to purchase such Securities by paying to
the Holders of such Securities on or before the close of business on the
Repayment Date an amount not less than the Repayment Price payable by the
Company on repayment of such Securities, together with, if applicable, accrued
interest thereon, and the obligation of the Company to pay the Repayment Price
of such Securities shall be satisfied and discharged to the extent such payment
is so paid by such purchasers.
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ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
Section 1401. Applicability of the Article; Company's
Obligation to Effect Defeasance or Covenant
Defeasance.
Unless otherwise provided pursuant to Section 301, provision is hereby made
for either or both of (a) defeasance of the Securities of or within a series
under Section 1402 or (b) covenant defeasance of the Securities of or within a
series under Section 1403, then the provision of the Section or Sections, as the
case may be, together with other provisions of this Article (with such
modifications thereto as may be specified pursuant to Section 301 with respect
to any Securities), shall be applicable to such Securities and any Coupons
appertaining thereto, and the Company may at its option by Board Resolution, at
any time, with respect to such Securities and any Coupons appertaining thereto,
elect to have Section 1402 (if applicable) or Section 1403 (if applicable) be
applied to such Outstanding Securities and any Coupons appertaining thereto upon
compliance with the conditions set forth below in this Article.
Section 1402. Defeasance and Discharge.
Upon the Company's exercise of the above option applicable to this Section
with respect to any Securities of or within a series, the Company shall be
deemed to have been discharged from its obligations with respect to such
Outstanding Securities and any Coupons appertaining thereto on the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such Outstanding
Securities and any Coupons appertaining thereto, which shall thereafter be
deemed to be "Outstanding" only for the purpose of Section 1405 and other
Sections of this Indenture referred to in clauses (a) and (b) of this Section,
and to have satisfied all its other obligations under such Securities and any
Coupons appertaining thereto and this Indenture insofar as such Securities and
any Coupons appertaining thereto are concerned (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
herein: (a) the rights of Holders of such Outstanding Securities and any Coupons
appertaining thereto to receive, solely from the trust funds described in
Section 1404 and as more fully set forth in such Section, payments in respect of
the principal of (and premium, if any) and interest, if any, on and such
Additional Amounts, if any, with respect to such Securities and any Coupons
appertaining thereto when such payments are due, (b) the Company's and the
Trustee's obligations with respect to such Securities under Sections 304, 305,
306, 1002 and 1003 and with respect to payments of Additional Amounts, if any,
on such Securities as
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contemplated by Section 1007, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (d) this Article. Subject to compliance
with this Article Fourteen, the Company may exercise its option under this
Section notwithstanding the prior exercise of its option under Section 1403 with
respect to such Securities and any Coupons appertaining thereto.
Section 1403. Covenant Defeasance.
Upon the Company's exercise of the option applicable to this Section with
respect to any Securities of or within a series, the Company shall be released
from its obligations under the covenants, if any, specified pursuant to Section
301, with respect to such Outstanding Securities and any Coupons appertaining
thereto on and after the date the conditions set forth in Section 1404 are
satisfied (hereinafter "covenant defeasance"), and such Securities and any
Coupons appertaining thereto shall thereafter be deemed to be not "Outstanding"
for the purpose of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to such
Outstanding Securities and any Coupons appertaining thereto, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section or such other covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or other such covenant or by reason of reference in any such
Section or such other covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a default or an Event
of Default under Section 501(d) or 501(h) or otherwise, as the case may be, but,
except as specified above, the remainder of this Indenture and such Securities
and any Coupons appertaining thereto shall be unaffected thereby.
Section 1404. Applicability of the Article; Company's Obligation
to Effect Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 1402 or
1403 to any Outstanding Securities of or within a series and any Coupons
appertaining thereto:
(a) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the
provisions of this Article Fourteen) as trust funds in trust for the
purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
such Securities and any Coupons appertaining thereto, (i) an amount
sufficient (in such Currency or Currencies in which such Securities and
any Coupons appertaining thereto, and installments of principal, if
any, thereof and interest, if any, thereon, are then specified as
payable at Stated Maturity), (ii) Government Obligations applicable to
such Securities and Coupons appertaining thereto (determined on the
basis of the Currency or Currencies in which such Securities and
Coupons appertaining thereto, and installments of principal, if any,
thereof and
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interest, if any, thereon, are then specified as payable at Stated
Maturity) which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide not
later than one day before the due date of any payment of principal of
(and premium, if any) and interest, if any, on, and Additional Amounts,
if any, with respect to such Securities and any Coupons appertaining
thereto, money in an amount, or (iii) a combination thereof, in each
case in an amount, sufficient in the opinion of a nationally recognized
firm of independent public accountants or a nationally recognized
investment banking firm expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and
discharge (A) the principal of (and premium, if any), on, interest, if
any, on, and Additional Amounts, if any, with respect to such
Outstanding Securities and any Coupons appertaining thereto on the
Stated Maturity of such principal or installment of principal or
installment of principal or interest and (B) any mandatory sinking fund
payments or analogous payments applicable to such Outstanding
Securities and any Coupons appertaining thereto on the day on which
such payments are due and payable in accordance with the terms of this
Indenture and of such Securities and any Coupons appertaining thereto;
provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such Government Obligations to said
payments with respect to such Securities and any related Coupons.
Before such a deposit, the Company may give to the Trustee, in
accordance with Section 1102 hereof, a notice of its election to redeem
all or any portion of such Outstanding Securities at a future date in
accordance with the terms of the Securities of such series and Article
Eleven hereof, which notice shall be irrevocable. Such irrevocable
redemption notice, if given, shall be given effect in applying the
foregoing.
(b) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company is a
party or by which it is bound;
(c) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default with respect to such
Securities and any Coupons appertaining thereto shall have occurred and
be continuing on the date of such deposit or, insofar as Section 501(e)
or (f) are concerned, at any time during the period ending on the 91st
day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period);
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(d) In the case of an election under Section 1402, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (ii) since of the date of this
Indenture, there has been a change in the applicable United States
federal income tax law or the judicial interpretation thereof by a U.S.
federal court of competent jurisdiction, in either case to the effect
that, and based thereon such opinion shall confirm that, Holders of the
Securities of that series and any Coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on
the same amounts, and in the same manner and at the same times, as
would have been the case if such defeasance had not occurred;
(e) In the case of an election under Section 1403, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that Holders of such Outstanding Securities and any Coupons
appertaining thereto will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, and in the
same manner and at the same times, as would have been the case if such
covenant defeasance had not occurred; and
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 1402 or the covenant
defeasance under Section 1403 (as the case may be) have been complied
with and an Opinion of Counsel to the effect that, as a result of a
deposit pursuant to subsection (a) above and the related exercise of
the Company's option under Section 1402 or Section 1403 (as the case
may be), registration is not required under the Investment Company Act
of 1940, as amended, by the Company, with respect to the trust funds
representing such deposit or by the Trustee for such trust funds; and
(g) Notwithstanding any other provisions of this Section, such
defeasance or covenant defeasance shall be effected in compliance with
any additional or substitute terms, conditions or limitations which may
be established as contemplated by Section 301 in respect of the
Securities of that series.
Section 1405. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and Government Obligations (or other property as may be provided pursuant
to Section 301) (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee,
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collectively for purposes of this Section 1405, the "Trustee") pursuant to
Section 1404 in respect of any Outstanding Securities of any series and any
Coupons appertaining thereto shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and any Coupons
appertaining thereto and this Indenture, to the payment, either directly or
through any Paying Agent (other than the Company acting as its own Paying Agent)
as the Trustee may determine, to the Holders of such Securities and any Coupons
appertaining thereto of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest and Additional Amounts, if any, but
such money need not be segregated from other funds except to the extent required
by law.
Unless otherwise specified in or pursuant to this Indenture or any
Securities pursuant to Section 301, if, after a deposit referred to in Section
1404(a) has been made, (a) the Holder of a Security in respect of which such
deposit was made is entitled to, and does, elect pursuant to Section 301 or the
terms of such Security to receive payment in a Currency other than that in which
the deposit pursuant to Section 1404(a) has been made in respect of such
Security, or (b) a Conversion Event occurs in respect of the Foreign Currency in
which the deposit pursuant to Section 1404(a) has been made, the indebtedness
represented by such Security and any Coupons appertaining thereto shall be
deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium, if any), and interest, if any, on, and
Additional Amounts, if any, with respect to such Security as the same becomes
due out of the proceeds yielded by converting (from time to time as specified
below in the case of any such election ) the monies, proceeds from Government
Obligations or other property deposited in respect of such Security into the
Currency in which such Security becomes payable as a result of such election or
Conversion Event based on (x) in the case of payments made pursuant to clause
(a) above, the applicable market exchange rate for such Currency in effect on
the second Business Day prior to each payment date, or (y) with respect to a
Conversion Event, the applicable market exchange rate for such Foreign Currency
in effect (as nearly as feasible) at the time of the Conversion Event.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge, imposed on or assessed against the Government Obligations
deposited pursuant to this Section 1404 or the principal or interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of such Outstanding Securities and any Coupons
appertaining thereto.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or Government Obligations (or other property and any proceeds therefrom)
held by it as provided in Section 1404 which, in the opinion of a nationally
recognized firm of independent public accountants or a nationally recognized
investment bank expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof
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which would then be required to be deposited to effect a defeasance or covenant
defeasance, as applicable, in accordance with this Article
Section 1406. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1405 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and such
Securities and any related Coupons shall be revived and reinstated as though no
deposit had occurred pursuant to Section 1402 or 1403, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 1405; provided, however, that if the Company makes any
payment of principal of (or premium, if any) or interest, if any, on any such
Security or any related Coupon following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or Paying Agent.
Section 1407. Effect on Subordination Provisions.
