<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
----------------
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 01-13407
Hussmann International, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-1791715
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
12999 St. Charles Rock Road, Bridgeton, Missouri 63044-2483
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code (314) 291-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, par value $.001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), 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 February 28, 1999 the aggregate market value of the Registrant's
voting and non-voting common equity held by non-affiliates was $781.3 million
(based on closing sale price of $15.38 as reported for the New York Stock
Exchange-Composite Transactions).
The number of shares of the Registrant's Common Stock, $.001 par value per
share, outstanding as of February 28, 1999 was 50.8 million.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Hussmann International, Inc.'s Annual Report to Shareholders for
the year ended December 31, 1998 (Part I, Part II, and Part IV of Form 10-K).
2. Portions of Hussmann International, Inc.'s Notice of 1999 Annual Meeting of
the Stockholders and Proxy Statement (Part III of Form 10-K).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
PART I
1. Business...................................................... 1
2. Properties.................................................... 8
3. Legal Proceedings............................................. 8
4. Submission of Matters to a Vote of Security Holders........... 8
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 10
6. Selected Financial Data....................................... 10
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 10
7A. Quantitative and Qualitative Disclosures about Market Risk.... 10
8. Financial Statements and Supplementary Data................... 11
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 11
PART III
10. Directors and Executive Officers of the Registrant............ 11
11. Executive Compensation........................................ 11
12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 11
13. Certain Relationships and Related Transactions................ 12
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................... 12
Signatures.................................................... 13
</TABLE>
<PAGE>
PART I
Item 1. Business
Background
Hussmann International, Inc. ("Hussmann" or the "Company") was incorporated
under the laws of the State of Delaware on August 29, 1997. At the time of its
incorporation, the Company was a wholly owned subsidiary of Whitman
Corporation, a Delaware Corporation ("Whitman").
On January 30, 1998, (the "Distribution Date") Whitman distributed (the
"Distribution") all the issued and outstanding shares of common stock, par
value $.001 per share, of the Company ("Hussmann Common Stock") to the
shareholders of record of Whitman's common stock as of January 16, 1998. The
Distribution was made pursuant to the terms of a Distribution and Indemnity
Agreement (the "Distribution Agreement") dated as of December 31, 1997 by and
among Whitman, the Company and Hussmann Corporation, a Missouri corporation
("Hussmann Corporation") and wholly-owned subsidiary of the Company.
Pursuant to the Distribution Agreement and prior to the Distribution Date,
the Company and Whitman executed a series of steps in order to separate from
Whitman any assets related to the business of Hussmann. Such steps involved,
among other things, the transfer to Hussmann from Whitman of Hussmann
Corporation and all of the businesses managed by Hussmann Corporation including
its foreign operations, which were previously held by a Netherlands company
owned by Whitman. As a result of the Distribution, Hussmann including its
wholly and majority-owned subsidiaries is now an independent public company.
Hussmann Corporation is the successor to the business started by Harry L.
Hussmann in 1906 which sold butchers supplies. Hussmann Corporation introduced
the first meat display case in 1917 and the first frozen food case for Clarence
Birdseye in 1933. Since 1933, Hussmann Corporation has grown to be the market
leader in the manufacture and sale of refrigerated display merchandisers and
refrigeration systems in the U.S., Canada, the U.K., Mexico, Asia-Pacific, New
Zealand and Australia. Hussmann Corporation was incorporated in Missouri in
1929. Hussmann's principal executive offices are located at 12999 St. Charles
Rock Road, Bridgeton, Missouri 63044 and its telephone number is (314) 291-
2000.
Overview
Hussmann manufactures, sells, installs and services merchandising and
refrigeration systems for the world's commercial food industry. Products
include refrigerated and non-refrigerated display merchandisers, refrigeration
systems and controls, beverage coolers, air handlers, evaporative condensers,
heat exchange coils and walk-in storage coolers and freezers. Hussmann utilizes
advanced technology to create energy efficient products designed to provide low
life-cycle cost. Hussmann's wide product line features high quality products
intended to meet the needs of a broad range of customers.
Hussmann operates in three geographical segments: U.S. and Canada, Europe
(U.K.), and Other International which includes Mexico, Latin America and Asia-
Pacific. Hussmann's 1998 sales of $1.2 billion, included $901.7 million from
the U.S. and Canada, $144.8 million from the U.K. and $174.7 million from Other
International operations. For further information related to Hussmann's
geographical segments see Note 19 of the notes to consolidated financial
statements included as part of Hussmann's 1998 Annual Report to Shareholders
for the year ended December 31, 1998 (the "Annual Report") incorporated herein
by reference.
Market Overview
In the U.S. and Canada, Hussmann sells its products primarily to
supermarkets and convenience stores, including both national chains and local
retailers. Since 1995, supermarkets and convenience stores have accelerated
their expansion by remodeling their facilities and modernizing their equipment.
Changes have also resulted from growth in the number of dual wage-earner
families who demand more convenience in food
1
<PAGE>
preparation. Supermarkets and convenience stores have also begun to focus on
higher margin products such as prepared foods which require more refrigerated
or heated display merchandising space.
In addition to the expansion by supermarkets and convenience stores, with
the popularity of the home meal replacement trend, the food service market is
now one of the fastest growing parts of the commercial food industry in the
U.S. This growth is attributable to the same factors driving supermarkets and
convenience stores to sell more prepared foods. Another growing market within
the commercial food industry is commercial/industrial refrigeration, including
processing, produce ripening and cold storage warehousing facilities.
The international market represents a significant long-term growth
opportunity as countries develop their infrastructure, as well as their food
distribution and preservation needs. Many countries are also experiencing
economic growth, creating demand for more technologically advanced products.
Retailers in Mexico and Latin America are expanding and remodeling their stores
as a result of competition from U.S. and European chains entering these
markets.
Strategy
Hussmann's business strategy is to maintain and improve its position as a
leader in the mature markets in which it competes while expanding its presence
in the food service market and evolving international markets.
Sales Growth. In the U.S. and Canada, Hussmann seeks to increase its sales
to those customers which it has historically served in the commercial food
industry while also increasing sales to higher growth areas of the food service
market. Hussmann plans to achieve these goals by (i) continuing to develop
proprietary products such as the Impact line and the Protocol refrigeration
system (described below) in order to differentiate Hussmann from its
competitors, (ii) expanding into the food service market by leveraging its
existing technological and manufacturing expertise, and (iii) pursuing
strategic acquisitions to broaden its service and distribution network and
manufacturing capabilities.
International Expansion. Hussmann seeks to participate in the growth of
developing regions throughout the world by further strengthening its
manufacturing and distribution presence in these regions. In order to more
effectively serve these regions and follow the globalization of its customer
base, Hussmann is investing in manufacturing facilities that have the
technology to produce specific products tailored to local customer demand.
Hussmann expects to increase its global competitiveness by locating
manufacturing facilities in various regions throughout the world.
Approximately, 26% and 22% of Hussmann's 1998 and 1997 sales and revenues,
respectively, were derived from its operations located outside of the U.S.
To further the Company's strategy for international expansion, in March
1999, Hussmann completed its acquisition of Koxka CE. S.A., ("Koxka"), the
leading commercial refrigeration company in Spain and Portugal. Koxka
manufactures a complete line of commercial and industrial refrigeration
products, including standard and custom merchandising display cases for
supermarkets, beverage coolers, ice cream merchandisers and an array of other
self-contained food merchandisers. In 1998, Koxka had consolidated sales of
approximately $135 million.
On August 31, 1998, Hussmann announced that it had acquired a 65% interest
in McAlpine Investments, Ltd. ("MIL"). MIL consists of two separate operating
companies engaged in the sale, installation, manufacture and service of
commercial refrigeration products for the retail food industries in New
Zealand, Australia and various island nations throughout the South Pacific. MIL
had combined sales and revenues in 1997 of approximately $64.0 million. For
further information regarding the Company's recent acquisitions see Note 4 of
the notes to consolidated financial statements included in Hussmann's 1998
Annual Report, incorporated herein by reference.
Increased Capacity. The commercial food industry in the U.S. has experienced
significant growth since the beginning of 1995. As a result, Hussmann's plants
operated at full capacity during the third and fourth
2
<PAGE>
quarters of 1995, 1996, 1997 and 1998. In order to capitalize on the industry's
growth while providing timely delivery to existing customers, Hussmann is in
the process of expanding its production capacity of refrigerated display cases
at its Bridgeton, Missouri, plant by 20%. The Company also consolidated the
production of refrigeration systems from five plants to two, which are located
near Atlanta, Georgia and in Chino, California. For further information
regarding capacity expansion see "Management's Discussion and Analysis of
Financial Condition and Results of Operations: Liquidity, Financial Condition
and Capital Resources." included in the Company's 1998 Annual Report,
incorporated herein by reference.
Cost Reduction. Hussmann has implemented aggressive cost and expense
containment programs, including rationalizing similar manufacturing operations,
instituting centralized purchasing of frequently used components, consolidating
engineering efforts and striving to keep selling, general and administrative
and fixed costs constant through the year 2000.
Products
Hussmann products include refrigerated and non-refrigerated display
merchandisers, refrigeration systems and controls, beverage coolers, air
handlers, evaporative condensers, heat exchange coils and walk-in storage
coolers and freezers. Hussmann's wide product line features high quality
products intended to meet the needs of a broad range of customers. All of
Hussmann's products are certified to relevant national or international
industry standards, as appropriate, by independent laboratories.
Merchandisers. Refrigerated display merchandisers preserve perishable food
products while allowing attractive display and accessibility to the consumer.
Display merchandisers are used to display refrigerated and frozen products in
supermarkets, convenience stores, food service outlets and delicatessens. These
merchandisers are either self-contained or linked to a remote refrigeration
system through a system of pipes. Hussmann's display merchandisers can be
customized to display a variety of items.
Hussmann's current standard product line of merchandisers, the Impact line,
was introduced in 1995. Hussmann has positioned Impact as a global
merchandising platform. Before the introduction of the Impact line, Hussmann's
operating units offered region-specific merchandising product lines. Hussmann's
operations in the U.S., Latin America, the U.K. and China have completed the
transition to the Impact line. Hussmann does not anticipate significant changes
to Koxka's product line due to Koxka's unique European product design and
existing customer base.
The Impact platform was designed with new technological features,
manufacturing efficiencies, and global markets in mind. Impact products utilize
many common parts and each merchandiser is designed to be dismantled and
shipped in pieces so as to more economically and efficiently address export
shipment costs as well as remote case assembly opportunities. The Impact line
of merchandisers also includes cases that are not product specific, enabling
stores to display fresh meat, bulk produce, and other products in the same
merchandiser by changing display accessories. Impact merchandisers offer lower
energy, maintenance and refrigeration costs, while featuring advanced styling
and merchandising capabilities.
Hussmann is also a leader in providing customized refrigerated display
merchandisers and accessories which complement its standard lines. The demand
for these merchandisers has increased with the growth of specialty sections in
supermarkets that require attractive, custom designed merchandisers that
highlight displayed products. These higher margin, specialized merchandisers
represent an expanding market where Hussmann can capitalize on its leadership
position and extensive branch network for selling, installing and servicing
products. Hussmann merchandisers can be refrigerated, non-refrigerated, heated
and color coordinated to store specifications. Hussmann's Chino, California,
and Brantford, Ontario, plants are the largest custom merchandiser
manufacturers in North America.
Refrigeration Systems. Hussmann is a technological leader in centralized
refrigeration systems. These systems, which include multi-compressors,
automatic flow control systems and electronic controls, are generally located
in a store's back room, away from the display and merchandising areas. They are
built to customer specifications and vary by number of compressors, refrigerant
type and need for satellite units.
3
<PAGE>
In 1993 Hussmann introduced the Protocol refrigeration system. The Protocol
system utilizes compact, multiple scroll compressor refrigeration units
enclosed in attractive housings. Unlike back room systems, individual Protocol
units are located either in or, more often, very near the sales areas, close to
the refrigerated display cases. Protocol units use minimal floor space and
eliminate the need for back room refrigeration and the related construction
costs. Protocol is a chlorofluorocarbon (CFC) and hydrochlorofluorocarbon
(HCFC) free system, which uses up to 50% less refrigerant, and reduces the
amount of piping and brazed joints, which lessens the likelihood of refrigerant
leaks.
Other Products. Hussmann manufactures numerous other products for use in the
commercial food industry. These products include a line of coolers for the
beverage industry sold primarily in Mexico and Latin America. In addition,
Hussmann manufactures air handlers, evaporative condensers and heat exchange
coils for the commercial/industrial refrigeration market. Hussmann also
manufactures and installs walk-in storage coolers and freezers used for bulk
storage and storage for non-display items. These are typically found in the
back rooms of supermarkets and convenience stores and other commercial sites,
such as hotel and cafeteria kitchens, and are used to store items that require
refrigeration prior to sales area display. Hussmann's other products also
include self-contained refrigeration equipment utilized in convenience stores.
Product Development and Proprietary Information
Hussmann strives to be the technology leader in food merchandising equipment
and commercial refrigeration. Hussmann believes technological development is an
important factor in its ability to maintain its market leadership position.
Hussmann's research and product development strategy is to centralize the
development of new products for global application. Two global design centers
have responsibility for creating new products with a focus on global design for
specific technologies and product lines. The goal of the design centers is to
achieve more commonality of components and modularity in Hussmann's product
lines. The centers share technologies and product designs. The Impact
merchandiser platform reflects Hussmann's global design approach.
The corporate design center, located in Bridgeton, is responsible for
technology development and new supermarket display cases platforms as well as
global manufacturing support. The Mexico City design center is responsible for
entry level products such as beverage coolers and spot merchandisers. In
addition to the global design centers, Hussmann conducts refrigeration systems
development primarily at its Bridgeton and Atlanta facilities, and custom
merchandiser development is performed at its Chino, California facility.
The corporate design center, which Hussmann believes to be unique in the
industry, includes nine ambient-controlled display case test rooms, four
ambient-controlled psychrometric test rooms, one ambient-controlled test
chamber, all with dedicated computer based data acquisition systems, a "mini-
factory" model shop, materials testing lab, reverberate sound test room,
transit and vibration test area, rain test chamber and solid modeling design
workstations. The corporate design center allows Hussmann to work closely with
chemical companies and compressor, valve and controls manufacturers to create
new generations of cases and systems.
Hussmann's research and development efforts are staffed by approximately 130
engineers, designers, laboratory technicians and model makers, including
approximately 55 at the corporate design center. Hussmann has spent
approximately $6.4 million, $5.6 million and $6.0 million on research and
development, during the years ended 1998, 1997 and 1996, respectively. Research
and development expenditures in future years are expected to approximate $6.0
million a year.
Hussmann holds patents registered in the U.S. and foreign countries for
various products. Hussmann believes that, although its patents relating to the
Impact platform and Protocol refrigeration systems are important in maintaining
its competitive and marketing advantage, no individual patent is material to
its financial condition or results of operations. Hussmann also holds various
trademarks, trade names and
4
<PAGE>
copyrights, none of which, other than the Hussmann name, is considered by
Hussmann to be material to its financial condition or results of operations.
Manufacturing Operations
Hussmann has 10 manufacturing plants in the U.S. and Canada, each of which
is devoted to the manufacture of certain lines of Hussmann products. Hussmann
believes efficiency and quality are increased by concentrating the manufacture
of its different product lines at separate plants. See "Properties" appearing
elsewhere in this Form 10-K.
In Mexico, Hussmann has manufacturing plants in Mexico City and Monterrey
primarily serving the supermarket and beverage industries. In January, 1997,
Hussmann expanded its operations in South America with the acquisition of a 70%
interest in Hussmann Fast Frio do Brasil, Ltda. ("Fast Frio"), a Brazilian
supermarket equipment manufacturer. In November 1997, Hussmann also acquired
100% of Industrias Gilvert in Mexico City, a manufacturer of commercial and
industrial refrigeration products.
Hussmann reconfigured its manufacturing plant in Milton Keynes, England,
which makes refrigerated display merchandisers and closed its manufacturing
plant in Glasgow, Scotland during 1998. Hussmann sells the products
manufactured at the Milton Keynes plant primarily in the U.K.
Hussmann has a 55% interest in Luoyang Hussmann Refrigeration Co. Ltd.
("Luoyang Refrigeration"), a leading producer of refrigeration systems and
display merchandisers in China. Hussmann opened a new factory in Luoyang in
1996, and began to produce Hussmann-designed products, including the Impact
line of merchandisers.
As previously stated, Hussmann acquired a 65% interest in MIL with
operations in New Zealand and Australia. MIL has three manufacturing locations
throughout the Asia-Pacific region producing refrigeration systems, custom
display merchandisers and cool room panels. In addition, Koxka, Hussmann's most
recent acquisition and the leading commercial and industrial refrigeration
manufacturer in Spain and Portugal, has 5 manufacturing locations producing
standard and custom merchandising display cases, beverage coolers, ice cream
merchandisers, and other self-contained food merchandisers.
Most of Hussmann's component purchases are for standard, readily available
materials such as carbon steel, compressors and electrical components. Such
components are available from multiple suppliers, and Hussmann has not
experienced any significant shortages. Hussmann generally does not enter into
long-term supply contracts. Hussmann also purchases custom components produced
to its specifications. Although an interruption in the supply of a custom
component may cause a short-term disruption to operations, Hussmann has
alternative supply plans to mitigate any long-term effects. Hussmann believes
it enjoys good relationships with its suppliers of both standard and custom
components.
Sales and Marketing
In the U.S., Canada, Mexico and the U.K., Hussmann sells, installs and
services products primarily through its network of approximately 39 branch
facilities. In addition to these company-operated facilities, Hussmann works
with approximately 13 independent distributors in the U.S. and Canada. It has
also entered into a joint venture with Global TH, a Hungarian manufacturer, for
the marketing of Hussmann products in Hungary. Through this network and the
Hussmann Total Service Program ("TSP"), Hussmann seeks to promote strong
customer loyalty and strengthen its reputation for quality and reliability. The
Hussmann TSP encompasses Hussmann's ability to provide store design, engineer a
broad range of standard and customized equipment, and provide installation and
service capabilities to its customers.
Hussmann has also entered into agreements throughout the U.S. with
manufacturers' representatives specializing in the food service market.
Hussmann believes these relationships will enable it to more effectively
increase its sales in this growing market.
5
<PAGE>
In Latin America, Hussmann sells through a network of approximately 20
independent distributors in those countries where it has no direct investment.
Hussmann has distribution agreements in Argentina, Colombia, El Salvador,
Venezuela, Ecuador, Guatemala, Honduras, Costa Rica and Puerto Rico. Hussmann
has its own distribution network in Chile, Brazil and Peru. In Southeast Asia,
Hussmann has a 50% owned joint venture with a distributor in Singapore that
sells, services and installs Hussmann products throughout the Southern Pacific
Rim. Hussmann also has agreements with distributors in Korea, Taiwan, Thailand,
French Polynesia and Guam.
Hussmann's pricing is usually on a competitive bid basis. Hussmann submits
individual store bids, multi-store package bids and annual contract bids. There
is standard pricing for some items such as service parts and also for wholesale
sales.
Competition
In general, the markets in which Hussmann participates are highly
competitive with competition primarily based on features, quality, technology,
energy conservation and price. Hussmann believes it is competitive on these
bases. Hussmann's competitors vary according to product and geographic area and
include companies that manufacture a variety of products for the commercial
food industry and those that specialize in a particular product. Hussmann faces
competition from a limited number of large competitors in the supermarket and
convenience store markets in the U.S. and Canada. These competitors include
Kysor-Warren (Scotsman Industries, Inc.), Tyler Refrigeration Corporation
(United Technologies Corporation) and Hill Phoenix, Inc. (Dover Corporation) in
supermarkets and Universal Nolin/Kelvinator (Electrolux AB), Master-Bilt
Products, and Federal (Standex International Corporation) in convenience
stores. Competition in the U.S. and Canada in refrigeration systems, walk-in
storage coolers and freezers, specialty cases and other Hussmann products is
more fragmented, with Hussmann facing competition from a number of regional
manufacturers.
In Mexico, Latin America and Europe, Hussmann faces competition from large
European manufacturers, such as Costan and Bonnet (EL. FI Elettrofinanziara
S.P.A.), Linde and Electrolux AB, as well as smaller local manufacturers. In
Asia-Pacific, Hussmann is in competition with local manufacturers, large
European manufacturers and Japanese manufacturers, such as Sanyo, Hitachi and
Nakano.
Customers
No single customer accounted for more than 10% of Hussmann's sales during
any of the last three fiscal years. Hussmann's largest customers are
supermarkets in the U.S. and include 19 of the top 20 chains. The U.S. customer
base is composed of approximately 11,000 independent and 19,000 chain-owned
supermarkets, plus over 96,000 other grocery stores. In recent years,
approximately 4,000 stores purchased refrigeration equipment annually for
either new store openings or remodelings. Historically, Hussmann's supermarket
business has been divided approximately equally between new store activity and
the remodeling of existing stores.
Backlog and Seasonality
The dollar amount of firm backlog at December 31, 1998, was $201.5 million,
compared with $176.6 million at December 31, 1997. Substantially all such
backlog was shipped by March 1, 1999.
Hussmann experiences the greatest demand for its products in the third and
fourth quarters of the year, with greater than 56% of annual sales and revenues
occurring during that period in 1998 and 1997. This demand results from
customers' seasonal construction cycles and desire to complete stores prior to
the year-end holiday season. On average, during the five-year period ending
1998, 67% of operating income was generated in the third and fourth quarters.
6
<PAGE>
Regulatory Compliance
Hussmann is subject to numerous federal, state and local laws and
regulations designed to protect the environment. In addition to environmental
laws, Hussmann is subject to the Federal Occupational Safety and Health Act and
other laws regulating safety and health. Hussmann maintains a program to
facilitate compliance with these laws, the capital costs of which are not
material to its financial condition or results of operations.
Hussmann is contractually obligated through 2004 to indemnify the current
owners of a previously sold operation for the costs to perform certain remedial
and monitoring activities. These activities are identified and outlined in a
Consent Order signed by Hussmann and the Missouri Department of Natural
Resources. Hussmann believes it has set aside sufficient reserves to meet these
obligations.
Hussmann has been named as a potentially responsible party under superfund
legislation at three sites. One site is a community landfill and the other two
sites are treatment, storage and disposal facilities used by Hussmann to handle
industrial waste. Hussmann is not currently utilizing any of these sites and
believes any liability it may ultimately incur at such sites would not have a
material adverse effect on its financial condition or results of operations.
Employees
At December 31, 1998, Hussmann had approximately 9,100 employees, including
approximately 5,000 covered by collective bargaining agreements. Labor
contracts with respect to approximately 800, 1,800 and 2,000 employees expire
in 1999, 2000 and 2001, respectively. Hussmann considers its relationships with
employees to be generally satisfactory.
7
<PAGE>
Item 2. Properties
The following table sets forth certain information with respect to
Hussmann's world headquarters and manufacturing facilities, all of which are
owned by Hussmann except as noted below.
<TABLE>
<CAPTION>
Approximate Primary Products
Location Square Footage Manufactured
-------- -------------- ----------------
<C> <C> <S>
Bridgeton, Missouri....... 110,000 World headquarters, corporate
offices and research and development
Bridgeton, Missouri....... 1,700,000 Refrigerated display merchandisers
Montgomery, Alabama(1).... 100,000 Walk-in storage coolers and freezers
Chino, California(1)...... 475,000 Custom display merchandisers and
refrigeration systems
Aurora, Colorado(1)....... 80,000 Bakery merchandisers and floral
displays
Suwanee, Georgia(1)....... 375,000 Refrigeration systems and electrical
distribution centers
Addison, Illinois......... 208,000 Evaporators, condensers and coils
Gloversville, New York.... 150,000 Self-contained refrigerated display
merchandisers
Seattle, Washington(1).... 95,000 Walk-in storage coolers and freezers
Brantford, Ontario........ 385,000 Custom display merchandisers
St. Hubert, Quebec........ 180,000 Evaporators, condensers, air
handlers and coils
Milton Keynes, England.... 80,000 Refrigeration display merchandisers
Glasgow, Scotland(1)...... 20,000 Refrigeration systems
Mexico City, Mexico(1).... 100,000 Evaporators, condensers and coils
Mexico City, Mexico....... 280,000 Beverage coolers and refrigerated
display merchandisers
Monterrey, Mexico......... 235,000 Beverage coolers, refrigerated
display merchandisers and walk-in
storage coolers and freezers
Londrina, Brazil(2)....... 244,000 Refrigerated display merchandisers,
shelving, check-out stands,
refrigeration systems and beverage
coolers
Luoyang, China(2)......... 450,000 Refrigerated display merchandisers
and refrigeration systems
Auckland, New Zealand(2).. 70,000 Refrigeration systems and assembly
of refrigerated display
merchandisers
Tauranga, New Zealand(1).. 40,000 Custom display merchandisers
Sydney, Australia(1)...... 20,000 Refrigeration systems and cool room
panels
Pamplona, Spain........... 310,000 Remote refrigerated display
merchandisers and cool room panels
Madrid, Spain............. 110,000 Ice cream conservators and beverage
coolers
Madrid, Spain............. 55,000 Self-contained refrigerated and
freezer display merchandisers
Huesca, Spain............. 30,000 Personalized refrigerated and
freezer merchandisers
Peralta, Spain............ 100,000 Heat exchange coils, evaporators and
condensers
</TABLE>
- --------
(1) Leased.
(2) Owned with a joint venture partner.
Item 3. Legal Proceedings
Hussmann has contingent liabilities arising from various pending claims and
litigation on a number of matters. It is impossible to estimate with any
certainty the ultimate liability that may result from these matters.
Nevertheless, in the opinion of Hussmann counsel, the final outcome of these
matters will not materially affect the consolidated financial condition or
results of operations of Hussmann.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1998.