Unless otherwise expressly provided pursuant to Section 301 with respect
to any series of Subordinated Securities, the provisions for subordination of
such Subordinated Securities contemplated by Article Sixteen hereof are hereby
expressly made subject to the provisions for satisfaction and discharge set
forth in Article Four hereof and the provisions for defeasance and covenant
defeasance set forth in this Article Fourteen and, anything herein to the
contrary notwithstanding, upon the effectiveness of such satisfaction and
discharge pursuant to Article Four or any such defeasance or covenant defeasance
pursuant to this Article Fourteen with respect to any Subordinated Securities,
such Subordinated Securities shall thereupon cease to be so subordinated and
shall no longer be subject to the subordination provisions applicable thereto
and, without limitation to the foregoing, all monies, Government Obligations and
other securities or property deposited with the Trustee (or other qualifying
trustee) in trust in connection with such satisfaction and discharge, defeasance
or covenant defeasance, as the case may be, and all proceeds therefrom may be
applied to pay the principal of, premium, if any, and interest, if any, on, and
Additional Amounts, if any, with respect to such Subordinated Securities as and
when the same shall become due and payable notwithstanding the provisions
contemplated by Article Sixteen hereof.
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ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
Section 1501. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities of any series may be called at any
time and from time to time pursuant to this Article to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or other Act
provided by this Indenture to be made, given or taken by Holders of Securities
of such series.
Section 1502. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of Securities
of any series for any purpose specified in Section 1501, to be held at such time
and at such place in the Borough of Manhattan, The City of New York, or in such
place as the Trustee shall determine, or, if Securities of such series have been
issued in whole or in part as Bearer Securities, in London or in such place
outside the United States as the Trustee shall determine. Notice of every
meeting of Holders of Securities of any series, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in the manner provided in Section 106, not less
than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company (by or pursuant to a Board
Resolution) or the Holders of at least 10% in principal amount of the
Outstanding Securities of any series shall have requested the Trustee to call a
meeting of the Holders of Securities of such series for any purpose specified in
Section 1501, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed
notice of or made the first publication of the notice of such meeting within 21
days after receipt of such request (whichever shall be required pursuant to
Section 106) or shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company or the Holders of Securities of such series in
the amount above specified, as the case may be, may determine the time and the
place in the Borough of Manhattan, The City of New York, or, if Securities of
such series are to be issued as Bearer Securities, in London for such meeting
and may call such meeting for such purposes by giving notice thereof as provided
in clause (a) of this Section.
Section 1503. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (a) a Holder of one or more Outstanding Securities of
such series, or (b) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by such
Holder or Holders. The only Persons
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who shall be entitled to be present or to speak at any meeting of Holders of
Securities of any series shall be the Persons entitled to vote at such meeting
and their counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 1504. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for a meeting of
Holders of Securities of such series; provided, however, that if any action is
to be taken at such meeting with respect to a consent or waiver which this
Indenture expressly provides may be given by the Holders of not less than a
specified percentage in principal amount of the Outstanding Securities of a
series, the Persons entitled to vote such specified percentage in principal
amount of the Outstanding Securities of such series shall constitute a quorum.
In the absence of a quorum within 30 minutes after the time appointed for any
such meeting, the meeting shall, if convened at the request of Holders of
Securities of such series, be dissolved. In any other case the meeting may be
adjourned for a period of not less than 10 days as determined by the chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided in Section
1502(a), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities of such
series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted only by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Securities of that series;
provided, however, that, except as limited by the proviso to Section 902, any
resolution with respect to any consent or waiver which this
Indenture expressly provides may be given by the Holders of not less than a
specified percentage, which is less than a majority in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an adjourned
meeting duly convened and at which a quorum is present as aforesaid only by the
affirmative vote of the Holders of at least such specified percentage in
principal amount of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of
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Securities of such series and the Coupons appertaining thereto, whether or not
such Holders were present or represented at the meeting.
Section 1505. Determination of Voting Rights; Conduct and
Adjournment of Meetings.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities of such series in regard to proof of the holding of
Securities of such series and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem appropriate.
Except as otherwise permitted or required by any such regulations, the holding
of Securities shall be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified in Section 104
or by having the signature of the person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 104 to
certify to the holding of Bearer Securities. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting, each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of Securities of
such series held or represented by him; provided, however, that no vote shall be
cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. If
the Securities of such series are issuable in minimum denominations of less than
$1,000, then a Holder of such a Security in a principal amount of less than
$1,000 shall be entitled to a fraction of one vote which is equal to the
fraction that the principal amount of such Security bears to $1,000. The
chairman of the meeting shall have no right to vote, except as a Holder of a
Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned from time
to time by
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Persons entitled to vote a majority in principal amount of the Outstanding
Securities of such series represented at the meeting; and the meeting may be
held as so adjourned without further notice.
Section 1506. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record, at least in
triplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1502 and, if
applicable, Section 1504. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE SIXTEEN
SUBORDINATION OF SECURITIES
Section 1601. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security of any
series, by his acceptance thereof, likewise covenants and agrees, that solely to
the extent and in the manner set forth in an indenture supplemental hereto
pursuant to Section 301(u) hereof, the indebtedness represented by the
Securities of such series and the payment of principal of (and premium, if any)
and interest on each or all of the Securities of such series will be expressly
made subordinate and subject in right of payment to the prior payment in full of
all Senior Indebtedness.
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ARTICLE SEVENTEEN
SECURITIES IN FOREIGN CURRENCIES
Section 1701. Applicability of Article.
Whenever this Indenture provides for any distribution to
Holders of Securities of any series in which not all of such Securities are
denominated in the same Currency, in the absence of any provision to the
contrary in or pursuant to this Indenture or the Securities of such series, any
amount in respect of any Security denominated in a Currency other than Dollars
shall be treated for any such distribution as that amount of Dollars that could
be obtained for such amount on such reasonable basis of exchange and as of the
record date with respect to Registered Securities of such series, if any, for
such distribution (or, if there shall be no applicable record date, such other
date reasonably proximate to the date of such distribution) as the Company may
specify in a written notice to the Trustee or, in the absence of such written
notice, as the Trustee may determine.
___________________________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-90-
<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
THE DIAL CORPORATION
By:________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:________________________
Name:
Title:
Norwest Bank Arizona, N.A., Trustee
By:________________________
Name:
Title:
Attest:
By:________________________
Name:
Title:
-91-
<PAGE> 102
STATE OF ARIZONA )
) ss.:
COUNTY OF )
On the _______ day of September, 1998, before me personally
came Susan J. Riley, to me known, who, being by me duly sworn, did depose and
say that she is the Senior Vice President and Chief Financial Officer of THE
DIAL CORPORATION, one of the parties described in and which executed the
foregoing instrument; that she knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation; and that she signed her
name thereto by like authority.
___________________________
Name:
Notary Public
State of Arizona
My Commission expires on
-92-
<PAGE> 103
STATE OF ARIZONA )
) ss.:
COUNTY OF )
On the _______ day of September, 1998, before me personally
came ______________________________, to me known, who, being by me duly sworn,
did depose and say that he/she is ___________________ of Norwest Arizona Bank,
N.A., one of the parties described in and which executed the foregoing
instrument; and that he/she signed his/her name thereto by like authority.
___________________________
Name:
Notary Public
State of Arizona
My Commission expires on
-93-
<PAGE> 1
6 1/2% SENIOR NOTES DUE 2008
THE DIAL CORPORATION
ISSUER
and
NORWEST BANK ARIZONA, N.A.
TRUSTEE
FIRST SUPPLEMENTAL INDENTURE
Dated as of September 23, 1998
Supplementing that certain
Indenture
Dated as of September 23, 1998
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE ONE - ISSUANCE OF NOTES
Section 101. Issuance of Notes; Principal Amount; Maturity...................3
Section 102. Interest on the Notes; Payment of Interest......................3
ARTICLE TWO - CERTAIN DEFINITIONS
Section 201. Certain Definitions.............................................4
ARTICLE THREE - CERTAIN COVENANTS
Section 301. Limitation on Liens.............................................7
Section 302. Limitation on Sales and Leasebacks..............................9
Section 303. Maintenance of Properties......................................10
Section 304. Insurance......................................................10
Section 305. Payment of Taxes and Other Claims..............................11
ARTICLE FOUR - REDEMPTION OF NOTES
Section 401. Right of Redemption............................................11
ARTICLE FIVE - MISCELLANEOUS
Section 501. Applicability of Certain Indenture Provisions..................12
Section 502. Reference to and Effect on the Indenture.......................12
Section 503. Waiver of Certain Covenants....................................12
Section 504. Governing Law..................................................13
Section 505. Supplemental Indenture May be Executed In Counterparts.........13
Section 506. Effect of Headings.............................................13
Section 507. Separability...................................................13
<PAGE> 3
This FIRST SUPPLEMENTAL INDENTURE, dated as of September 23, 1998 (the
"Supplemental Indenture"), between THE DIAL CORPORATION, a Delaware corporation
(the "Company"), and NORWEST BANK ARIZONA, N.A., a national banking association
organized and existing under the laws of the United States of America, as
Trustee (the "Trustee"), supplementing that certain Indenture, dated as of
September 23, 1998 (the "Base Indenture"), between the Company and the Trustee
(such Base Indenture, as supplemented by this Supplemental Indenture for this
series of Securities, being referred to herein as the "Indenture").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of the Base
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness to be issued in one or more
series as provided for in the Base Indenture heretofore executed and delivered.
Section 901(l) of the Base Indenture provides that, without the consent of
the Holders of the Securities of any series, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more supplemental indentures to the Base Indenture to establish the
form or terms of Securities of any series as contemplated by Sections 201 and
301 of the Base Indenture.
The Company proposes to issue a series of Securities denominated "6 1/2%
Senior Notes due 2008" (such Securities being referred to herein as the "Notes")
pursuant to the terms of this Supplemental Indenture and substantially in the
form set forth below, in each case with such appropriate insertions, omissions,
substitutions, and other variations as are required or permitted by the Base
Indenture and this Supplemental Indenture, and with such letters, numbers, or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of such Securities.
This Supplemental Indenture is subject to, and governed by, the provisions
of the Trust Indenture Act that are required to be a part of and to govern
indentures qualified under the Trust Indenture Act.
All things necessary to make this Supplemental Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
2
<PAGE> 4
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
ARTICLE ONE
ISSUANCE OF NOTES
Section 101. Issuance of Notes; Principal Amount; Maturity. (a) On or
about September 23, 1998, the Company shall issue and deliver to the Trustee,
and the Trustee shall authenticate, Notes substantially in the form set forth in
Exhibit A, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the Base
Indenture and this Supplemental Indenture, and with such letters, numbers, or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
(b) There is hereby authorized a series of Securities designated "6 1/2%
Senior Notes due 2008" limited to an aggregate principal amount of $200,000,000.
The Notes shall mature on September 15, 2008, which shall be the Stated Maturity
of the Notes.
Section 102. Interest on the Notes; Payment of Interest. (a) The Notes
shall bear interest at the rate of 6 1/2% per annum from and including September
23, 1998 until the principal amount thereof is due and at a rate of 6 1/2% per
annum on any overdue principal and premium, if any, and, to the extent permitted
by law, on any overdue interest. Interest shall be payable on March 15 and
September 15 of each year (each, an "Interest Payment Date"), commencing March
15, 1999. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
(b) The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided in such Indenture, be paid to the
Person in whose name a Note is registered at the close of business on the
Regular Record Date for such interest, which shall be the March 1 or September 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.
(c) Payment of the principal of (and premium, if any) and any interest on
the Notes shall be made at the designated Corporate Trust Office of the Trustee
or at the office of its agent maintained for that purpose in the Borough of
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address appears in the Security Register.
The Company hereby initially designates the Trustee as Paying Agent,
Security Registrar, transfer agent and custodian, and the designated Corporate
Trust Office of the Trustee or the office of its agent located in the Borough of
Manhattan, The City of New York, as the offices or agencies
3
<PAGE> 5
where the Notes may be surrendered for registration of transfer or exchange or
presentation for payment or redemption and where notices and demands to or upon
the Company in respect of the Notes or this Supplemental Indenture may be
received.
ARTICLE TWO
CERTAIN DEFINITIONS
Section 201. Certain Definitions. The terms defined in this Section 201
(except as herein otherwise expressly provided or unless the context of this
Supplemental Indenture otherwise requires) for all purposes of this Supplemental
Indenture and of any indenture supplemental hereto have the respective meanings
specified in this Section 201. All other terms used in this Supplemental
Indenture that are defined in the Base Indenture or the Trust Indenture Act,
either directly or by reference therein (except as herein otherwise expressly
provided or unless the context of this Supplemental Indenture otherwise
requires), have the respective meanings assigned to such terms in the Base
Indenture or the Trust Indenture Act, as the case may be, as in force at the
date of this Supplemental Indenture as originally executed.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable for a term of more than 12 months, at any date as
of which the amount thereof is to be determined, the total net amount of rent
required to be paid by such Person under such lease during the remaining term
thereof (excluding any subsequent renewal or other extension options held by the
lessee), discounted from the respective due dates thereof to such date at a rate
per annum equal to the prevailing market interest rate, at the time such lease
was entered into, on United States Treasury obligations having a maturity
substantially the same as the average term of such lease, plus 3%. The net
amount of rent required to be paid under any such lease for any such period
shall be the aggregate amount of the rent payable by the lessee with respect to
such period after excluding amounts required to be paid by such lessee, whether
or not designated as rent or additional rent, on account of maintenance and
repairs, services, insurance, taxes, assessments, water rates and similar
charges and contingent rents (such as those based on sales). In the case of any
lease which is terminable by the lessee upon the payment of a penalty, such net
amount of rent shall include the lesser of (i) the total discounted net amount
of rent required to be paid from the later of the first date upon which such
lease may be so terminated or the date of the determination of such net amount
of rent, as the case may be, and (ii) the amount of such penalty (in which event
no rent shall be considered as required to be paid under such lease subsequent
to the first date upon which it may be so terminated).
"Comparable Treasury Issue" has the meaning ascribed thereto in Section
401 hereof.
"Comparable Treasury Price" has the meaning ascribed thereto in Section
401 hereof.
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities
4
<PAGE> 6
(excluding any current liabilities which are by their terms extendible or
renewable at the option of the obligor thereon to a time more than 12 months
after the time as of which the amount thereof is being computed or which is
supported by other borrowings with a maturity of more than 12 months from the
date of calculation, (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles and (iii)
appropriate adjustments on account of minority interests of other Persons
holding stock of the Company's Subsidiaries, all as set forth on the most recent
balance sheet of the Company and its consolidated Subsidiaries (but, in any
event, as of a date within 150 days of the date of determination) in each case
excluding intercompany items and computed in accordance with generally accepted
accounting principles as in effect from time to time.
"Debt" means notes, bonds, debentures and other similar evidences of
indebtedness for money borrowed.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, applied on a
consistent basis and as in effect from time to time.
"Independent Investment Banker" has the meaning ascribed thereto in
Section 401 hereof.
"Lien" means any pledge, mortgage, lien, charge, encumbrance or security
interest.
"Permitted Liens" means (i) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; (ii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with Generally Accepted
Accounting Principles shall have been made therefor; (iii) Liens securing
reimbursement obligations with respect to letters of credit (whether or not
issued under the Credit Agreement) otherwise permitted under the Indenture and
issued in connection with the purchase of inventory or equipment by the Company
or any Subsidiary in the ordinary course of business; (iv) Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, landlords, operators, repairmen
and other similar Liens incurred in the ordinary course of business; (v)
easements, rights-of-way zoning restrictions, reservations, encroachments and
other similar encumbrances in respect of real property, which do not, in the
opinion of the Company, materially impair the use of such property in the
operation of the business of the Company or the value of such property; (vi)
Liens upon specific items of inventory or equipment and proceeds of the Company
or any Subsidiary securing its obligations in respect of bankers' acceptances
issued or created for its account to facilitate the purchase, shipment, or
storage of such inventory and equipment; (vii) leases or subleases granted to
others in the ordinary course of business that do not
5
<PAGE> 7
materially interfere with the business of the Company and its subsidiaries;
(viii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance, and other types
of social security, including any Liens securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds or other similar obligations (exclusive of obligations for
the payment of borrowed money); (ix) Liens incurred or deposits made to secure
liability to insurance carriers under insurance or self-insurance arrangements,
including liens of judgments thereunder that are not currently dischargeable;
(x) Liens on any property held in trust pursuant to defeasance or covenant
defeasance provisions governing indebtedness of the Company or any Restricted
Subsidiary arising in connection with any defeasance or covenant defeasance of
such indebtedness; (xi) Liens to secure (or encumbering deposits securing)
obligations arising from warranty or contractual service obligations of the
Company or any Restricted Subsidiary, including rights of offset and setoff; and
(xii) Liens incurred in connection with repurchase, swap or other similar
agreements.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Principal Property" means any manufacturing plant, distribution center or
warehouse, together with the land upon which it is erected and fixtures
comprising a part thereof, in each case, owned by the Company or any Restricted
Subsidiary and located in the United States, the gross book value (without
deduction of any reserve for depreciation) of which on the date as of which the
determination is being made is an amount which exceeds 1% of Consolidated Net
Tangible Assets but not including such manufacturing plants, distribution
centers or warehouses or portions thereof which in the opinion of the Company,
together with all such other manufacturing plants, distribution centers and
warehouses or portions thereof previously so declared, is not of material
importance to the total business conducted by the Company and its Subsidiaries
as an entirety.
"Redemption Date" has the meaning ascribed thereto in Section 401 hereof.
"Redemption Price" has the meaning ascribed thereto in Section 401 hereof.
"Reference Treasury Dealer" has the meaning ascribed thereto in Section
401 hereof.
"Reference Treasury Dealer Quotations" has the meaning ascribed thereto in
Section 401 hereof.
"Restricted Securities" has the meaning ascribed thereto in Section 301
hereof.
"Restricted Subsidiary" means any Subsidiary of the Company which, at the
time of determination, owns Principal Property.
6
<PAGE> 8
"Sale and Leaseback Transaction" has the meaning ascribed thereto in
Section 302 hereof.
"Treasury Rate" has the meaning ascribed thereto in Section 401 hereof.
ARTICLE THREE
CERTAIN COVENANTS
Subject to Article Fourteen of the Base Indenture, the following covenants
shall be applicable to the Company for so long as any of the Notes are
outstanding in addition to the covenants contained in the Base Indenture.