8
<PAGE>
Executive Officers of the Registrant
The names, ages and experience of the executive officers of the Company as
of March 1999, are set forth below:
J. Larry Vowell (58)
President and Chief Executive Officer, Director since January 29, 1998
Mr. Vowell has spent his entire professional career with Hussmann. After
holding a variety of management positions, Mr. Vowell became President
and Chief Operating Officer-Hussmann U.S.A. in 1990 and President and
Chief Executive Officer later that year.
John S. Gleason (57)
Executive Vice President-North American Operations
Mr. Gleason joined Hussmann in 1988 as President-International Group. He
served as Executive Vice President-Sales and Marketing for North America
from 1991 to 1995.
Michael D. Newman (42)
Senior Vice President-Chief Financial Officer
Mr. Newman joined Hussmann in 1996. Prior to that, he spent seventeen
years with General Electric Company in various financial positions, most
recently as Manager, America's Finance.
John Schlee (56)
Senior Vice President-Europe and Middle East
Mr. Schlee joined Hussmann in 1988 as Group Vice President-
Manufacturing. He became Senior Vice President-Manufacturing in 1989,
was Senior Vice President-International from 1995 to 1996 and was Senior
Vice President-Global Development from 1996 to November 1997.
Lawrence R. Rauzon (49)
Vice President-Asia-Pacific
Mr. Rauzon served as Vice President-Western United States from 1989-1994
when he was appointed Vice President and Region Manager, Western United
States. He was appointed to his present position in 1996. He has been
with Hussmann since 1978.
Mark C. Schaefer (41)
Vice President-Mexico and Latin America
Mr. Schaefer joined Hussmann in 1981. He became President-Hussmann
Mexico in 1992, and was appointed to his present position in 1995.
Dennis G. Gipson (45)
Vice President-Global Development
Mr. Gipson joined Hussmann in 1972. From 1989 to 1991 he was Vice
President Sales-North Central Zone. He served as Vice President for
Product Development and Research from 1992 to 1996 and as Vice
President-Refrigeration, North America from 1996 to November 1997.
Burton Halpern (57)
Vice President, General Counsel and Secretary
Mr. Halpern has served in various legal capacities with Hussmann since
1970. He became General Counsel in 1985.
Joseph R. Pinkston III (44)
Vice President-Human Resources
Mr. Pinkston joined Hussmann in 1995. From 1992-1995 he served as Group
Director of Human Resources for the Bowman Distribution Division of the
Barnes Group. Prior to that, he served in various human resource
positions with units of Allied Signal.
9
<PAGE>
Thomas G. Korte (35)
Vice President-Corporate Controller
Mr. Korte joined Hussmann on March 23, 1998. From 1986 until joining
Hussmann he was employed by KPMG LLP with his last position being Senior
Manager.
There are no family relationships among any of the executive officers.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Hussmann Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "HSM". As of March 5, 1999, there were 14,485 holders of
record of Hussmann Common Stock.
"When issued" trading of Hussmann Common Stock commenced on the NYSE on
January 20, 1998. Prior to that date, Hussmann Common Stock was not listed or
quoted on any securities exchange or quotation system. The table below sets
forth the reported high and low sales prices as reported for NYSE Composite
Transactions for Hussmann Common Stock and the dividends declared during the
quarter for each quarterly period ending after January 20, 1998.
<TABLE>
<CAPTION>
Dividends
Quarter Ended High Low Declared
------------- ------ ------ ---------
<S> <C> <C> <C>
March 31, 1998.................................... $18.75 $13.63 $0.02
June 30, 1998..................................... 19.50 17.00 0.02
September 30, 1998................................ 18.94 12.63 0.02
December 31, 1998................................. 19.38 12.00 0.02
</TABLE>
Item 6. Selected Financial Data
The information required by this item is set forth under "Five Year Summary
of Selected Financial Data" which appears in Hussmann's 1998 Annual Report
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this item is set forth in Hussmann's 1998
Annual Report, which is incorporated herein by reference. In addition, the
information contained in the "Safe Harbor Statement" section of "Management's
Discussion and Analysis of Financial Condition and Results of Operations" is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Risk
Hussmann's most significant non-U.S. operations are located in Canada,
Mexico and the U.K., with smaller operations located in, among other
countries, New Zealand, Australia, Brazil, Chile, China and Singapore. Because
Hussmann's non-U.S. entities conduct the majority of their business in their
respective local currencies, Hussmann is subject to foreign currency risks
when translating its non-U.S. entity financial statements into U.S. dollars
for financial reporting purposes. However,the Company is not significantly
exposed to foreign currency transactions. Hussmann did not use foreign
currency risk management instruments to manage its exposure to changes in
currency exchange rates in 1998. However, as the significance of Hussmann's
foreign operations grows, Management will continue to monitor whether it would
be appropriate to use foreign currency risk management instruments to mitigate
its larger exposures.
10
<PAGE>
In January 1999, the Company announced that it had entered into a definitive
agreement to purchase Koxka. The purchase price established in the definitive
agreement, (approximately $145 million) was denominated in Spanish Pesetas.
Hussmann hedged the Peseta exposure to lock in to a U.S. Dollar purchase price
of $145 million using forward currency exchange contracts.Any realized gains or
losses from settling the forward contracts must be reflected in the income
statement of the corresponding period. As such, Hussmann will record a one-time
charge of approximately $10 million (pre-tax) in the first quarter of 1999.
Interest Rate Risk
As of December 31, 1998, Hussmann had $204.8 in long-term debt outstanding,
$125 million of which represented senior note obligations with a fixed rate of
6 3/4%. The majority of the remaining balance represents amounts outstanding on
the Company's unsecured revolving credit facility, with interest based on LIBOR
(London Interbank Offer Rate). Given the current mix of the Company's
outstanding indebtedness, the Company does not believe its exposure to short-
term interest rate changes would be material.
Commodity Risk
Hussmann's products use copper wiring and tubing. As a result, Hussmann's
results are subject to fluctuations in the price of copper. Hussmann uses
hedging instruments to mitigate a portion of these risks. Overall, this hedging
activity is not considered to be material to Hussmann's consolidated results of
operations or financial position.
Item 8. Financial Statements and Supplementary Data
The consolidated and combined financial statements and supplemental data
required by this item are incorporated herein by reference to Hussmann's 1998
Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required for Executive Officers is reported in Part I of
this report. Other information required by this item is incorporated herein by
reference to the information contained under "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in Hussmann's proxy
statement dated April 2, 1999, filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Proxy Statement").
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to
the information contained under "Compensation of Directors" and "Executive
Compensation and Other Information" in Hussmann's Proxy Statement (other than
"Report of Management Resources and Compensation Committee" and "Performance
Graph").
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to
the information contained under "Beneficial Ownership of Common Stock" in
Hussmann's Proxy Statement.
11
<PAGE>
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference to
the information contained under "Certain Transactions" in Hussmann's Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(A) 1. Financial Statements
The consolidated and combined financial statements of Hussmann and its
subsidiaries and the independent auditors' report thereon are incorporated
herein by reference to Hussmann's 1998 Annual Report.
2. Financial Statement Schedules
All schedules are omitted because they are not required, not applicable or
the information is given in the consolidated financial statements or notes
thereto contained in Hussmann's 1998 Annual Report.
3. Exhibits
See the accompanying Exhibit Index for a list of Exhibits which are filed as
a part of this Form 10-K.
(B) Reports on Form 8-K
Hussmann filed a Current Report on Form 8-K and a Current Report on Form 8-
K/A, each dated August 17, 1998, and filed on August 31 and October 30, 1998,
respectively, to report the following:
Item 2 (Acquisition or Disposition of Assets) to report the acquisition
of a 65% interest in McAlpine Refrigeration, Ltd. and Triangle
Refrigeration (Australia) Pty. Limited as of August 17, 1998.
The Form 8-K/A was filed to include audited financial statements and
unaudited pro forma financial information as follows:
Item 7 (Financial Statements and Exhibits) Financial Statements filed with
the report were:
a) Financial statements of business acquired.
The audited consolidated statements of financial position of McAlpine
Refrigeration, Ltd. at June 30, 1998 and 1997 and the related
consolidated statements of financial performance, movements in equity
and cash flows for the years then ended.
The audited consolidated balance sheet of Triangle Refrigeration
(Australia) Pty. Limited at June 30, 1998 and 1997 and the consolidated
profit and loss statements and the consolidated statements of cash flows
for the years then ended.
b) Pro forma financial information.
Introduction to Unaudited Pro Forma Combined Condensed Financial
Statements.
Unaudited Pro Forma Combined Condensed Statement of Operations for the
year ended December 31, 1997.
Unaudited Pro Forma Combined Condensed Statement of Operations for the
six month period ended June 30, 1998.
Unaudited Pro Forma Combined Condensed Balance Sheet at June 30, 1998.
Hussmann also filed a Current Report on Form 8-K dated January 6, 1999 and
filed on January 8, 1999 to report that Hussmann had signed a definitive
agreement to acquire Koxka CE, S.A. ("Koxka"), a Spanish company listed on the
Madrid Stock Exchange, by means of a public tender offer.
(C) Exhibits
See Item 14(A)(3) above.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, this 22nd day of
March, 1999.
HUSSMANN INTERNATIONAL, INC.
/s/ Michael D. Newman
By:
___________________________________
Michael D. Newman
Senior Vice President-Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on behalf of the registrant, this 22nd day of March, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ J. Larry Vowell President and Chief
____________________________________ Executive Officer and
J. Larry Vowell Director (principal
executive officer)
/s/ Michael D. Newman Senior Vice President-Chief
____________________________________ Financial Officer (principal
Michael D. Newman financial officer)
/s/ Richard G. Cline Chairman of the Board and
____________________________________ Director
Richard G. Cline
/s/ J. Joe Adorjan Director
____________________________________
J. Joe Adorjan
/s/ Lawrence A. Del Santo Director
____________________________________
Lawrence A. Del Santo
/s/ R. Randolph Devening Director
____________________________________
R. Randolph Devening
/s/ Archie R. Dykes Director
____________________________________
Archie R. Dykes
/s/ Victoria B. Jackson Director
____________________________________
Victoria B. Jackson
/s/ Thomas G. Korte Vice President-Corporate
____________________________________ Controller (principal
Thomas G. Korte accounting officer)
</TABLE>
13
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement Relating to Hussmann McAlpine Limited dated August 17,
1998 between Hussmann Netherlands B.V. and Barry Edward Brill and
Allan Francis Cotter, Phillip Joseph Miller, Howard James Small,
and Robert Charles Todd and Kevin Stainer (incorporated by
reference to Exhibit 2 to Hussmann International, Inc.'s Form 8-K
filed with the Securities and Exchange Commission ("SEC") on
August 31, 1998).
2.2* Share Purchase Agreement dated January 6, 1999 between Hussmann
International, Inc. and Vicente Guibert Azcue, Ramon Guibert
Encio, Inigo Guibert Encio, Jose Iriondo Murua, Juan Felix Iriondo
Altuna, Maria Elena Iriondo Altuna, Maria Teresa Iriondo Altuna,
and Florita Iriondo Altuna (the definitive agreement to acquire
Koxka).
3(i) Certificate of Incorporation (incorporated by reference to Exhibit
3(i).1 to Hussmann International, Inc.'s Registration Statement on
Form 10/A No. 3 (Post-Effective Amendment No. 1) (Commission File
No. 1-13407) (the "Form 10")).
3(ii) By-Laws (incorporated by reference to Exhibit 4.3 to Hussmann
International, Inc.'s Registration Statement on Form S-8 relating
to its Retirement Savings Plans (Registration No. 333-44623) (the
"RSP Form S-8")).
4.1 Credit Agreement dated as of January 23, 1998 among Hussmann
International, Inc., various financial institutions and Bank of
America National Trust and Savings Association, as administrative
agent (the "Credit Agreement") (incorporated by reference to
Exhibit 4 to Hussmann International, Inc.'s Form 8-K filed with
the SEC on May 27, 1998).
4.2 First Amendment dated as of May 29, 1998 to the Credit Agreement
(incorporated by reference to Exhibit 4 to Hussmann International,
Inc.'s Form 8-K filed with the SEC on May 27, 1998).
4.3* Second Amendment dated as of January 15, 1999 to the Credit
Agreement.
4.4 Certificate of Designation of Series A Junior Participating
Preferred Stock (incorporated by reference to Exhibit 4.2 to the
RSP Form S-8).
4.5 Rights Agreement, dated as of December 31, 1997, between Hussmann
International, Inc. and First Chicago Trust Company of New York
(incorporated by reference to Exhibit 4.4 to the RSP Form S-8).
4.6* Indenture dated as of May 22, 1998 by and between Hussmann
International, Inc. and The Bank of New York.
10.1 Distribution and Indemnity Agreement dated as of December 31, 1997
among Hussmann International, Inc., Hussmann Corporation and
Whitman Corporation (incorporated by reference to Exhibit 2.1 to
Hussmann International, Inc.'s Form 8-K filed with the SEC on
February 17, 1998).