Section 301. Limitation on Liens. The Company will not itself, and will
not permit any Restricted Subsidiary to, create, incur, issue or assume any Debt
secured by any Lien on any Principal Property owned by the Company or any
Restricted Subsidiary, and the Company will not itself, and will not permit any
Restricted Subsidiary to, create, incur, issue or assume any Debt secured by any
Lien on any shares of stock or Debt of any Restricted Subsidiary (such shares of
stock or Debt of any Restricted Subsidiary being called "Restricted
Securities"), without in any such case effectively providing that the Notes
(together with, if the Company shall so determine, any other Debt of the Company
or such Restricted Subsidiary then existing or thereafter created which is not
subordinate to the Notes) shall be secured equally and ratably with (or prior
to) such secured Debt, for so long as such other secured Debt shall be so
secured, unless after giving effect thereto, the aggregate principal amount of
all such secured Debt then outstanding plus the Attributable Debt of the Company
and its Restricted Subsidiaries in respect of Sale and Leaseback Transactions
involving Principal Properties entered into after the date of the first issuance
by the Company of Notes under this Supplemental Indenture (other than Sale and
Leaseback Transactions permitted by paragraph (b) of Section 302 hereof) would
not exceed an amount equal to 10% of the Company's Consolidated Net Tangible
Assets; provided, however, that nothing contained in this Section 301 shall
prevent, restrict or apply to, and there shall be excluded from secured Debt in
any computation under this Section 301, Debt secured by:
(a) Liens on any Principal Property or Restricted Securities of the
Company or any Subsidiary existing as of the date of the first issuance by
the Company of the Notes;
(b) Liens on any Principal Property or Restricted Securities of any
Person existing at the time such Person becomes a Restricted Subsidiary,
or arising thereafter whether or not the obligations secured by such Liens
are assumed by the Company or a Restricted Subsidiary (i) otherwise than
in connection with the borrowing of money arranged thereafter and (ii)
pursuant to contractual commitments entered into prior to and not in
contemplation of such Person's becoming a Restricted Subsidiary;
(c) Liens on any Principal Property or Restricted Securities of the
Company or any Subsidiary existing at the time of acquisition thereof
(including acquisition through
7
<PAGE> 9
merger or consolidation or acquisition of stock or assets or otherwise) or
securing the payment of all or any part of the purchase price or
construction cost of the Principal Property or Restricted Securities or
securing any Debt incurred prior to, at the time of or within 180 days
after the acquisition of such Principal Property or Restricted Securities
or the completion of any such construction, whichever is later, for the
purpose of financing all or any part of the purchase price or construction
cost thereof (provided such Liens are limited to such Principal Property
or Restricted Securities, to improvements on such Principal Property and
to any other property or assets not then constituting a Principal Property
or Restricted Security);
(d) Permitted Liens;
(e) to the extent not covered by (d) above, pledges or deposits,
Liens resulting from litigation or judgments, taxes or other governmental
charges or landlord or tenant rights and other Liens incidental to the
conduct of the business or the ownership of the property and assets of the
Company or a Restricted Subsidiary which were not incurred in connection
with borrowing of money or the obtaining of advances or credit, and which
do not, in the opinion of the Company, materially detract from the value
of the property or assets or materially impair the use thereof in the
operation of the business of the Company and its Restricted Subsidiaries,
taken as a whole;
(f) Liens on any property to secure all or part of the cost of
improvements or construction thereon or indebtedness incurred to provide
funds for such purpose in a principal amount not exceeding the cost of
such improvements or construction;
(g) Liens which secure Debt owing by a Subsidiary to the Company or
to a Restricted Subsidiary; and
(h) any extension, renewal, substitution or replacement (or
successive extensions, renewals, substitutions or replacements), as a
whole or in part, of any of the Liens referred to in paragraphs (a)
through (g) above or the Debt secured thereby; provided that (1) such
extention, renewal, substitution or replacement Lien shall be limited to
all or any part of the same Principal Property or Restricted Securities
that secured the Lien extended, renewed, substituted or replaced (plus
improvements or expansions on such property, and plus any other property
or assets not then constituting a Principal Property or Restricted
Securities) and (2) in the case of paragraphs (a) through (g) above, the
Debt secured by such Lien at such time is not increased (except to pay for
any premium, interest, fee or expense payable in connection with any such
replacement, extension or renewal).
For the purposes of this Section 301 and Section 302 hereof, the giving of
a guarantee which is secured by a Lien on a Principal Property or Restricted
Securities, and the creation of a Lien on a Principal Property or Restricted
Securities to secure Debt which existed prior to the creation of such Lien,
shall be deemed to involve the creation of Debt in an amount equal to the
principal
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<PAGE> 10
amount guaranteed or secured by such Lien; but the amount of Debt secured by
Liens on Principal Properties and Restricted Securities shall be computed
without cumulating the underlying indebtedness with any guarantee thereof or
Lien securing the same.
Section 302. Limitation on Sales and Leasebacks. The Company will not
itself, and will not permit any Restricted Subsidiary to, enter into any
arrangement after the date of the first issuance by the Company of the Notes
with any bank, insurance company or other lender or investor (other than the
Company or another Restricted Subsidiary) providing for the leasing by the
Company or any such Restricted Subsidiary of any Principal Property (except a
lease for a temporary period not to exceed three years by the end of which it is
intended that the use of such Principal Property by the lessee will be
discontinued), which was or is owned or leased by the Company or a Restricted
Subsidiary and which has been or is to be sold or transferred by the Company or
a Restricted Subsidiary, more than 180 days after the completion of construction
and commencement of full operation thereof by the Company or such Restricted
Subsidiary, to such lender or investor who has advanced or will advance funds on
the security of such Principal Property (herein referred to as a "Sale and
Leaseback Transaction") unless, (i) the gross proceeds of the sale or transfer
of the Principal Property leased equals or exceeds the fair market value of such
Principal Property and (ii) either:
(a) the Attributable Debt of the Company and its Restricted
Subsidiaries in respect of such Sale and Leaseback Transaction and all
other Sale and Leaseback Transactions entered into after the date of the
first issuance by the Company of the Notes (other than such Sale and
Leaseback Transactions as are permitted by paragraph (b) below), plus the
aggregate principal amount of Debt secured by Liens on Principal
Properties and Restricted Securities then outstanding (excluding any such
Debt secured by Liens covered in paragraphs (a) through (h) of Section 301
hereof) without equally and ratably securing the Notes, would not exceed
10% of the Company's Consolidated Net Tangible Assets, or
(b) the Company, within 180 days after the sale or transfer, applies
or causes a Restricted Subsidiary to apply an amount equal to the greater
of the net proceeds of such sale or transfer or fair market value of the
Principal Property so sold and leased back at the time of entering into
such Sale and Leaseback Transaction (in either case determined by any two
of the following: the Chairman, the President, any Vice President, the
Treasurer and the Controller of the Company) to (i) purchase other
Principal Property having a fair market value at least equal to the fair
market value of the Principal Property (or portion thereof) sold or
transferred in such Sale and Leaseback Transaction or (ii) the retirement
of the Notes or other Debt of the Company (other than Debt subordinated to
the Notes) or Debt of a Restricted Subsidiary, having a Maturity more than
12 months from the date of such application (or which is supported by
other borrowings with a maturity of more than 12 months from the date of
application) or which is extendible at the option of the obligor thereon
to a date more than 12 months from the date of such application; provided
that the amount to be so applied shall be reduced by (i) the principal
amount of Notes delivered within 180 days after such sale or transfer to
the Trustee for retirement and cancellation, and
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<PAGE> 11
(ii) the principal amount of any such Debt of the Company or a Restricted
Subsidiary, other than Notes, voluntarily retired by the Company or a
Restricted Subsidiary within 180 days after such sale or transfer, or
(c) such Sale and Leaseback Transaction involves property of a
Person existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time of the sale, lease or other disposition of the
properties of such Person as an entirety or substantially as an entirety
to the Company, in each case (i) otherwise than in connection with the
borrowing of money arranged thereafter and (ii) pursuant to contractual
commitments related to the Sale and Leaseback Transaction entered into
prior to and not in contemplation of such merger, sale, lease or
disposition or such Person's becoming a Restricted Subsidiary.
Notwithstanding the foregoing, where the Company or any Restricted
Subsidiary is the lessee in any Sale and Leaseback Transaction, Attributable
Debt shall not include any Debt resulting from the guarantee by the Company or
any other Restricted Subsidiary of the lessee's obligation thereunder.
Section 303. Maintenance of Properties. The Company will cause all
Principal Properties owned by the Company or any Restricted Subsidiary or used
or held for use in the conduct of its business or the business of any Restricted
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment (except for ordinary wear and tear)
and will cause to be made all necessary repairs, renewals and replacements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly conducted at all
times; provided, however, that nothing in this Section 303 shall prevent the
Company or any Restricted Subsidiary from discontinuing the operation or
maintenance of any Principal Properties if such discontinuation is, in the
judgment of the Company, desirable in the conduct of its business or the
business of any Restricted Subsidiary and not reasonably expected to have a
material adverse effect on the ability of the Company to perform its obligations
hereunder.
Section 304. Insurance. The Company shall keep all of its and its
Restricted Subsidiaries' Principal Properties which are of an insurable nature
insured with insurers, believed by the Company in good faith to be financially
sound and responsible, against loss or damage to the extent that property of
similar character is usually so insured by corporations similarly situated and
owning like properties engaged in similar operations in the same general
geographic areas in which the Company and its Restricted Subsidiaries operate,
except where the failure to do so could not reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), earnings,
business affairs or prospects of the Company and its Restricted Subsidiaries,
taken as a whole, provided that such insurance is generally available at
commercially reasonable rates, and further provided that the Company may
self-insure, or insure through captive insurers or insurance cooperatives to the
extent consistent with prudent business practices. Such insurance shall be in
such amounts, contain such terms, be in such forms and be for such periods as
are customary in the
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Company's industry and commercially reasonable. Such insurance may be subject to
such deductibles as are customary in the industry.
Section 305. Payment of Taxes and Other Claims. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges levied
or imposed upon it or any Subsidiary or upon the income, profits or property of
the Company or any Subsidiary, and (ii) all material and lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien upon
the property of the Company or any Subsidiary, except for any Lien permitted to
be incurred under Section 301; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
ARTICLE FOUR
REDEMPTION OF NOTES
Section 401. Right of Redemption. The Notes may be redeemed, as a whole or
in part, at the option of the Company at any time, at a redemption price (a
"Redemption Price") equal to the greater of (i) 100% of the principal amount of
such Notes and (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the redemption date
(the "Redemption Date") on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points,
plus in each case accrued interest thereon to the Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of a comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any Redemption Date,
(A) the average of the Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable
11
<PAGE> 13
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m.,
New York time, on the third business day preceding such Redemption Date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and three other primary U.S. Government securities dealers in
The City of New York to be selected by the Company, and their respective
successors.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Notes to be redeemed.
Unless the Company defaults in payment of the Redemption Price, on and
after the Redemption Date interest will cease to accrue on the Notes or portions
thereof called for redemption.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed by such method as the Trustee shall deem fair and
appropriate. The Trustee may select for redemption Notes and portions of Notes
in amounts of whole multiples of $1,000.
ARTICLE FIVE
MISCELLANEOUS
Section 501. Applicability of Certain Indenture Provisions. Each of the
defeasance and covenant defeasance provisions of Article Fourteen of the Base
Indenture shall apply to the Notes.
Section 502. Reference to and Effect on the Indenture. This Supplemental
Indenture shall be construed as supplemental to the Base Indenture and all the
terms and conditions of this Supplemental Indenture shall be deemed to be part
of the terms and conditions of the Base Indenture. Except as set forth herein,
the Base Indenture heretofore executed and delivered is hereby ratified,
approved and confirmed. The provisions of this Supplemental Indenture shall for
the purposes of this series of Securities supersede the provisions of the Base
Indenture to the extent the Base Indenture is inconsistent herewith.
Section 503. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any term, provision, or condition set forth
in Article Three hereof if, before or after the time for such compliance, the
Holders of a majority in principal amount of the Outstanding Notes shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such term, provision or condition, but no such waiver
shall extend to or affect such term, provision, or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision, or condition shall remain in full force and effect.
12
<PAGE> 14
Section 504. Governing Law. This Supplemental Indenture and each Note
shall be deemed to be a contract under the laws of the State of New York, and
for all purposes shall be governed by and construed in accordance with the laws
of such state, without regard to principles of conflicts of laws. This
Supplemental Indenture is subject to the provisions of the Trust Indenture Act,
and shall, to the extent applicable, be governed by such provisions.
Section 505. Supplemental Indenture May be Executed In Counterparts. This
instrument may be executed in any number of counterparts, each of which shall be
an original; but such counterparts shall together constitute but one and the
same instrument.
Section 506. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
Section 507. Separability. In case any one or more of the provisions
contained in this Supplemental Indenture or in the Notes shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not effect any other provisions of this
Supplemental Indenture or of the Notes, but this Supplemental Indenture and the
Notes shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed all as of the day and year first above written
THE DIAL CORPORATION
By:_________________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:________________________________
Name:
Title:
NORWEST BANK ARIZONA, N.A., as Trustee
By:_________________________________
Name:
Title:
Attest:
By:_________________________________
Name:
Title:
14
<PAGE> 16
STATE OF ARIZONA )
) ss.:
COUNTY OF )
On the ____ day of September, 1998, before me personally came Susan
J. Riley, to me known, who, being by me duly sworn, did depose and say that she
is Senior Vice President and Chief Financial Officer of The Dial Corporation,
one of the parties described in and which executed the foregoing instrument;
that she knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that she signed her name thereto by
like authority.
______________________________________
Name:
Notary Public
State of Arizona
My Commission expires on
15
<PAGE> 17
STATE OF ARIZONA )
) ss.:
COUNTY OF )
On the ___ day of September, 1998, before me personally came
_________________________, to me known, who, being by me duly sworn, did depose
and say that he or she is ___________________________________ of Norwest Bank
Arizona, N.A., one of the parties described in and which executed the foregoing
instrument; and that he or she signed his or her name thereto by like authority.
______________________________________
Name:
Notary Public
State of Arizona
My Commission expires on
16
<PAGE> 18
Exhibit A
[Form of Face of Security]
[IF SUCH SECURITY IS A GLOBAL SECURITY, INSERT -- THIS SECURITY IS A BOOK-ENTRY
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS
NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE THEREOF OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE DIAL CORPORATION
6 1/2% Senior Note due September 15, 2008
No. A-__ $____________
CUSIP: 25247DAA9
THE DIAL CORPORATION, a corporation duly organized and existing under the
laws the State of Delaware (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ________________, or registered assigns, the
principal sum of _____________________________
<PAGE> 19
United States Dollars (U.S. $_____________) on September 15, 2008 and to pay
interest thereon from September 23, 1998 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 15 and September 15 in each year, commencing March 15, 1999, at the
rate of 6 1/2% per annum, until the principal hereof is paid or made available
for payment, and at a rate of 6 1/2% per annum on any overdue principal and
premium, if any, and, to the extent permitted by law, or any overdue interest.
Interest will be computed on the basis of a 360- day year of twelve 30-day
months. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, or at the option of
the Holder, the Corporate Trust Office of the Trustee, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
2
<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this instrument to be signed
manually or by facsimile by their duly authorized officers and by its corporate
seal to be affixed or imported thereon.
THE DIAL CORPORATION
By:_________________________________
Title:
Attest:
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
Dated: NORWEST BANK ARIZONA, N.A.
As Trustee
By:_________________________________
Authorized Signatory
3
<PAGE> 21
FORM OF REVERSE OF SECURITY
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of September 23, 1998 (herein called the
"Indenture," which term shall have the meaning assigned to it in such
instrument), between the Company and Norwest Bank Arizona, N.A., as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture and all indentures
supplemental thereto for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal amount to
$200,000,000, and is issued pursuant to a Supplemental Indenture supplementing
the Indenture, dated as of September 23, 1998, between the Company and the
Trustee relating to the issuance of the "6 1/2% Senior Notes due 2008" of this
series (the "Supplemental Indenture").
The Notes may be redeemed, as a whole or in part, at the option of the
Company at any time, at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
redemption date (the "Redemption Date") on a semiannual basis (assuming a 360-
day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis
points, plus in each case accrued interest thereon to the Redemption Date.
In the event of redemption of this Security in part only, a new Security
or Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of more than 50% in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and
4
<PAGE> 22
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or its
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made to a Holder for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
5
<PAGE> 23
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
6
<PAGE> 1
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED DECEMBER 23, 1997)
<PAGE> 2
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 1
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the Plan is to give the Company a significant advantage
in attracting, retaining and motivating officers, employees and directors and to
provide the Company and its subsidiaries with the ability to provide incentives
more directly linked to the profitability of the Company's businesses and
increases in stockholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Affiliate" means a corporation or other entity controlled by the
Company and designated by the Committee as such.
(b) "Award" means Stock Appreciation Right, Stock Option or Restricted
Stock.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (1) the conviction of a participant for committing a
felony under federal law or the law of the state in which such action occurred,
(2) dishonesty in the course of fulfilling a participant's employment duties or
(3) willful and deliberate failure on the part of a participant to perform his
employment duties in any material respect, or such other events as shall be
determined by the Committee. The Committee will have the sole discretion to
determine whether "Cause" exists, and its determination will be final.
(e) "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 8(b) and (c), respectively.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(g) "Commission" means the Securities and Exchange Commission or any
successor agency.
(h) "Committee" means the Committee referred to in Section 2.
(i) "Common Stock" means common stock, par value $0.01 per share, of
the Company.
(j) "Company" means The Dial Corporation, a Delaware corporation.
(k) "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
<PAGE> 3
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 2
(l) "Distribution" means the distribution of shares of Company Common
Stock by The Dial Corp (which, in connection with such distribution, will be
renamed "Viad Corp," herein referred to as "Old Dial") to the holders of common
stock of Old Dial, par value $1.50 per share.
(m) "Distribution Agreement" means the Distribution Agreement, dated as
of July 25, 1996, by and among Old Dial, the Company and Exhibitgroup Inc.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(o) "Fair Market Value" means, as of any given date, the mean between
the highest and lowest reported sales prices of the Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national exchange on which the Stock is listed or on the NASDAQ National Market
System or on NASDAQ. If there is no regular public trading market for such
Stock, the Fair Market Value of the Stock will be determined by the Committee in
good faith.
(p) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Non-Employee Director" means a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3(b)(3), as promulgated by
the Commission under the Exchange Act, or any successor definition adopted by
the Commission.
(r) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(s) "Performance Goals" means the performance goals established by the
Committee prior to the grant of Restricted Stock. In the case of Qualified
Performance-Based Awards, such goals (1) will be based on the attainment of
specified levels of one or more of the following measures: earnings per share,
sales, net profit after tax, gross profit, operating profit, cash generation,
unit volume, return on equity, change in working capital, return on capital,
stockholder return or such other performance measures as the Committee selects
and discloses to stockholders in connection with stockholder approval for
purposes of Section 162(m) of the Code and related regulations and (2) will be
set by the Committee within the time period prescribed by Section 162(m) of the
Code and related regulations.
(t) "Plan" means The Dial Corporation 1996 Stock Incentive Plan, as set
forth herein and as hereinafter amended from time to time.
(u) "Preferred Stock" means preferred stock, par value $0.01, of the
Company.
<PAGE> 4
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 3
(v) "Qualified Performance-Based Awards" means an Award of Restricted
Stock designated as such by the Committee at the time of grant, based upon a
determination that (1) the recipient is or may be a "covered employee" within
the meaning of Section 162(m)(3) of the Code in the year in which the Company
would expect to be able to claim a tax deduction with respect to such Restricted
Stock and (2) the Committee wishes such Award to qualify for the exemption from
the limitation on deductibility imposed by Section 162(m) of the Code that is
set forth in Section 162(m)(4)(C).
(w) "Replacement Awards" means Stock Options granted to replace
outstanding options to purchase Old Dial common stock pursuant to the
Distribution Agreement.
(x) "Restricted Stock" means an award granted under Section 7.
(y) "Retirement" means retirement from active employment under a
pension plan of the Company, any subsidiary or Affiliate, or under an employment
contract with any of them, or termination of employment at or after age 55 under
circumstances which the Committee, in it sole discretion, deems equivalent to
retirement.
(z) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
(aa) "Stock" means the Common Stock or Preferred Stock.
(bb) "Stock Appreciation Right" means a right granted under Section 6.
(cc) "Stock Option" means an option granted under Section 5.
(dd) "Termination of Employment" means the termination of the
participant's employment with the Company and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate shall also be deemed to
incur a Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Company or another subsidiary
or Affiliate. Transfers among the Company and its subsidiaries and Affiliates,
as well as temporary absences from employment because of illness, vacation or
leave of absence, will not be considered a Termination of Employment.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
<PAGE> 5
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 4
SECTION 2. ADMINISTRATION.
The Plan will be administered by the Executive Compensation Committee
of the Board pursuant to authority delegated by the Board in accordance with the
Company's Bylaws. If at any time there is no such Executive Compensation
Committee or such Executive Compensation Committee shall fail to be composed of
at least two directors each of whom (1) is a Non-Employee Director and (2) is an
"outside director" under Section 162(m)(4) of the Code, the Plan will be
administered by a Committee selected by the Board and composed of not less than
two individuals, each of whom is such a Non-Employee Director and such an
"outside director."