10.2 Tax Sharing Agreement dated as of December 31, 1997 among Hussmann
International, Inc., Hussmann Corporation and Whitman Corporation
(incorporated by reference to Exhibit 2.2 to Hussmann
International, Inc.'s Form 8-K filed with the SEC on February 17,
1998).
10.2 Amended and Restated Stock Incentive Plan (incorporated by
reference to Exhibit 10.3 to Hussmann International, Inc.'s Form
10-Q filed with the SEC on May 14, 1998).
10.3 Form of Option Agreement (incorporated by reference to Exhibit
10.4 to Hussmann International, Inc.'s Form 10-K filed with the
SEC on March 31, 1998).**
10.4 Form of Restricted Stock Award (incorporated by reference to
Exhibit 10.4 to Hussmann International, Inc.'s Form 10-K filed
with the SEC on March 31, 1998).**
10.5 Change in Control Agreement (incorporated by reference to Exhibit
10.5 to Hussmann International, Inc.'s Registration Statement on
Form 10/A No. 1 (Commission File No.
1-13407)).**
</TABLE>
1
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.6 Agreement between the Registrant and Richard G. Cline
(incorporated by reference to Exhibit 10.5 to the Form 10).**
10.7 Stock Option Agreement dated as of January 30, 1998 between
Hussmann International, Inc. and Richard G. Cline (incorporated by
reference to Exhibit 10.8 to Hussmann International, Inc.'s
Form 10-Q filed with the SEC on May 14, 1998).**
10.8 Employment Agreement dated as of April 9, 1998 between Hussmann
International, Inc. and J. Larry Vowell (incorporated by reference
to Exhibit 10.9 to Hussmann International, Inc.'s Form 10-Q filed
with the SEC on May 14, 1998).**
10.9* Deferred Compensation Plan for Directors.**
10.10* Form of Deferred Compensation and Payment Agreement for
Directors.**
13* Annual Report to Shareholders.
21* Subsidiaries of Hussmann International, Inc.
23* Consent of KPMG LLP.
27* Financial Data Schedules.
99* Press release dated March 30, 1999.
</TABLE>
- --------
*Filed herewith.
**Management compensation plan or agreement.
2
<PAGE>
Exhibit 2.2
SHARE PURCHASE AGREEMENT
In Madrid, Spain, on January 6, 1999
GATHERED
ON THE ONE PART, Hussmann International Inc., a company duly incorporated and
existing under the laws of the State of Delaware, United States of America, with
domicile at 12999 St. Charles Rock Road, Bridgeton, Missouri 63044 USA, duly
represented by Mr. John Schlee, a U.S. citizen, with U.S. Passport number
025317818, in his capacity as Senior Vice President, Europe, Africa and Middle
East, by virtue of a Power of Attorney issued in his favor on December 30, 1998.
AND ON THE OTHER PART,
Mr. Vicente Guibert Azcue, of legal age, married, of Spanish nationality, with
domicile at c/ Hernani, number 2, 20004, San Sebastian, Guipuzcoa and Tax
Identification Number (NIF) 1.959.426-X, duly represented by Mr. Ramon Guibert
Encio by virtue of power of attorney granted in his favor on November 24, 1998.
Mr. Ramon Guibert Encio, of legal age, single, of Spanish nationality, with
domicile at c/ Hernani, number 2, 20004, San Sebastian, Guipuzcoa, Spain and
Tax Identification Number (NIF) 15.991.239-Y, acting on his own name and behalf.
Mr. Inigo Guibert Encio, of legal age, married, of Spanish nationality, with
domicile at c/ Garibay, number 1, 4, San Sebastian and Tax Identification Number
(NIF) 15.924.213-W, duly represented by Mr. Ramon Guibert Encio by virtue of
power of attorney granted in his favor on November 24, 1998.
Mr. Jose Iriondo Murua, of legal age, married, of Spanish nationality, with
domicile at c/ Media Luna, number 5, Pamplona and Tax Identification Number
(NIF) 15.303.864, duly represented by Mr. Juan Feliz Iriondo Altuna by virtue of
power of attorney issued in his favor on December 23, 1997.
Mr. Juan Felix Iriondo Altuna, of legal age, single, of Spanish nationality,
with domicile at c/ Media Luna, number 5, Pamplona, Spain and Tax
Identification Number (NIF) 16.235.108-Y, acting on his own name and behalf.
Ms. Maria Elena Iriondo Altuna, of legal age, single, of Spanish nationality,
with domicile at c/ Media Luna, number 5, Pamplona, Spain and Tax
Identification Number (NIF) 16.231.354-16.231.354-Y, duly represented by Mr.
Juan Felix Iriondo Altuna by virtue of power of attorney issued in her favor on
September 24, 1987.
<PAGE>
Ms. Maria Teresa Iriondo Altuna, of legal age, married, of Spanish nationality,
with domicile at c/ Media Luna, number 5, Pamplona, Spain and Tax
Identification Number (NIF) 15.360.132, duly represented by Mr. Juan Felix
Iriondo Altuna by virtue of power of attorney issued in her favor on September
24, 1987.
Ms. Florita Iriondo Altuna, of legal age, single, of Spanish nationality, with
domicile at c/ Media Luna, number 5, Pamplona, Spain and Tax Identification
Number (NIF) 15.366.887, duly represented by Mr. Juan Felix Iriondo Altuna by
virtue of power of attorney issued in her favor on September 24, 1987.
Messrs. Vicente Guibert Azcue, Ramon Guibert Encio, Inigo Guibert Encio, Jose
Iriondo Murua, Juan Felix Iriondo Altuna, Maria Elena Iriondo Altuna, Maria
Teresa Iriondo Altuna, Florita Iriondo Altuna shall hereinafter be referred to
as the "Sellers".
WHEREAS
I. Hussmann International Inc. is a company dedicated to the manufacturing and
commercialization of commercial refrigerator display and storage cases,
refrigeration equipment and refrigeration systems.
II. The Sellers are owners of 950,145 shares representing 77.25% of the issued
and outstanding shares of the Spanish company KOXKA CE, S.A. (the
"Company"), with domicile at Poligono de Landaben, calle A, s/n, Pamplona,
Spain and NIF number A-31-016363, a public company listed on the Madrid
Stock Exchange. The shares owned by each Seller are listed in Exhibit II
hereto. Anagre, S.A. is the owner of 37,062 shares representing 3.01% of
the share capital of the Company.
III. Hussmann International Inc. is interested in purchasing a number of the
issued and outstanding shares of the Company which represents at least
80.26% of the Company's share capital, by means of a public tender offer,
in accordance with applicable Spanish securities market regulations.
IV. The Sellers are interested in selling their shares of the Company to
Hussmann International Inc. or to the subsidiary or affiliate company of
Hussmann International Inc. which launches the public tender offer (the
entity launching the public tender offer shall hereinafter be referred to
as the "Purchaser"), provided that a minimum purchase price is offered.
In accordance with the above considerations, the parties have agreed to enter
into this Share Purchase Agreement, subject to the following :
<PAGE>
CLAUSES
1. PURCHASE OF SHARES
------------------
1.1 Each of the Sellers irrevocably undertakes to sell to the Purchaser all the
shares he owns in the capital of the Company if the Purchaser launches a
public tender offer for 100% of the issued and outstanding shares of the
Company at a purchase price of 16,195 pesetas/share, net of clearing,
settlement and other stock exchange expenses.
1.2 Mr. Juan Felix Iriondo Altuna irrevocably promises that, in the event the
Purchaser launches the Public Tender Offer described in Clause 1.1 above,
Anagre, S.A. shall sell to the Purchaser all the shares that Anagre, S.A.
holds of the Company.
Consequently, and for the purposes of this Agreement, Anagre, S.A. shall
be considered as an additional Seller, and Juan Felix Iriondo Altuna shall
assume personally in his own name all the rights, obligations and
liabilities that would correspond to Anagre, S.A. if Anagre, S.A. had
signed this Agreement.
1.3 Completion of the public tender offer will be conditional upon the
Purchaser acquiring at least 80% of the issued and outstanding shares of
the Company, less the shares owned by any Seller who may die or be affected
by incapacity or third party attachment on his assets (but in any case,
upon acquiring at least 51%). This condition will be expressly reflected in
the prospectus and all other documents pertaining to the public tender
offer. Should the Spanish Comision Nacional del Mercado de Valores not
accept that the threshold for completion of the public tender offer be
conditional upon the aforementioned events, the public tender offer will be
formally conditional upon the Purchaser acquiring at least 62% of the
issued and outstanding shares of the Company, even though the Purchaser
undertakes to complete the public tender offer even if the 62% threshold is
not reached due to death, incapacity or third party attachment affecting
any of the Sellers, provided always that at least 51% of the shares of the
Company are acquired by the Purchaser.
The public tender offer shall provide that the acceptance period will
expire on the earliest possible day of March of 1999.
1.4 The Purchaser undertakes to purchase all, but not part of, the shares of
the Company owned by the Sellers pursuant to the conditions described in
the preceding paragraph and the remaining Clauses of this Agreement.
1.5 The Sellers' obligations under this Agreement shall be several
("mancomunadas"), that is, each Seller shall be responsible only for
his/her own obligations hereunder except for the liability of the breaching
Sellers pursuant to Clause 5 hereof, which will be joint and several among
those breaching Sellers only.
3
<PAGE>
1.6 In the event the Purchaser is an entity different than Hussmann
International, Inc., Hussmann International, Inc. and the Purchaser shall
be jointly and severally liable for the responsibilities of the Purchaser
hereunder.
1.7 Within a term of 30 days of signature of this Agreement, the Purchaser
shall file an Application to the Spanish Stock Exchange Commission
(Comision Nacional del Mercado de Valores) for authorisation to launch the
above described Public Tender Offer.
2. CONSIDERATION
-------------
2.1 The price per share to be paid by the Purchaser to each of the Sellers in
consideration for the sale of their shares of the Company shall be the same
price that is offered to all the remaining shareholders of the Company. The
Sellers shall receive no further consideration other than the purchase
price per share paid to all the shareholders who accept the public tender
offer.
2.2 The purchase price shall be paid in cash by the Purchaser to each of the
Sellers at the time of settlement of the purchase price upon closure of the
public tender offer, through the stock broker ("agente de pagos") appointed
by the Purchaser to settle and liquidate the public tender offer.
3. ADDITIONAL COMMITMENTS OF THE SELLERS
-------------------------------------
3.1 Each of the Sellers irrevocably undertakes not to sell, charge, encumber of
in any way dispose of any of the shares of the Company which he may own now
or in the future in favor of any party other than the Purchaser (including
any other Seller), whether in the process of a public tender offer launched
by any third party prior to, simultaneously or after the public tender
offer launched by the Purchaser, or through any other valid means of
acquisition, except for the case that any Seller decide the transfer of the
shares owned by such Seller to an individual (which must be another Seller)
or a Company directly or indirectly owned by the relevant or another
Seller, as long as the acquirer of such shares subrogates in all
obligations of the transferring Seller to the Purchaser and/or Hussmann
International Inc. with respect to the transaction contemplated herein.
3.2 Each of the Sellers irrevocably undertakes, as soon as the public tender
offer is authorized by the Spanish Comision Nacional del Mercado de
Valores, to inform the Comision Nacional del Mercado de Valores of his
commitment to accept the offer.
3.3 Each of the Sellers irrevocably undertakes to formally accept the public
tender offer launched by the Purchaser within the first three business days
of the acceptance period.
3.4 Each of the Sellers irrevocably undertakes to refrain from any action which
may prejudice the success of the public tender offer.
3.5 The Sellers acknowledge that the minimum price referred to in Clause 1.1
above is a fair and reasonable consideration for the sale of the shares of
the Company. The Sellers
4
<PAGE>
undertake to use their best efforts to cause the Board of Directors of the
Company to produce a report recommending the sale of the shares of the
Company to the Purchaser, at a price at least equal to that referred to in
Clause 1.1 above, in the course of the public tender offer.
4. OBLIGATIONS OF THE PURCHASER / CONDITIONS
-----------------------------------------
4.1 The parties expressly agree that the Purchaser shall have no obligation to
launch a public tender offer or otherwise acquire any shares of the Company
if the authorization for the public tender offer by the Spanish Comision
Nacional del Mercado de Valores is duly and timely filed for but is not
issued or if the foreign investment verification is duly and timely applied
for but is not granted. The Purchaser shall file and process the relevant
Applications in good faith, shall post a bank guarantee for the full amount
of the public tender offer and comply with all relevant Spanish regulatory
requirements to the best of its ability.
4.2 If the Purchaser launches a public tender offer for the shares of the
Company, the Purchaser shall be entitled to withdraw from such public
tender offer without acquiring any shares of the Company if:
(a) The shares tendered for sale to the Purchaser by the shareholders of
the Company who accept the offer do not reach the threshold established for
completing the public tender offer pursuant to Clause 1.3 above; or
(b) The Spanish government issues a resolution before the end of the
acceptance period which prohibits the transaction.
4.3 In the cases described in Clauses 4.1 and 4.2 above, the Purchaser shall
not be obliged to indemnify the Sellers nor to reimburse the Sellers for
any damages or expenses incurred in connection with this Agreement, nor to
pay the penalties established in Clause 5 below.
5. INDEMNITY
---------
If any of the Sellers fails to comply with any of their obligations or
commitments hereunder, the Purchaser may decide either to enforce the breaching
Sellers' obligations or to be released from any and all of its obligations
hereunder vis-a-vis such breaching Seller(s) (Mr. Juan Felix Iriondo Altuna
shall be considered as a breaching Seller if Anagre, S.A. fails to sell all of
its shares in the Company as promised by Mr. Iriondo Altuna in Clause 1.2 above)
and the breaching Seller(s) shall be jointly and severally liable to:
(a) reimburse the Purchaser for all expenses incurred in the preparation
and/or launching of the public tender offer, including attorneys',
auditors' and advisors' fees; and
(b) pay to the Purchaser a penalty in the amount of 705,000,000 pesetas,
which damages shall be the exclusive damages available to the
Purchaser.
5
<PAGE>
In a similar fashion, if the Purchaser fails to comply with any of its
obligations or commitments hereunder, the Sellers may decide either to enforce
Purchaser's obligations or to be released from any and all of their obligations
hereunder and the Purchaser shall be liable to:
(a) reimburse the Sellers for all expenses incurred in the preparation of
this Agreement including attorneys', auditors' and advisors' fees, and
(b) pay to the Sellers a penalty in the total amount of 705,000,000
pesetas which damages shall be the exclusive damages available to the
Sellers.
6. GOVERNING LAW / ARBITRATION
---------------------------
6.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Kingdom of Spain.
6.2 The Parties shall try to resolve any dispute, conflict, controversy or
difference which might arise between them under this Agreement by way of
good faith negotiations. In the event the Parties are unable to achieve a
satisfactory resolution of such dispute, conflict, controversy or
difference within a period of 30 days, the parties, expressly waiving any
other forum which may correspond to them, irrevocably submit to the
jurisdiction of the Courts of the city of Madrid, Spain.
7. LANGUAGE
--------
English and Spanish versions of this Agreement are being executed by the parties
and both versions shall constitute valid and binding documents. In the event any
difference(s) should be discovered between the English and Spanish versions of
this Agreement, then the Spanish version will prevail with respect to such
difference(s).
AND IN WITNESS WHEREOF, the parties execute this share purchase agreement, in
five original counterparts, in the place and on the date first above written.
/s/ John Schlee /s/ Ramon Guibert Encio
- -------------------------- ----------------------------------------
Hussmann International Inc. Mr. Ramon Guibert Encio representing Mr.
Vicente Guibert Azcue
/s/ Ramon Guibert Encio
----------------------------------------
Mr. Ramon Guibert Encio
6
<PAGE>
/s/ Ramon Guibert Encio
----------------------------------------
Mr. Ramon Guibert Encio, representing
Mr. Inigo Guibert Encio
/s/ Juan Felix Iriondo Altuna
----------------------------------------
Mr. Juan Felix Iriondo Altuna,
representing Mr. Jose Iriondo Murua
/s/ Juan Felix Iriondo Altuna
----------------------------------------
Mr. Juan Felix Iriondo Altuna
/s/ Juan Felix Iriondo Altuna
----------------------------------------
Mr. Juan Felix Iriondo Altuna,
representing Ms. Maria Elena Iriondo
Altuna
/s/ Juan Felix Iriondo Altuna
----------------------------------------
Mr. Juan Felix Iriondo Altuna,
representing Ms. Maria Teresa Iriondo
Altuna
/s/ Juan Felix Iriondo Altuna
----------------------------------------
Mr. Juan Felix Iriondo Altuna,
representing Ms. Florita Iriondo Altuna
7
<PAGE>
EXHIBIT II
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF KOXKA'S
SHAREHOLDER SHARES HELD SHARE CAPITAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Ramon Guibert Encio 162,562 13.22%
Inigo Guibert Encio/(a)/ 162,562 13.22%
Vicente Guibert Azcue/(a)/ 167,485 13.62%
Juan Felix Iriondo Altuna 68,213 5.55%
Maria Elena Iriondo Altuna/(b)/ 54,643 4.44%
Maria Teresa Iriondo Altuna/(b)/ 54,640 4.44%
Florita Iriondo Altuna/(b)/ 54,640 4.44%
Jose Iriondo Murua/(b)/ 225,400 18.33%
TOTAL 950,145 77.25%
- --------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of Clauses 1.2 and 5, Anagre, S.A., which currently holds
37,062 shares of Koxka, C.E. S.A. representing 3.91% of the share capital, shall
be considered as an additional Seller.
TOTAL INCLUDING SHARES OWNED BY ANAGRE 987,207 80.26%
(a) Represented by Ramon Guibert Encio.
(b) Represented by Juan Felix Iriondo Altuna.
<PAGE>
Exhibit 4.3
SECOND AMENDMENT
----------------
THIS SECOND AMENDMENT (this "Second Amendment") dated as of January 15,
----------------
1999 is to the Credit Agreement (as previously amended, the "Credit Agreement")
----------------
dated as of January 23, 1998 among HUSSMANN INTERNATIONAL, INC. (the "Company"),
-------
various financial institutions (the "Lenders") and Bank of America National
-------
Trust and Savings Association, as administrative agent (in such capacity, the
"Administrative Agent"). Unless otherwise defined herein, terms defined in the
- ---------------------
Credit Agreement are used herein as defined therein.
WHEREAS, the Company, the Lenders and the Administrative Agent have entered
into the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as more
fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1 Amendment. Effective on (and subject to the occurrence of) the
---------
Amendment Effective Date (as defined below), the first parenthetical in Section
8.5 of the Credit Agreement is amended in its entirety to read "(excluding
Indebtedness of any Subsidiary to the Parent or any other Subsidiary)".
SECTION 2 Representations and Warranties. The Company represents and
------------------------------
warrants to the Bank that, after giving effect hereto, (a) the representations
and warranties set forth in Section 6 of the Credit Agreement are true and
correct as of the date of the execution and delivery of this Second Amendment by
the Company with the same effect as if made on such date (except to the extent
such representations and warranties expressly refer to an earlier date, in which
case they were true and correct as of such earlier date), and (b) no Event of
Default or Unmatured Event of Default exists.
SECTION 3 Effectiveness. The amendment set forth in Section 1 above shall
------------- ---------
become effective on the date (the "Amendment Effective Date") when the
------------------------
Administrative Agent shall have received counterparts of this Second Amendment
executed by the Company and the Required Lenders.
SECTION 4 Miscellaneous.
-------------
4.1 Continuing Effectiveness, etc. As herein amended, the Credit
------------------------------
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references
in the Credit Agreement and the other Loan Documents to "Credit Agreement" or
similar terms shall refer to the Credit Agreement as amended hereby.
4.2 Counterparts. This Second Amendment may be executed in any number of
------------
counterparts and by the different parties on separate counterparts, and each
such counterpart shall
<PAGE>
be deemed to be an original but all such counterparts shall together constitute
one and the same Second Amendment.
4.3 Governing Law. This Second Amendment shall be a contract made under
-------------
and governed by the laws of the State of Illinois applicable to contracts made
and to be performed entirely within such state.
4.4 Successors and Assigns. This Second Amendment shall be binding upon
----------------------
the parties hereto and their respective successors and assigns, and shall inure
to the benefit of the parties hereto and the successors and assigns of the
Administrative Agent and the Lenders.
Delivered at Chicago, Illinois, as of the day and year first above written.
HUSSMANN INTERNATIONAL, INC. CREDIT SUISSE FIRST BOSTON,
as a Co-Agent and as a Lender
By: /s/ Charles R. Snavely
-----------------------------
Charles R. Snavely By: /s/ Bill O'Daly
Vice President and Treasurer ----------------------
Bill O'Daly
Vice President
BANK OF AMERICA NATIONAL By: /s/ Robert Hetu
TRUST AND SAVINGS ASSOCIATION, ----------------------
as Administrative Agent, as Swing Line Robert Hetu
Lender, as an Issuing Lender and as a Lender Vice President
By:/s/ William F. Sweeney THE FIRST NATIONAL BANK OF
--------------------------- CHICAGO, as a Co-Agent and as a
William F. Sweeney Lender
Vice President
By: /s/ Deborah E. Stevens
BANQUE NATIONALE DE PARIS, as a -----------------------
Lender Deborah E. Stevens
Authorized Agent
By: /s/ Arnaud Collin du Bocage
---------------------------- MARINE MIDLAND BANK, as a
Arnaud Collin du Bocage Lender
Executive Vice President and
General Manager By: /s/ Christopher M. Samms
-------------------------
Christopher M. Samms. #9426
THE BANK OF NEW YORK, as a Lender Vice President
By: /s/ David Shedd
------------------------------
David Shedd MELLON BANK, N.A., as a Lender
Vice President
By: /s/ Martin J. Randal
------------------------
Martin J. Randal
Assistant Vice President
2
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, WESTDEUTSCHE LANDESBANK
LTD., CHICAGO BRANCH, as a Lender GIROZENTRALE, NEW YORK
BRANCH, as a Lender
By:/s/ Hajime Watanabe
----------------------- By: /s/ Lisa Walker
Hajime Watanabe --------------------------
Deputy General Manager Lisa Walker
Vice President
MERCANTILE BANK NATIONAL By: /s/ Elisabeth R. Wilds
ASSOCIATION, as a Lender --------------------------
Elisabeth R. Wilds
By: /s/ Timothy W. Hasser Associate
------------------------
Timothy W. Hassler
Vice President WACHOVIA BANK, N.A., as a
Lender
CREDIT AGRICOLE INDOSUEZ, as By:/s/ Walter S. Gilliken
a Lender --------------------------
Walter S. Gilliken
By: /s/ David Bouhl Senior Vice President
-----------------------
David Bouhl
First Vice President
Head of Corporate Banking
Chicago
By: /s/ Katherine L. Abbott
-----------------------
Katherine L. Abbott
First Vice President
NATIONSBANK, N.A., as a Co-
Agent and as a Lender
By: /s/ William F. Sweeney
------------------------
William F. Sweeney
Vice President
THE NORTHERN TRUST COMPANY,
as a Lender
By: /s/ Lisa M. Taylor
------------------------
Lisa M. Taylor
Second Vice President
3
<PAGE>
Exhibit 4.6
================================================================================
HUSSMANN INTERNATIONAL, INC.