The Committee will have plenary authority to grant Awards pursuant to
the terms of the Plan to officers, employees and directors of the Company and
its subsidiaries and Affiliates.
Among other things, the Committee will have the authority, subject to
the terms of the Plan:
(a) to select the officers, employees and directors to whom Awards may
from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights and Restricted Stock or
any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to Section
5(a)), any vesting condition, restriction or limitation (which may be related to
the performance of the participant, the Company or any subsidiary or Affiliate)
and any vesting acceleration or waiver of forfeiture regarding any Award and the
shares of Stock relating thereto, based on such factors as the Committee shall
determine; provided, however, that the Committee will have no power to
accelerate the vesting, or waive the forfeiture, of any Qualified
Performance-Based Awards;
(e) to modify, amend or adjust the terms and conditions, at any time or
from time to time, of any Award, including but not limited to Performance Goals;
provided, however, that the Committee may not adjust upwards the amount payable
with respect to any Qualified Performance-Based Award or waive or alter the
Performance Goals associated therewith; and
<PAGE> 6
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 5
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an Award will be deferred.
The Committee will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it from
time to time deems advisable, to interpret the terms and provisions of the Plan
and any Award issued under the Plan (and any agreement relating thereto) and to
otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may (1) delegate to designated officers or
employees of the Company such of its powers and authorities under the Plan as it
deems appropriate (provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to fail to be exempt from Section
16(b) of the Exchange Act) and (2) authorize any one or more members of the
Committee or any designated officer or employee of the Company to execute and
deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award will
be made in the sole discretion of the Committee or such delegate(s) at the time
of the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer(s) or employee(s) pursuant to the provisions of
the Plan will be final and binding on all persons, including the Company and
Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The aggregate number of shares of Stock covered by Awards granted to
any one participant will not exceed 1,000,000 shares for any consecutive
three-year period plus the number of shares necessary to provide new Awards to
replace outstanding awards of Old Dial pursuant to the Distribution Agreement
("Replacement Awards"). No more than 9,600,000 shares of Common Stock will be
cumulatively available for the grant of Incentive Stock Options under the Plan.
Shares subject to an Award under the Plan may be authorized and unissued shares
or may be "treasury shares."
In the event of any merger, reorganization, consolidation,
recapitalization, spin-off, stock dividend, stock split, extraordinary
distribution with respect to the Stock or other change in corporate structure
affecting the Stock, such substitution or adjustments shall be made in the
aggregate number of shares reserved for issuance under the Plan, in the number,
or kind, and option price of shares subject to outstanding Stock Options and
Stock Appreciation Rights, and in the number, or kind, of shares subject to
other outstanding Awards granted under the Plan as may be determined to be
appropriate by the Committee or the Board in its sole discretion; provided,
however, that the number of shares subject to any Award shall always be a whole
number.
<PAGE> 7
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 6
SECTION 4. ELIGIBILITY.
Officers, employees and directors of the Company, its subsidiaries, and
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company, its subsidiaries and Affiliates
are eligible to be granted Awards under the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan will be in
such form as the Committee may from time to time approve.
The Committee will have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it will be deemed to be a Non-Qualified
Stock Option.
Stock Options will be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement will indicate on its face
whether it is an agreement for an Incentive Stock Option or a Non-Qualified
Stock Option. The grant of a Stock Option will occur on the date the Committee
by resolution selects an individual to be a participant in any grant of a Stock
Option, determines the number of shares of Stock to be subject to such Stock
Option to be granted to such individual and specifies the terms and provisions
of the Stock Option. The Company will notify a participant of any grant of a
Stock Option, and a written option agreement or agreements shall be duly
executed and delivered by the Company to the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options will be interpreted, amended or altered
nor shall any discretion or authority granted under the Plan be exercised so as
to disqualify the Plan under Section 422 of the Code or, without the consent of
the optionee affected, to disqualify any Incentive Stock Option under such
Section 422.
Stock Options granted under the Plan will he subject to the following
terms and conditions and will contain such additional terms and conditions as
the Committee shall deem desirable:
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(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee and set forth in the option
agreement. It is the intention under the Plan that such option price will not be
less than the Fair Market Value of the Stock subject to the Stock Option on the
date of grant; provided, however, that (1) the Committee may, from time to time,
grant Awards of Stock Options with an exercise price of less than Fair Market
Value and (2) the option prices for Replacement Awards will be determined in
accordance with the Distribution Agreement.
(b) Option Term. The term of each Stock Option will be fixed by the
Committee, but no Incentive Stock Option may be exercisable more than ten (10)
years after the date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
will be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying the
number of shares of Stock subject to the Stock Option to be purchased.
Such notice must be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Company may
accept. An option agreement may provide that, if approved by the Committee,
payment in full or in part may also be made in the form of unrestricted Stock
already owned by the optionee of the same class as the Stock subject to the
Stock Option and, in the case of the exercise of a Non-Qualified Stock Option,
Restricted Stock subject to an Award hereunder which is of the same class as the
Stock subject to the Stock Option, in both cases based on the Fair Market Value
of the Stock on the date the Stock Option is exercised; provided, however, that,
in the case of an Incentive Stock Option, the right to make a payment in the
form of already owned shares of Stock of the same class as the Stock subject to
the Stock Option may be authorized only at the time the Stock Option is granted.
In addition, an option agreement may provide that in the discretion of the
Committee, payment for any shares subject to a Stock Option may also be made by
instruction to the Committee to withhold a number of such shares having a Fair
Market Value on the date of exercise equal to the aggregate exercise price of
such Stock Option.
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If payment of the option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of Restricted Stock, the number of
shares of Stock to be received upon such exercise equal to the number of shares
of Restricted Stock used for payment of the option exercise price will be
subject to the same forfeiture restrictions to which such Restricted Stock was
subject, unless otherwise determined by the Committee.
No shares of Stock will be issued until full payment therefor has been
made. Subject to any forfeiture restrictions that may apply if a Stock Option is
exercised using Restricted Stock, an optionee will have all of the rights of a
stockholder of the Company holding the class or series of Stock that is subject
to such Stock Option (including, if applicable, the right to vote the shares and
the right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given the
representation described in Section 11(a).
(e) Nontransferability of Stock Options. (1) No Stock Option will be
transferable by the optionee other than (A) by will or by the laws of descent
and distribution or (B) in the case of a Non-Qualified Stock Option, pursuant to
a qualified domestic relations order (as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder). All Stock Options will be exercisable, during the optionee's
lifetime, only by the optionee or by the guardian or legal representative of the
optionee, it being understood that the terms "holder" and "optionee" include the
guardian and legal representative of the optionee named in the option agreement
and any person to whom an option is transferred by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order.
(2) Notwithstanding Section 5(e)(1) above, the Committee may
grant Stock Options that are transferable, or amend outstanding Stock
Options to make them transferable, by the optionee (any such Stock
Option so granted or amended a "Transferable Option") to one or more
members of the optionee's immediate family, to partnerships of which
the only partners are members of the optionee's immediate family, or to
trusts established by the optionee for the benefit of one or more
members of the optionee's immediate family. For this purpose the term
"immediate family" means the optionee's spouse, children or
grandchildren. Consideration may not be paid for the transfer of a
Transferable Option. A transferee described in this Section 5(e)(2)
will be subject to all terms and conditions applicable to the
Transferable Option prior to its transfer. The option agreement with
respect to a Transferable Option will set forth its transfer
restrictions, such option agreement shall be approved by the Committee,
and only Stock Options granted pursuant to a stock option agreement
expressly permitting transfer pursuant to this Section 5(e)(2) will be
so transferable.
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(f) Termination by Death. If an optionee's employment terminates by
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as the
Committee may specify in the option agreement) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter.
(g) Termination by Reason of Disability or Retirement. If an optionee's
employment terminates by reason of Disability or Retirement, any Stock Option
held by such optionee may thereafter be exercised by the optionee, to the extent
it was exercisable at the time of termination, or on such accelerated basis as
the Committee may determine, for a period of three years (or such shorter period
as the Committee may specify in the option agreement) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that if the
optionee dies within such three-year period (or such shorter period), any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three-year (or such shorter) period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of twelve (12) months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter. In the
event of termination of employment by reason of Disability or Retirement, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
(h) Other Termination. Unless otherwise determined by the Committee,
(1) if an optionee incurs a Termination of Employment for Cause, all Stock
Options held by such optionee will thereupon terminate and (2) if an optionee
incurs a Termination of Employment for any reason other than death, Disability,
Retirement, or Cause, any Stock Option held by such optionee shall thereupon
terminate, except that such Stock Option, to the extent then exercisable, or on
such accelerated basis as the Committee may determine, may be exercised for the
lesser of three (3) months from the date of such Termination of Employment or
the balance of such Stock Option's term; provided, however, that if the optionee
dies within such three-month period, any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such three-month period,
continue to be exercisable to the extent to which it was exercisable at the time
of death for a period of twelve (12) months from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of Termination of Employment, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
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(i) Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Stock, equal to the excess of the Fair Market
Value of the Stock over the option price times the number of shares of Stock for
which the Option is being exercised on the effective date of such cash out.
(j) Change in Control Cash-Out. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the time
of grant, an optionee shall have the right, whether or not the Stock Option is
fully exercisable and in lieu of the payment of the exercise price for the
shares of Stock being purchased under the Stock Option and by giving notice to
the Company, to elect (within the Exercise Period) to surrender all or part of
the Stock Option to the Company and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change in Control Price
per share of Stock on the date of such election shall exceed the exercise price
per share of Stock under the Stock Option (the "Spread") multiplied by the
number of shares of Stock granted under the Stock Option as to which the right
granted under this Section 5(j) shall have been exercised.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right will terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee will be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered will no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights will be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(1) Stock Appreciation Rights will be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of Section 5
and this Section 6.
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(2) Upon the exercise of a Stock Appreciation Right, an
optionee will be entitled to receive an amount in cash, shares of Stock
or both equal in value to the excess of the Fair Market Value of one
share of Stock as of the date of exercise over the option price per
share specified in the related Stock Option multiplied by the number of
shares in respect of which the Stock Appreciation Right shall has been
exercised, with the Committee having the right to determine the form of
payment.
(3) Stock Appreciation Rights will be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee will
determine the individuals to whom and the time or times at which grants of
Restricted Stock will be awarded, the number of shares to be awarded to any
participant, the conditions for vesting, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards, in addition to those contained in Section 7(c).
(b) Awards and Certificates. Shares of Restricted Stock will be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Except as
otherwise set forth in a Restricted Stock Agreement, any certificate issued in
respect of shares of Restricted Stock will be registered in the name of such
participant and will bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the 1996 Stock Incentive Plan and a Restricted Stock
Agreement. Copies of such Plan and Agreement are on file at the office
of The Dial Corporation, 15501 North Dial Boulevard, Scottsdale,
Arizona 85260-1619."
The Committee may require that the certificates evidencing such shares
be held in custody by the Company until the restrictions thereon have lapsed and
that, as a condition of any Award of Restricted Stock, the participant has
delivered a stock power, endorsed in blank, relating to the Stock covered by
such Award.
(c) Terms and Conditions. Shares of Restricted Stock will be subject to
the following terms and conditions:
(1) The Committee may, prior to or at the time of grant,
designate an Award of Restricted Stock as a Qualified Performance-Based
Award, in which event it will condition the grant or vesting, as
applicable, of such Restricted Stock upon the
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attainment of Performance Goals. If the Committee does not designate an
Award of Restricted Stock as a Qualified Performance-Based Award, it
may also condition the grant or vesting thereof upon the attainment of
Performance Goals. Regardless of whether an Award of Restricted Stock
is a Qualified Performance-Based Award, the Committee may also
condition the grant or vesting upon the continued service of the
participant. The provisions of Restricted Stock Awards (including the
conditions for grant or vesting and any applicable Performance Goals)
need not be the same with respect to each recipient. The Committee may
at any time, in its sole discretion, accelerate or waive, in whole or
in part, any of the foregoing restrictions; provided, however, that in
the case of Restricted Stock that is a Qualified Performance-Based
Award, the applicable Performance Goals have been satisfied.
(2) Subject to the provisions of the Plan (including Section
5(d)) and the Restricted Stock Agreement referred to in Section
7(c)(7), during a period set by the Committee, commencing with the date
of such Award for which such participant's continued service is
required (the "Restriction Period") and until the later of (A) the
expiration of the Restriction Period and (B) the date the applicable
Performance Goals (if any) are satisfied, the participant will not be
permitted to sell, assign, transfer, pledge or otherwise encumber
shares of Restricted Stock.
(3) Except as provided in this paragraph (3) and Sections
7(c)(1) and (2) and the Restricted Stock Agreement, the participant
will have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class or series of
Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
dividends. If so determined by the Committee in the applicable
Restricted Stock Agreement and subject to Section 11(f) of the Plan,
(A) dividends consisting of cash, stock or other property (other than
Stock) on the class or series of Stock that is the subject of the
Restricted Stock shall be automatically deferred and reinvested in
additional Restricted Stock (in the case of stock or other property,
based on the fair market value thereof, and the Fair Market Value of
the stock, in each case as of the record date for the dividend) held
subject to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable to the underlying
Restricted Stock, and (B) dividends payable in Stock shall be paid in
the form of Restricted Stock of the same class as the Stock with which
such dividend was paid and shall be held subject to the vesting of the
underlying Restricted Stock, or held subject to meeting Performance
Goals applicable to the underlying Restricted Stock.
(4) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(1), 7(c)(2), 7(c)(5) and
8(a)(2), upon a participant's Termination of Employment for any reason
during the Restriction Period or before any applicable Performance
Goals are met, all shares still subject to restriction shall be
forfeited by the participant.
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1996 STOCK INCENTIVE PLAN
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(5) Except to the extent otherwise provided in Section
8(a)(2), in the event that a participant retires or such participant's
employment is involuntarily terminated (other than for Cause), the
Committee will have the discretion to waive in whole or in part any or
all remaining restrictions (other than, in the case of Restricted Stock
which is a Qualified Performance-Based Award, satisfaction of the
applicable Performance Goals unless the participant's employment is
terminated by reason of death or Disability) with respect to any or all
of such participant's shares of Restricted Stock.
(6) Except as otherwise provided herein or as required by law,
if and when applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted
Stock, unlegended certificates for such shares will be delivered to the
participant upon surrender of legended certificates.
(7) Each Award will be confirmed by, and be subject to the
terms of, a Restricted Stock Agreement.
SECTION 8. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(1) Any Stock Options and Stock Appreciation Right outstanding
as of the date such Change in Control is determined to have occurred
and not then exercisable and vested will become fully exercisable and
vested to the full extent of the original grant.
(2) The restrictions and conditions to vesting applicable to
any Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
(1) An acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (i) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the
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1996 STOCK INCENTIVE PLAN
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security being so converted was itself acquired directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the company or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (3) of this Section 8(b);
or
(2) A change in the composition of the Board such that the
individuals who, as of the date that the Distribution is effective,
constitute the Board (such Board shall be hereinafter referred to as
the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this Section
8(b), that any individual who becomes a member of the Board subsequent
to the date that the Distribution is effective, whose election, or
nomination for election by the Company's stockholders, was approved by
vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) will be considered as though such
individual were a member of the Incumbent Board; but, provided,
further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms as used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
will not be considered as a member of the Incumbent Board; or
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company ("Corporate
Transaction") (or, if consummation of such Corporate Transaction is
subject, at the time of such approval by stockholders, to the consent
of any government or governmental agency, the earlier of the obtaining
of such consent or the consummation of the Corporate Transaction);
excluding, however, such a Corporate Transaction pursuant to which (A)
all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the outstanding shares of
common stock, and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (other than the Company,
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Corporate Transaction) will
beneficially own,
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directly or indirectly, 20% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed
prior to the Corporate Transaction and (C) individuals who were members
of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from
such Corporate Transaction; or
(4) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (1) the highest reported sales price, regular
way, of a share of Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on the NASDAQ National Market System or on NASDAQ during the 60-day
period prior to and including the date of a Change in Control or (2) if the
Change in Control is the result of a tender or exchange offer or a Corporate
Transaction, the highest price per share of Stock paid in such tender or
exchange offer or Corporate Transaction; provided, however, that in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, the Change in Control Price will be in all cases the Fair Market
Value of the Stock on the date such Incentive Stock Option or Stock Appreciation
Right is exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
non-cash consideration, the value of such securities or other non-cash
consideration will be determined in the sole discretion of the Board.
SECTION 9. TERM, AMENDMENT AND TERMINATION.
The Plan will have no fixed termination date, but may be terminated at
any time by the Board. Awards outstanding as of the date of any such termination
will not be affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (a) impair the rights of
an optionee under a Stock Option or a recipient of a Stock Appreciation Right or
Restricted Stock Award theretofore granted without the optionee's or recipient's
consent, except such an amendment which is necessary to cause any Award or
transaction under the Plan to qualify, or to continue to qualify, for the
exemption provided by Rule 16b-3, or (b) disqualify any Award or transaction
under the Plan from the exemption provided by Rule 16b-3. In addition, no such
amendment may be made without the approval of the Company's stockholders to the
extent such approval is required by law or agreement.
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The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment will
(1) impair the rights of any holder without the holder's consent except such an
amendment which is necessary to cause any Award or transaction under the Plan to
qualify, or to continue to qualify, for the exemption provided by Rule 16b-3 or
(2) amend any Qualified Performance-Based Award in such a way as to cause it to
cease to qualify for the exemption set forth in Section 162(m)(4)(C). The
Committee may also substitute new Stock Options for previously granted Stock
Options, including previously granted Stock Options having higher option prices.
Subject to the above provisions, the Board will have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 10. UNFUNDED STATUS OF PLAN.
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan will be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any stock exchange upon which the
Stock is then listed and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in the Plan will prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan will not confer upon any employee any
right to continued employment nor will it interfere in any way with the right of
the Company or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
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1996 STOCK INCENTIVE PLAN
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(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any Award under the Plan, the participant will pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Company, withholding obligations may be settled with Stock, including Stock
that is part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan will be conditional on such payment or
arrangements, and the Company and its Affiliates will, to the extent permitted
by law, have the right to deduct any such taxes from any payment otherwise due
to the participant. The Committee may establish such procedures as it deems
appropriate, including the making of irrevocable elections, for the settlement
of withholding obligations with Stock.
(e) At the time of grant, the Committee may provide in connection with
any grant made under the Plan that the shares of Stock received as a result of
such grant will be subject to a right of first refusal pursuant to which the
participant will be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Stock, subject
to such other terms and conditions as the Committee may specify at the time of
grant.
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if sufficient shares of
Stock are available under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Awards).
(g) The Committee will establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid or by whom any
rights of the participant, after the participant's death, may be exercised.
(h) Notwithstanding any other provision of the Plan or any agreement
relating to any Award hereunder, if any right granted pursuant to this Plan
would make a Change in Control transaction ineligible for
pooling-of-interests-accounting under APE No. 16 that, but for the nature of
such grant, would otherwise be eligible for such accounting treatment, the
Committee will have the ability, in its sole discretion, to substitute for the
cash payable pursuant to such grant Common Stock with a Fair Market Value equal
to the cash that would otherwise be payable hereunder.
(i) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
<PAGE> 19
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 18
SECTION 12. EFFECTIVE DATE OF PLAN
The Plan shall be effective on August 15, 1996.
SECTION 13. DIRECTOR STOCK OPTIONS.