AND
THE BANK OF NEW YORK,
AS TRUSTEE
______________________
INDENTURE
DATED AS OF MAY 22, 1998
______________________
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ONE
Definitions
Section 1.01. Certain Terms Defined................................................................. 1
Section 1.02. Other Definitions..................................................................... 7
Section 1.03. Incorporation by Reference of Trust Indenture Act..................................... 7
ARTICLE TWO
Issue, Description, Execution, Registration, Registration
of Transfer and Exchange of Securities
Section 2.01. Amount Unlimited; Establishment of Series............................................. 8
Section 2.02. Form of Securities and Trustee's Certificate of Authentication........................ 11
Section 2.03. Global Securities..................................................................... 12
Section 2.04. Denomination, Authentication and Dating of Securities................................. 14
Section 2.05. Execution of Securities............................................................... 16
Section 2.06. Registration of Transfer and Exchange................................................. 17
Section 2.07. Temporary Securities.................................................................. 18
Section 2.08. Mutilated, Destroyed, Lost or Stolen Securities....................................... 18
Section 2.09. Cancellation of Surrendered Securities................................................ 19
Section 2.10. Provisions of Indenture and Securities for the Sole Benefit of the Parties and the
Holders.......................................................................... 20
Section 2.11. Computation of Interest............................................................... 20
Section 2.12. Authenticating Agents................................................................. 20
Section 2.13. Compliance with Certain Laws and Regulations.......................................... 21
Section 2.14. Medium-Term Securities................................................................ 22
Section 2.15. CUSIP Numbers......................................................................... 22
ARTICLE THREE
Redemption of Securities - Sinking Fund
Section 3.01. Applicability of Article.............................................................. 23
Section 3.02. Notice of Redemption; Selection of Securities......................................... 23
Section 3.03. When Securities Called for Redemption Become Due and Payable.......................... 24
Section 3.04. Sinking Fund.......................................................................... 25
Section 3.05. Use of Acquired Securities to Satisfy Sinking Fund Obligation......................... 26
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.06. Effect of Failure to Deliver Officers' Certificate or Securities.................................. 26
Section 3.07. Manner of Redeeming Securities.................................................................... 27
Section 3.08. Sinking Fund Moneys to Be Held as Security During Continuance of Event of Default; Exceptions..... 27
ARTICLE FOUR
Particular Covenants of the Company
Section 4.01. Existence......................................................................................... 28
Section 4.02. Payments of Principal of (and Premium, if any) and Interest, if any, on Securities................ 28
Section 4.03. Maintenance of Offices or Agencies for Registration of Transfer, Exchange and Payment of
Securities................................................................................... 29
Section 4.04. Appointment to Fill a Vacancy in the Office of Trustee............................................ 29
Section 4.05. Duties and Rights of Paying Agents; Company as Paying Agent....................................... 29
Section 4.06. Limitation on Liens............................................................................... 30
Section 4.07. Limitation on Sale and Lease-Back................................................................. 33
Section 4.08. Exempted Indebtedness............................................................................. 33
Section 4.09. Annual Certificate of Compliance.................................................................. 34
Section 4.10. Further Instruments and Acts...................................................................... 34
Section 4.11. Calculation of Original Issue Discount............................................................ 34
ARTICLE FIVE
Holders' Lists and Reports by the Company
and the Trustee
Section 5.01. Company to Furnish Trustee Information as to Names and Addresses of Holders....................... 34
Section 5.02. Preservation of Information; Communications to Holders............................................ 35
Section 5.03. Reports by Company................................................................................ 36
Section 5.04. Reports by Trustee................................................................................ 37
ARTICLE SIX
Remedies
Section 6.01. Events of Default................................................................................. 38
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 6.02. Acceleration of Maturity; Rescission and Annulment................................................ 40
Section 6.03. Collection of Indebtedness and Suits for Enforcement by Trustee................................... 41
Section 6.04. Trustee May File Proofs of Claim.................................................................. 42
Section 6.05. Trustee May Enforce Claims Without Possession of Securities....................................... 43
Section 6.06. Application of Moneys Collected................................................................... 43
Section 6.07. Limitation on Suits............................................................................... 44
Section 6.08. Unconditional Right of Holders to Receive Principal, Premium and Interest......................... 45
Section 6.09. Restoration of Rights and Remedies................................................................ 46
Section 6.10. Rights and Remedies Cumulative.................................................................... 46
Section 6.11. Delay or Omission Not Waiver...................................................................... 46
Section 6.12. Control by Holders................................................................................ 46
Section 6.13. Waiver of Past Defaults........................................................................... 47
Section 6.14. Undertaking for Costs............................................................................. 47
Section 6.15. Waiver of Stay or Extension Laws.................................................................. 47
ARTICLE SEVEN
The Trustee
Section 7.01. Certain Duties and Responsibilities............................................................... 48
Section 7.02. Notice of Defaults................................................................................ 49
Section 7.03. Certain Rights of Trustee......................................................................... 50
Section 7.04. Trustee Not Liable for Recitals in Indenture or in Securities..................................... 52
Section 7.05. Trustee, Paying Agent or Security Registrar May Own Securities.................................... 52
Section 7.06. Moneys Received by Trustee to Be Held in Trust.................................................... 52
Section 7.07. Compensation and Reimbursement.................................................................... 52
Section 7.08. Right of Trustee to Rely on an Officers' Certificate Where No Other Evidence Specifically
Prescribed................................................................................... 53
Section 7.09. Disqualification; Conflicting Interests........................................................... 53
Section 7.10. Corporate Trustee Required; Requirements for Eligibility.......................................... 54
Section 7.11. Resignation and Removal of Trustee; Appointment of Successor...................................... 54
Section 7.12. Acceptance by Successor to Trustee................................................................ 56
Section 7.13. Successor to Trustee by Merger, Consolidation or Succession to Business........................... 58
Section 7.14. Preferential Collection of Claims Against Company................................................. 59
Section 7.15. Appointment of Additional and Separate Trustees................................................... 59
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE EIGHT
Concerning the Holders
Section 8.01. Evidence of Action by Holders...................................................................... 62
Section 8.02. Proof of Execution of Instruments and of Holding of Securities..................................... 62
Section 8.03. Who May Be Deemed Owner of Securities............................................................. 63
Section 8.04. Securities Owned by Company or Controlled or Controlling Companies Disregarded for Certain
Purposes..................................................................................... 63
Section 8.05. Instruments Executed by Holders Bind Future Holders............................................... 64
ARTICLE NINE
Holders' Meetings and Consents
Section 9.01. Purposes for Which Meeting May Be Called.......................................................... 64
Section 9.02. Call of Meeting by Trustee........................................................................ 65
Section 9.03. Call of Meetings by Company or Holders............................................................ 65
Section 9.04. Who May Attend and Vote at Meetings............................................................... 66
Section 9.05. Regulations May Be Made by Trustee................................................................ 66
Section 9.06. Manner of Voting at Meetings and Record to Be Kept................................................ 67
Section 9.07. Written Consent in Lieu of Meetings............................................................... 67
Section 9.08. No Delay of Rights by Meeting..................................................................... 67
ARTICLE TEN
Supplemental Indentures
Section 10.01. Purposes for Which Supplemental Indentures May Be Entered into Without Consent of Holders......... 68
Section 10.02. Modification of Indenture with Consent of Holders of a Majority in Principal Amount
of Securities................................................................................ 70
Section 10.03. Effect of Supplemental Indentures................................................................. 71
Section 10.04. Securities May Bear Notation of Changes by Supplemental Indentures................................ 72
ARTICLE ELEVEN
Consolidation, Merger, Sale, Conveyance or Lease
Section 11.01. Company May Consolidate, etc., on Certain Terms................................................... 72
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 11.02. Successor Corporation to Be Substituted........................................................... 73
Section 11.03. Opinion of Counsel to Be Given Trustee............................................................ 73
ARTICLE TWELVE
Satisfaction and Discharge of Indenture; Unclaimed Moneys
Section 12.01. Satisfaction and Discharge of Indenture........................................................... 74
Section 12.02. Defeasance and Discharge of Securities or Certain Obligations..................................... 74
Section 12.03. Application by Trustee of Funds Deposited for Payment of Securities............................... 78
Section 12.04. Repayment of Moneys Held by Paying Agent.......................................................... 79
Section 12.05. Repayment of Moneys Held by Trustee............................................................... 79
ARTICLE THIRTEEN
Immunity of Incorporators, Stockholders, Officers, Directors and Employees
Section 13.01. Incorporators, Stockholders, Officers, Directors and Employees of Company Exempt from
Individual Liability......................................................................... 79
ARTICLE FOURTEEN
Miscellaneous Provisions
Section 14.01. Successors and Assigns of Company Bound by Indenture.............................................. 80
Section 14.02. Acts of Board, Committee or Officer of Successor Corporation Valid................................ 80
Section 14.03. Required Notices or Demands....................................................................... 80
Section 14.04. Indenture and Securities to Be Construed in Accordance with the Laws of the State of New York..... 81
Section 14.05. Officers' Certificate and Opinion of Counsel to Be Furnished upon Application or Request by the
Company...................................................................................... 81
Section 14.06. Payments Due on Non-Business Days................................................................. 82
Section 14.07. Moneys of Different Currencies to Be Segregated................................................... 82
Section 14.08. Payment to Be in Proper Currency.................................................................. 82
Section 14.09. Provisions Required by Trust Indenture Act to Control............................................. 83
Section 14.10. Indenture May Be Executed in Counterparts......................................................... 83
Section 14.11. Separability Clause............................................................................... 83
</TABLE>
<PAGE>
INDENTURE, dated as of the 22nd day of May, 1998 between Hussmann
International, Inc., a corporation incorporated under the laws of Delaware (the
"Company"), and The Bank of New York, a New York banking corporation (the
"Trustee").
WHEREAS, the Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
debentures, notes and other evidences of indebtedness (hereinafter referred to
as the "Securities"), to be issued in one or more series in an unlimited amount
as provided in this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid
agreement 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, the Company and the Trustee mutually covenant
and agree, for the equal and proportionate benefit of the respective Holders
from time to time of the Securities, and of the Coupons, if any, appertaining
thereto, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. CERTAIN TERMS DEFINED. The terms defined in this
---------------------
Section 1.01 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section 1.01:
"Authorized Newspaper" shall mean a newspaper printed in the English
--------------------
language or official language of the country of publication and customarily
published at least once a day on each business day in each calendar week and of
general circulation in the place or places of publication, whether or not such
newspaper is published on Saturdays, Sundays and legal holidays. Whenever,
under the provisions of this Indenture, two or more publications of a notice or
other communication are required or permitted, such publications may be in the
same or different Authorized Newspapers. If, because of temporary or permanent
suspension of publication or general circulation of any newspaper or for any
other reason, it is impossible or impracticable to publish any notices required
by this Indenture in the manner herein provided, then such publication in lieu
thereof or such other notice as shall be made with the approval of the Trustee
shall constitute a sufficient publication of such notice.
"Bankruptcy Law" shall mean Title 11 of the United States Code or any
--------------
similar federal or state law for the relief of debtors.
"Board of Directors" when used with reference to the Company, shall
------------------
mean the Board of Directors of the Company or any committee of such Board of
Directors authorized to act on its behalf with respect to any particular matter.
<PAGE>
"Business Day" shall mean any day other than a Saturday or Sunday and
------------
other than a day on which banking institutions in New York, New York or any
other jurisdiction in which the Paying Agent is being utilized, are authorized
or obligated by law or executive order to close or, with reference to any
Securities of any series, as set forth in the instrument establishing the series
and in the Securities of such series.
"Certified Board Resolution" shall mean one or more resolutions
--------------------------
certified by the Secretary or any 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.
"Company" shall mean Hussmann International, Inc. and, subject to the
-------
provisions of Article Eleven, shall mean its successors and assigns from time to
time hereafter.
"Company Direction" or a "Company Request" shall mean a written
----------------- ---------------
direction or request of the Company, signed by its Chairman, President, Chief
Executive Officer, any Executive Vice President, Senior Vice President or Vice
President and by its Secretary, any Assistant Secretary, its Treasurer, or any
Assistant Treasurer.
"Consolidated Net Tangible Assets" shall mean the excess of tangible
--------------------------------
assets over total liabilities of the Company and its consolidated Subsidiaries,
as determined from time to time in accordance with generally accepted accounting
principles consistently applied.
"Consolidated Net Worth" shall mean the excess of assets over total
----------------------
liabilities of the Company and its consolidated Subsidiaries plus Minority
Interests, as determined from time to time in accordance with generally accepted
accounting principles consistently applied.
"Corporate Trust Office" or other similar term, shall mean the
----------------------
principal corporate trust office of the Trustee, at which at any particular time
its corporate trust business shall be administered, or, if no such office is
maintained, such other office of the Trustee as shall be designated. The
Corporate Trust Office on the date hereof is located at 101 Barclay Street,
Floor 21 West, New York, New York 10286.
"Coupon" shall mean any interest coupon appertaining to a Security.
------
"Depositary" shall mean, with respect to the Securities of any series
----------
issuable or issued in whole or in part in the form of one or more Global
Securities, the person designated as Depositary by the Company pursuant to
Section 2.01 until a successor Depositary shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Depositary" shall mean
or include each person who is then a Depositary hereunder, and if at any time
there is more than one such person, "Depositary" as used with respect to the
Securities of any such series shall mean the Depositary with respect to the
Securities of that series.
"Dollars and $" shall mean lawful money of the United States of
-------------
America.
"Event of Default" shall mean any event specified in Section 6.01,
----------------
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
<PAGE>
"Global Security" shall mean a Security evidencing all or part of a
---------------
series of Securities issued to, and registered in the name of, the Depositary
for such series (or its nominee) in accordance with Section 2.03.
"Government Obligations" with respect to any series of Securities
----------------------
shall mean (i) direct noncallable obligations of the government which issued the
currency in which the Securities of that series are denominated or (ii)
noncallable obligations the payment of the principal of and interest on which is
fully guaranteed by such government and which, in either case, are full faith
and credit obligations of such government.
"Holder", with respect to a registered Security, shall mean any person
------
in whose name such Security shall be registered on the Security Register, and,
with respect to an unregistered Security, shall mean the bearer thereof or any
Coupon appertaining thereto.
"Indenture" shall mean this instrument as originally executed or, if
---------
amended or supplemented as herein provided, as so amended or supplemented, and
shall include the terms and forms of particular series of Securities established
as contemplated hereunder.
"Interest Payment Date" shall mean the date on which an installment of
---------------------
interest on any series of Securities shall become due and payable, as therein or
herein provided.
"Maturity" when used with respect to any Security shall mean the date
--------
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Minority Interest" shall mean any shares of stock of any class of a
-----------------
Subsidiary (other than directors' qualifying shares) that are not owned by the
Company or any Subsidiary.
"Officers' Certificate" shall mean a certificate of the Company,
---------------------
signed by its Chairman, President, Chief Executive Officer, any Executive Vice
President, Senior Vice President or Vice President and by its Secretary, any
Assistant Secretary, its Treasurer or any Assistant Treasurer, delivered to the
Trustee. Each such certificate shall include (except as otherwise provided in
this Indenture) the statements provided for in Section 14.05.
"Opinion of Counsel" shall mean an opinion in writing signed by legal
------------------
counsel, who may be an employee of, or counsel to, the Company. Each such
opinion shall include (except as otherwise provided in this Indenture) the
statements provided for in Section 14.05.