(a) Each director of the Company who is not otherwise an employee of
the Company or any of its subsidiaries or Affiliates, will (1) on the date of
his or her first election as a director of the Company, which election will be
deemed to occur on August 15, 1996 for individuals who become directors of the
Company in connection with the Distribution (any such initial grant, an "Initial
Grant"), and (2) on August 15, 1996 and thereafter annually, on the third
Thursday in August, during such director's term (the "Annual Grant"),
automatically be granted Non-Qualified Stock Options to purchase Common Stock
having an exercise price per share of Common Stock equal to 100% of Fair Market
Value per share of Common Stock at the date of grant of such Non-Qualified Stock
Option. The number of shares subject to each such Initial Grant, and each such
Annual Grant, will be equal to the annual retainer fee in effect at the date of
grant for nonemployee directors of the Company divided by an amount equal to
one-third (1/3) of the Fair Market Value of the Common Stock at the date of
grant, rounded to the nearest 100 shares. A nonemployee director elected during
the course of a year (i.e., on a date other than the date of the Annual Grant)
will, in addition to the Initial Grant, receive upon election a grant of
Non-Qualified Stock Options prorated for the year in which the election occurs,
with the number of shares of Common Stock subject to such Stock Options being
equal to (1) the number of shares subject to the Initial Grant multiplied by (2)
a fraction the numerator of which is the number of full calendar months from the
date of such election through the date of the next Annual Grant and the
denominator of which is twelve.
(b) An automatic director Stock Option will be granted hereunder only
if as of each date of grant the director (1) is not otherwise an employee of the
Company or any of its subsidiaries or Affiliates, (2) has not been an employee
of the Company or any of its subsidiaries or Affiliates for any part of the
preceding fiscal year, and (3) has served on the Board continuously since the
commencement of his term.
(c) Except as expressly provided in this Section 13, any Stock Option
granted hereunder will be subject to the terms and conditions of the Plan as if
the grant were made pursuant to Section 5 hereof including, without limitation,
the rights set forth in Section 5(j) hereof.
SECTION 14. DEFERRAL OF STOCK OPTIONS
(a) The Committee may, in its discretion, permit optionees to elect to
defer the issuance of Common Stock upon the exercise of one or more
Non-Qualified Stock Options granted pursuant to the Plan (including, but not
limited to, Replacement Awards). All such deferrals shall be made by the
delivery of a written election (in such form as may be
<PAGE> 20
THE DIAL CORPORATION
1996 STOCK INCENTIVE PLAN
PAGE 19
prescribed by the Committee) by an optionee at such time as may be established
by the Committee for such purpose and, once made, shall be irrevocable;
provided, however, that such election shall (i) be made at least six (6) months
prior to the initial exercise in respect of such Non-Qualified Stock Option and
(ii) apply to the entirety of such Non-Qualified Stock Option.
(b) Notwithstanding any other provision of the Plan, the exercise price
of a Non-Qualified Stock Option in respect of which a deferral election has been
made pursuant to this Section 14 shall be paid by delivery of unrestricted
Common Stock owned by the optionee for at least six (6) months prior to the date
of exercise or such other Common Stock as the Committee may authorize (the
"Previously Owned Shares").
(c) Upon the exercise of a Non-Qualified Stock Option in respect of
which a deferral election has been made, a number of shares equal to the number
of shares of Common Stock which would otherwise have been received by the
optionee in excess of the Previously Owned Shares if such deferral election had
not been made (the "Deferred Shares") shall be credited to an account maintained
on behalf of the optionee pursuant to the Plan; provided, however, that, subject
to Section 10, the Company may (but shall not be required to) actually cause
shares of Common Stock to be delivered to one or more trusts or other
arrangements to satisfy its obligations created under the Plan to deliver
Deferred Shares to optionees.
(d) Upon the making of a deferral election pursuant to this Section 14,
an optionee shall elect on a form and in such manner as the Committee shall
prescribe the time or times at which the Deferred Shares shall be delivered to
the optionee (or, in the event of the optionee's death, to his or her
beneficiary). Notwithstanding the election by an optionee, upon Termination of
an optionee's employment for Cause, all Deferred Shares shall be delivered to
such optionee in a lump sum as promptly as practicable after his or her
Termination.
<PAGE> 1
CHANGE OF CONTROL AGREEMENT
(Sr. Vice President)
AGREEMENT by and between The Dial Corporation, a Delaware corporation
(the "Company") and _______________ (the "Executive"), dated as of the ___ day
of _________, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the second anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company
<PAGE> 2
shall give notice to the Executive that the Change of Control Period shall not
be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior
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<PAGE> 3
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the second anniversary of
such date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is
3
<PAGE> 4
expressly understood and agreed that to the extent that any such activities have
been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the Executive's highest bonus under the Company's Management Incentive Plan,
or any comparable bonus under any predecessor or successor annual incentive
plan, for the last three full fiscal years prior to the Effective Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those
4
<PAGE> 5
provided generally at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
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(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive
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<PAGE> 7
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company's requiring the Executive to travel on Company business to
a substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
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<PAGE> 8
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2)
the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve
full months or during which the Executive was employed for less
than twelve full months), for the most recently completed fiscal
year during the Employment Period, if any (such higher amount
being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the
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number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
(B) the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus.
(ii) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination an amount equal to (i)
the present value of the Executive's accrued benefits under The Dial Corporation
Retirement Income Plan and The Dial Corporation Supplemental Pension Plan, or
successor plans thereto or any other supplemental, non-qualified pension plan in
which the Executive was participating at the Date of Termination (collectively,
the "Pension Plans"), determined after giving the Executive three additional
years of age and pension service credit under the Pension Plans from the Date of
Termination, less (ii) the present value of Executive's accrued benefits under
the Pension Plans at the Date of Termination determined without regard to any
additional years of age and pension service credit. Such present values shall be
determined using actuarial assumption and discount rates consistent with the
Company's practice in effect immediately prior to the Date of Termination.
(iii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period;
(iv) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole discretion; and
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(v) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period or if
Executive voluntarily terminates employment during the Employment Period
(excluding a termination for Good Reason), this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (i) his or her Annual
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Base Salary through the Date of Termination, (ii) the amount of any compensation
previously deferred by the Executive, and (iii) Other Benefits, in each case to
the extent theretofore unpaid.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with
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respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche LLP or such other certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized account firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
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(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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<PAGE> 15
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. Except as provided in
Section 12(f), this Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
___________________________
___________________________
___________________________
___________________________
If to the Company:
The Dial Corporation
15501 North Dial Boulevard
Scottsdale, AZ 85260-1619
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v)
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of this Agreement, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
__________________________________
[Name of Executive]
The Dial Corporation
By:_______________________________
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<PAGE> 1
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between The Dial Corporation, a Delaware corporation
(the "Company") and Malcolm Jozoff (the "Executive"), dated as of the 23rd day
of October, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the second anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
<PAGE> 2
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding
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<PAGE> 3
any corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the second anniversary of
such date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such
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<PAGE> 4
activities (or the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the Executive's highest bonus under the Company's Annual Incentive Plan, or
any comparable bonus under any predecessor or successor annual incentive plan,
for the last three full fiscal years prior to the Effective Date (annualized in
the event that the Executive was not employed by the Company for the whole of
such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
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<PAGE> 5
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the
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<PAGE> 6
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of
6
<PAGE> 7
employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company's requiring the Executive to travel on Company business to
a substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
7
<PAGE> 8
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2)
the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve
full months or during which the Executive was employed for less
than twelve full months), for the most recently completed fiscal
year during the Employment Period, if any (such higher amount
being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the
8
<PAGE> 9
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
(B) the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus.
(ii) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination an amount equal to (i)
the present value of the Executive's accrued benefits under The Dial Corporation
Retirement Income Plan and The Dial Corporation Supplemental Pension Plan, or
successor plans thereto and any other supplemental, non-qualified pension plan
in which the Executive was participating at the Date of Termination
(collectively, the "Pension Plans"), determined after giving the Executive six
additional years of age and pension service credit under the Pension Plans from
the Date of Termination, less (ii) the present value of Executive's accrued
benefits under the Pension Plans at the Date of Termination determined without
regard to any additional years of age and pension service credit. Such present
values shall be determined using actuarial assumption and discount rates
consistent with the Company's practice in effect immediately prior to the Date
of Termination.
(iii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period;
(iv) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole discretion; and
9
<PAGE> 10
(v) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period or if
Executive voluntarily terminates employment during the Employment Period
(excluding a termination for Good Reason), this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay to
the Executive (i) his or her Annual
10
<PAGE> 11
Base Salary through the Date of Termination, (ii) the amount of any compensation
previously deferred by the Executive, and (iii) Other Benefits, in each case to
the extent theretofore unpaid.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with
11
<PAGE> 12
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche LLP or such other certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized account firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
12
<PAGE> 13
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
13
<PAGE> 14
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
14
<PAGE> 15
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. Except as provided in
Section 12(f), this Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to the Company:
The Dial Corporation
15501 North Dial Boulevard
Scottsdale, AZ 85260-1619
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v)
15
<PAGE> 16
of this Agreement, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is "at
will" and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
______________________________
Malcolm Jozoff
The Dial Corporation
By:___________________________
Jane Owens
Senior Vice President &
General Counsel
16
<PAGE> 1
THE DIAL CORPORATION
SIGNIFICANT SUBSIDIARIES
EXHIBIT 21
The Freeman Cosmetic Corporation
Nuevo Federal, S.A.
Industrias Corporativas Diversificadas, S.A.
Dial Benefits Management Corporation
Dial Brands, Inc.
Sarah Michaels, Inc.
Armour International Company
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-47355 on Form S-3 and Registration Nos. 333-10149, 333-10153, 333-10157,
333-11037, 333-11037, 333-13187, 333-56607, 333-67619, and 333-71113 on Form S-8
of the Dial Corporation of our report dated January 29, 1999, appearing in this
Annual Report on Form 10-K of The Dial Corporation for the year ended December
31, 1998.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 25, 1999
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