"Original Issue Discount Security" shall mean 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 Stated Maturity thereof
pursuant to Section 6.02.
"Outstanding" when used with reference to Securities of any series,
-----------
subject to the provisions of Section 8.04, shall mean, as of any particular
time, all Securities of such series authenticated by the Trustee and delivered
under this Indenture, except:
(a) Securities of such series theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
<PAGE>
(b) Securities of such series paid pursuant to Section 2.09 or
Securities of such series or portions thereof for the payment or redemption
of which moneys in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or shall
have been set aside and segregated in trust by the Company (if the Company
shall act as its own paying agent); provided that, if such Securities or
portions thereof are to be redeemed, notice of such redemption shall have
been given as provided in Article Three or provision satisfactory to the
Trustee shall have been made for giving such notice;
(c) Securities of such series in lieu of or in substitution for which
other Securities shall have been authenticated and delivered pursuant to
this Indenture, other than Securities as to which the Trustee receives
proof satisfactory to it that such Security is held by a bona fide
purchaser in whose hands such Security is a legal, valid and binding
obligation of the Company; and
(d) Securities which have been defaced pursuant to Section 12.02;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Securities of any or all series then Outstanding have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, the principal amount of an Original Issue Discount Security which
shall be deemed to be Outstanding for such purposes shall be the portion of the
principal amount thereof that could be declared to be due and payable upon the
occurrence of an Event of Default and the continuation thereof pursuant to the
terms of such Original Issue Discount Security as of such time.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
"Principal Property" shall mean any manufacturing plant or warehouse
------------------
owned or leased by the Company or any Subsidiary and located within the United
States of America, whether owned or leased on the date hereof or hereafter, the
gross book value of which exceeds 2% of Consolidated Net Worth, other than
manufacturing plants and warehouses which the Board of Directors by resolution
declares are not of material importance to the total business conducted by the
Company and its Restricted Subsidiaries as an entirety and which, when taken
together with all other plants and warehouses as to which such a declaration has
been so made, is so declared by the Board of Directors to be not of material
importance to the total business conducted by the Company and its Restricted
Subsidiaries as an entirety.
"Record Date" as used with respect to any Interest Payment Date shall
-----------
mean the close of business on the 15th day of the month preceding the month in
which an Interest Payment Date occurs, if such Interest Payment Date is the
first day of such month, or the first day of the month in which an Interest
Payment Date occurs, if such Interest Payment Date is the 15th day of such
month, in each case whether or not a Business Day, or such other dates with
respect to a particular series of Securities as may be specified in the
instrument establishing such series.
<PAGE>
"Responsible Officer" when used with respect to the Trustee shall mean
-------------------
any vice president, any assistant vice president, any assistant secretary, any
assistant treasurer 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 his or her knowledge of and
familiarity with the particular subject.
"Restricted Subsidiary" shall mean any Subsidiary which owns or leases
---------------------
a Principal Property.
"Security or Securities" shall have the meaning stated in the recital
----------------------
of this Indenture and shall more particularly mean any Security or such
Securities, as the case may be, authenticated and delivered pursuant to this
Indenture.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"SEC" shall mean the United States Securities and Exchange Commission.
---
"Sinking Fund" shall mean any fund established by the Company for
------------
redemption of the Securities of any series prior to Stated Maturity.
"Stated Maturity", when used with respect to any Security, shall mean
---------------
the date on which the last payment of principal of such Security is due and
payable in accordance with the terms thereof.
"Subsidiary" shall mean any corporation, association or other business
----------
entity of which at least a majority of the outstanding securities or equity
interests having ordinary voting power to elect a majority of the board of
directors of such corporation or Persons performing similar functions (whether
or not any other class of securities or equity interests has or might have
voting power by reason of the happening occurrence a contingency) is at the time
owned or controlled, directly or indirectly, by the Company, or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
"Trustee" shall mean the Trustee named in the first paragraph of this
-------
Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions hereof, and thereafter "Trustee" shall mean or include all
Trustees hereunder, and, subject to the provisions of Article Seven, shall also
include its successors and assigns, and, unless the context otherwise requires,
shall also include any co-trustee or co-trustees or separate trustee or trustees
appointed pursuant to Section 7.15.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
-------------------
amended, as in force on the date of this Indenture; provided, however, that in
the event that such Act is amended after such date, "Trust Indenture Act" shall
mean, to the extent required by such amendment or the context of this Indenture,
the Trust Indenture Act of 1939 as so amended.
SECTION 1.02. OTHER DEFINITIONS. The terms listed below in this
-----------------
Section 1.02 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all
<PAGE>
purposes of this Indenture and any indenture supplemental hereto shall have the
respective meanings specified in the sections of this Indenture set opposite the
particular term:
Defined in
Terms Section
----- --------
Debt...................................... 4.06
Defaulted Interest........................ 2.03
Funded Debt............................... 4.07
Liens..................................... 4.06
Mandatory Sinking Fund payment............ 3.04
Market Exchange Rate...................... 14.08
Optional Sinking Fund payment............. 3.04
Sale and Lease-Back Transaction........... 4.07
Security Register and Security Registrar.. 2.06
Sinking Fund payment date................. 3.04
Specified Currency........................ 14.08
Value..................................... 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
-------------------------------------------------
Whenever this Indenture refers to a provision of the Trust Indenture Act, the
provision is incorporated by reference in and made a part of this Indenture.
All terms not defined in this Article One which are defined in the Trust
Indenture Act, or which are by reference therein defined in the Securities Act
(except as herein otherwise expressly provided and unless the context otherwise
requires), shall have the meanings assigned to such terms in the Trust Indenture
Act and in the Securities Act as in force as of the date of this Indenture. The
following Trust Indenture Act terms used in the provisions of the Trust
Indenture Act incorporated by reference in this Indenture shall have the
following meanings:
"Commission" shall mean the SEC.
----------
"Indenture Securities" shall mean the Securities.
--------------------
"Indenture to Be Qualified" shall mean this Indenture.
-------------------------
"Indenture Trustee or Institutional Trustee" shall mean the Trustee.
------------------------------------------
"Obligor" with reference to Indenture Securities shall mean the
-------
Company.
<PAGE>
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION, REGISTRATION OF
TRANSFER AND EXCHANGE OF SECURITIES
SECTION 2.01. AMOUNT UNLIMITED; ESTABLISHMENT OF 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; and each such
series shall rank pari passu with all other unsecured and unsubordinated
---- -----
indebtedness of the Company. All Securities of any one series shall be
substantially identical except as to denomination and except as the Company in
an Officers' Certificate delivered pursuant to this Section 2.01 or in any
supplemental indenture may otherwise provide. The Securities may bear interest
at such lawful rate or rates, from such date or dates, shall mature at such time
or times, may be redeemable at such price or prices and upon such terms,
including, without limitation, out of proceeds from the sale of other
Securities, or other indebtedness of the Company, and may contain and/or be
subject to such other terms and provisions as shall be determined by the Company
prior to the issuance of such Securities in accordance with the authority
granted in one or more resolutions of the Board of Directors and set forth in an
Officers' Certificate or a supplemental indenture, which instrument shall
establish with respect to each series of Securities:
(1) the designation of the Securities of such series, which shall
distinguish the Securities of one series from all other Securities;
(2) the limit upon the aggregate principal amount at Stated Maturity
of the Securities of such series which may be authenticated and delivered
under this Indenture (not including Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other
Securities of such series pursuant to Section 2.06, 2.07, 2.08, 3.02 or
10.04);
(3) the rate or rates at which the Securities of such series shall
bear interest, if any, or the formula or method by which interest shall
accrue, the dates from which interest shall accrue, the Interest Payment
Dates on which such interest shall be payable, and, in the case of
registered Securities, the Record Date for the interest payable on any
Interest Payment Date;
(4) the Stated Maturity of the Securities of such series;
(5) the period or periods within which, the price or prices at which,
and the terms and conditions upon which, the Securities of such series may
be redeemed, in whole or in part, at the option of the Company;
(6) the obligation, if any, of the Company to redeem or purchase
Securities of such series pursuant to a sinking, purchase or analogous fund
or at the option of the holder thereof and the period or periods within
which, the price or prices at which, and
<PAGE>
the terms and conditions upon which, the Securities of such series shall be
redeemed, or purchased, in whole or in part, pursuant to such obligation;
(7) if other than the principal amount at Stated Maturity, the
portion of the principal amount at Stated Maturity of the Securities of
such series which shall be payable upon declaration of acceleration of the
maturity thereof pursuant to Section 6.02;
(8) if other than denominations of $1,000, if registered, and $5,000,
if unregistered, and any integral multiple of such denominations for
Securities denominated in Dollars, the denominations in which the
Securities of such series shall be issuable;
(9) the form of Security to be used to evidence ownership of
Securities of such series;
(10) any terms with respect to conversion of the Securities of such
series, warrants attached thereto or terms pursuant to which warrants may
exist;
(11) the place or places where the principal of (and premium, if any)
and interest, if any, on the Securities of such series shall be payable;
(12) any additional offices or agencies maintained pursuant to Section
4.03;
(13) whether the Securities of such series shall be issued as
registered Securities or as unregistered Securities, with or without
Coupons; whether unregistered Securities may be exchanged for registered
Securities of such series and whether registered Securities may be
exchanged for unregistered Securities of such series (if permitted by
applicable laws and regulations) and the circumstances under which and the
place or places where any such exchanges, if permitted, may be made; and
whether the Securities of such series shall be issued in whole or in part
in the form of one or more Global Securities and, in such case, the
Depositary for such Global Security or Securities and whether any Global
Securities of such series shall be issuable initially in temporary form,
and whether any Global Securities of such series shall be issuable in
definitive form, with or without Coupons, and, if so, whether beneficial
owners of interests in any such definitive Global Security may exchange
such interests for Securities of such series and the circumstances under
which and the place or places where any such exchange may occur;
(14) if other than Dollars, the currency or currencies, or currency
unit or units in which the Securities of such Series shall be denominated
and in which payment of the principal of (and premium, if any) and
interest, if any, on any of such Securities shall be payable;
(15) if the principal of (and premium, if any) and interest, if any,
on any of the Securities of such series are to be payable at the election
of the Company or a Holder thereof or under some or all other
circumstances, in a currency or currencies, or currency unit or units other
than that in which the Securities are denominated, the period or periods
within which, and the terms and conditions upon which, such election may be
made, or the other circumstances under which
<PAGE>
any of the Securities are to be so payable, and any provision requiring the
Holder to bear currency exchange costs by deduction from such payments;
(16) if the amount of payments of principal (and premium, if any) and
interest, if any, on any of the Securities of such series may be determined
with reference to a currency, currency unit, commodity or financial or non-
financial index or indices, then the manner in which such amounts shall be
determined;
(17) whether and under what circumstances and with what procedures and
documentation the Company will pay additional amounts on any of the
Securities and Coupons, if any, of such series to any holder who is not a
U.S. Person (including a definition of such term), in respect of any tax,
assessment or governmental charge withheld or deducted and, if so, whether
the Company will have the option to redeem such Securities rather than pay
additional amounts (and the terms of any such option);
(18) the Person to whom any interest on any registered Security of
such series shall be payable, if other than the Person in whose name that
Security is registered at the close of business on the Record Date for such
interest, the manner in which, or the Person to whom, any interest on any
unregistered Security of such series shall be payable, if otherwise than
upon presentation and surrender of the Coupons appertaining thereto as they
severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary Global Security on an Interest Payment Date
will be paid if other than in the manner provided in Section 4.02;
(19) whether Section 12.02 shall not apply to the Securities of such
series; and
(20) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series need not be issued at the same time,
and unless otherwise provided, a series may be reopened for issuance of
additional Securities of such series.
SECTION 2.02. FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE OF
-----------------------------------------------
AUTHENTICATION. The Securities of each series shall be substantially in the
- --------------
form established by or pursuant to one or more resolutions of the Board of
Directors, with such specific terms, additions or omissions as may be determined
pursuant to an Officers' Certificate or a supplemental indenture as contemplated
in Section 2.01 hereof, in each case with such letters, numbers or other marks
of identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of the 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. The Trustee's certificate of authentication to
be borne by such Securities shall be in the form set forth below:
(Form of Trustee's Certificate of Authentication)
<PAGE>
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By______________________
Authorized Signatory
SECTION 2.03. GLOBAL SECURITIES. If Securities of a series are
-----------------
issuable in whole or in part as Global Securities pursuant to Section 2.01,
then, notwithstanding clause (8) of Section 2.01 and the provisions of Section
2.04, such Global Securities shall represent such of the Outstanding Securities
of such series as shall be specified therein and may provide that they shall
represent the aggregate amount of Outstanding Securities from time to time
endorsed thereon and that the aggregate amount of Outstanding Securities
represented thereby may from time to time be reduced to reflect exchanges or
redemptions. Any endorsement of a Global Security 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 therein or in the Company
Direction to be delivered to the Trustee pursuant to Section 2.04 or Section
2.07. Subject to the provisions of Section 2.04 and, if applicable, Section
2.07, the Trustee shall deliver and redeliver any Global Security in the manner
and upon written instructions given by the Person or Persons specified therein
or in the applicable Company Direction. If a Company Direction pursuant to
Section 2.04 or 2.07 has been, or simultaneously is, delivered, any instructions
by the Company with respect to endorsement or delivery or redelivery of a Global
Security shall be in writing but need not comply with Section 14.05 and need not
be accompanied by an Opinion of Counsel.
Notwithstanding the provisions of Sections 2.02 and 4.02, unless
otherwise specified pursuant to Section 2.01, payment of principal of (and
premium, if any) and interest, if any, on any Global Security shall be made to
the Person or Persons specified therein.
If at any time the Depositary for the Global Securities of a series
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Securities of such series or if at any time the Depositary for
the Global Securities of such series shall no longer be eligible to serve as
Depositary, the Company shall appoint a successor Depositary with respect to the
Global Securities of such series. If a successor Depositary for the Global
Securities of such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such ineligibility, the
Company's election pursuant to Section 2.01 that such Securities be represented
by one or more Global Securities shall no longer be effective with respect to
the Global Securities of such series and the Company shall execute, and the
Trustee, upon receipt of a Company Direction for the authentication and delivery
of definitive Securities of such series, shall authenticate and make available
for delivery Securities of such series in definitive form in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such series in exchange for such Global Security or
Securities.
<PAGE>
The Company may at any time and in its sole discretion determine that
the Securities of any series or portion thereof issued in the form of one or
more Global Securities shall no longer be represented by such Global Security or
Securities. In such event the Company will execute, and the Trustee, upon
receipt of a Company Direction for the authentication and delivery of definitive
Securities of such series in exchange for such Global Security or Securities,
will authenticate and make available for delivery Securities of such series in
definitive form and in an aggregate principal amount equal to the principal
amount of such Global Security or Securities being exchanged.
Upon the exchange of a Global Security for Securities in definitive
form, such Global Security shall be canceled by the Trustee. Registered
Securities issued in exchange for a Global Security pursuant to this Section
shall be registered in such names and in such authorized denominations as the
Depositary for such Global Security, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such registered Securities to, or upon the order of, the Persons
in whose names such Securities are so registered.
Unless otherwise specified by the Company pursuant to Section 2.01, a
Global Security representing all or a portion of the Securities of a series may
not be transferred except as a whole by the Depositary for such series to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
Depositary.
None of the Company, the Trustee or any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
SECTION 2.04. DENOMINATION, AUTHENTICATION AND DATING OF SECURITIES.
-----------------------------------------------------
The Securities of each series may be issued as registered Securities
or, if provided by the terms of the instrument establishing such series of
Securities, as unregistered Securities, with or without Coupons. The Securities
of each series, if registered, shall be issuable in denominations of $ 1,000 and
any integral multiple of $ 1,000, unless otherwise provided by the terms of the
instrument establishing such series of Securities. Each Security shall be dated
as of the date of its authentication.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Direction for
authentication and delivery of such Securities, and the Trustee shall thereupon
authenticate and make available for delivery such Securities in accordance with
such Company Direction. Prior to the issuance of Securities of any series, the
Trustee shall be entitled to receive, and subject to Section 7.01, shall be
fully protected in relying upon:
(1) a Certified Board Resolution pursuant to which the issuance of the
Securities of such series is authorized;
<PAGE>
(2) an executed supplemental indenture, if any;
(3) an Officers' Certificate, if any, delivered in accordance with
Section 2.01 and an Officers' Certificate as to the absence of any Event of
Default or any event which with notice or lapse of time or both could
become an Event of Default; and
(4) at the option of the Company, one of the following: an Opinion of
Counsel or a letter addressed to the Trustee permitting the Trustee to
conclusively rely on an Opinion of Counsel, substantially to the effect
that:
(i) the form and the terms of the Securities of such series
have been established in conformity with the provisions of this
Indenture;
(ii) the Securities of such series have been duly authorized,
and, when the Securities of such series and the Coupons, if any,
appertaining thereto shall have been executed by the Company and
authenticated by the Trustee in accordance with the provisions of this
Indenture and delivered to and duly paid for by the purchasers
thereof, such Securities will have been duly issued under this
Indenture and will be valid and legally binding obligations of the
Company enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of creditors'
rights and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law), and
will be entitled to the benefits of this Indenture;
(iii) no consent, approval, authorization, order, registration
or qualification of or with any governmental agency or body having
jurisdiction over the Company is required for the execution and
delivery of the Securities of such series by the Company, except such
as have been obtained, but no opinion need be expressed as to
provincial or state securities or Blue Sky laws; and
(iv) the registration statement, if any, relating to the
Securities of such series and any amendments thereto has become
effective under the Securities Act, and to the best knowledge of such
counsel, no stop order suspending the effectiveness of such
registration statement, as amended, has been issued and no proceeding
for that purpose have been instituted or threatened;
In addition, such Opinion of Counsel shall address such other matters
as the Trustee may reasonably request.
The Trustee shall have the right to decline to authenticate and
deliver any Securities of such series (A) if a Responsible Officer of the
Trustee, being advised by counsel, determines that such action may not lawfully
be taken; or (B) if the Trustee in good faith shall determine that such action
would expose the Trustee to personal liability to Holders of Outstanding
Securities of any series.
So long as there is no existing default in the payment of interest on
registered Securities of any series, all such Securities authenticated by the
Trustee after the close of
<PAGE>
business on the Record Date for the payment of interest on any Interest Payment
Date relating to such Record Date and prior to such Interest Payment Date shall
bear interest from such Interest Payment Date; provided, however, that if and to
the extent that the Company shall default in the interest due on such Interest
Payment Date, then any such Securities shall bear interest from the next
preceding Interest Payment Date relating to such Security with respect to which
interest has been paid or duly provided for on such Securities, or if no
interest has been paid or duly provided for on such Securities, from the date
from which interest shall accrue as such date is set forth in the instrument
establishing the terms of such Securities.
The Person in whose name any Security is registered at the close of
business on any Record Date with respect to any Interest Payment Date shall be
entitled to receive the interest payable on such Interest Payment Date
notwithstanding the cancellation of such Security upon any registration and
transfer or exchange thereof subsequent to such Record Date and prior to such
Interest Payment Date, except if and to the extent the Company shall default in
the payment of the interest due on such Interest Payment Date, in which case
such defaulted interest (herein called "Defaulted Interest") shall be paid to
the Persons in whose names outstanding Securities of such series are registered
at the close of business on a subsequent record date, which shall not be less
than five Business Days preceding the date of payment of such Defaulted Interest
established for such purpose by notice given by mail by or on behalf of the
Company to Holders of such Securities not less than 15 days preceding such
subsequent record date. Such notice shall be given to the Persons in whose names
such Outstanding Securities of such series are registered at the close of
business on the third business day preceding the date of the mailing of such
notice.
SECTION 2.05. EXECUTION OF SECURITIES. The Securities and Coupons
-----------------------
appertaining thereto, if any, shall be signed on behalf of the Company by its
Chairman, President, Chief Executive Officer, any Executive Vice President,
Senior Vice President or Vice President and by its Secretary or any Assistant
Secretary under its corporate seal. Such signatures may be the manual or
facsimile signatures of the present or any future such authorized officers and
may be imprinted or otherwise reproduced on the Securities and such Coupons. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities and such
Coupons.
Only such Securities as shall bear thereon a Trustee's certificate of
authentication substantially in the form provided in Section 2.04 (or Section
2.12, if applicable), signed manually by the Trustee, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. The
Trustee's certificate of authentication on any Security executed by the Company
shall be conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder.
In case any officer of the Company who shall have signed any of the
Securities or such Coupons shall cease to be such officer before the Securities
or such Coupons so signed shall have been authenticated by the Trustee and
delivered or disposed of by the Company, such Securities and such Coupons
nevertheless may be authenticated and delivered or disposed of as though the
officer who signed such Securities and such Coupons had not ceased to be such
officer of the Company; and any Security or such Coupons may be signed on behalf
of the Company by such Persons as, at the actual date of the execution of such
Security or such
<PAGE>
Coupons, shall be the proper officers of the Company, although at the date of
such Security or such Coupons or of the execution of this Indenture any such
Person was not such officer.
SECTION 2.06. REGISTRATION OF TRANSFER AND EXCHANGE. The Company
-------------------------------------
shall keep, at an office or agency maintained by the Company in accordance with
the provisions of Section 4.03, a register for each series of registered
Securities (such register being herein referred to as the "Security Register"),
in which, subject to such reasonable regulations as it may prescribe, the
Company shall register Securities of such series and shall register the transfer
of such Securities as in this Article Two provided. At all reasonable times the
Security Register shall be open for inspection by the Trustee. Subject to
Sections 2.01 and 2.03, upon due presentment for registration of transfer of any
such Security at such office or agency, or such other offices or agencies as the
Company may designate, the Company shall execute and the Trustee shall
authenticate and make available for delivery in the name of the transferee or
transferees a new Security or Securities of authorized denominations, of the
same series and of like aggregate principal amount at Stated Maturity.
Unless and until otherwise determined by or pursuant to one or more
resolutions of the Board of Directors, the Security Register for the purpose of
registration, exchange or registration of transfer of registered Securities
shall be kept at the Corporate Trust Office and, for this purpose, the Trustee
shall be designated the "Security Registrar".
Subject to Sections 2.01 and 2.03, at the option of the Holder,
Securities of any series may be exchanged for Securities of the same series of
like aggregate principal amount at Stated Maturity and of other authorized
denominations. Securities to be so exchanged shall be surrendered at the offices
or agencies to be maintained by the Company as provided in Section 4.03, and the
Company shall execute and the Trustee shall authenticate and make available for
delivery in exchange therefor the Security or Securities which the Holder making
the exchange shall be entitled to receive.
All Securities presented or surrendered for registration of transfer,
exchange, redemption or payment shall (if so required by the Company or the
Security Registrar) be duly endorsed or be accompanied by a written instrument
or instruments of transfer, in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder or his attorney duly authorized in
writing.
No service charge shall be made for any exchange or registration of
transfer 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 relation
thereto.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Securities of any series for a period of 15 days next
preceding the mailing of a notice of redemption of Securities of such series to
be redeemed, or (b) to register the transfer of or exchange any Securities of
such series selected, called or being called for redemption in whole or in part
except, in the case of any Security to be redeemed in part, the portion thereof
not so to be redeemed.
SECTION 2.07. TEMPORARY SECURITIES. Pending the preparation of
--------------------
definitive Securities, the Company may execute and make available for delivery
and the Trustee, upon
<PAGE>
Company Direction, shall authenticate and make available for delivery temporary
Securities (printed, lithographed, or typewritten), of any authorized
denomination, and substantially in the form of the definitive Securities, but
with such omissions, insertions and variations as may be appropriate for
temporary Securities, all as may be determined by the Company. Temporary
Securities may be issued without a recital of the specific redemption prices, if
any, applicable to such Securities, and may contain such reference to any
provisions of this Indenture as may be appropriate. Every temporary Security
shall be executed by the Company and be authenticated by the Trustee upon the
same conditions and in substantially the same manner, and with like effect, as
the definitive Securities. The Company shall execute and furnish definitive
Securities as soon as practicable and thereupon any or all temporary Securities
may be surrendered in exchange therefor at the Corporate Trust Office, and the
Trustee shall authenticate and make available for delivery in exchange for such
temporary Securities a like aggregate principal amount at Stated Maturity of
definitive Securities of the same series. Until so exchanged, the temporary
Securities shall be entitled to the same benefits under this Indenture as
definitive Securities authenticated and delivered hereunder.
SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES. In
-----------------------------------------------
case any temporary or definitive Security and, in the case of a definitive
Security, Coupons appertaining thereto, if any, shall become mutilated or be
destroyed, lost or stolen, the Company in its discretion may execute, and upon a
Company Direction the Trustee shall authenticate and make available for
delivery, a new Security or such Coupons of the same series bearing a number not
contemporaneously Outstanding, in exchange and substitution for the mutilated
Security or such Coupons, or in lieu of and in substitution for the Security or
such Coupons so destroyed, lost or stolen. In every case, the applicant for a
substituted Security or such Coupons shall furnish to the Company and to the
Security Registrar and any paying agent, such security or indemnity as may be
required by them to save each of them harmless from all risk, however remote,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company and to the Security Registrar and any paying agent,
evidence to their satisfaction of the destruction, loss or theft of such
Security or such Coupons and of the ownership thereof. The Trustee may
authenticate any such substituted Security and deliver the same upon Company
Direction. Upon the issuance of any substituted Security or such Coupons, 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 connected therewith. In case any Security which has matured or is about
to mature or which has been called for redemption shall become mutilated or be
destroyed, lost or stolen, the Company may, instead of issuing a substituted
Security, pay or authorize the payment of the same (without surrender thereof
except in the case of a mutilated Security) if the applicant for such payment
shall furnish the Company and any paying agent with such security or indemnity
as either may require to save it harmless from all risk, however remote, and, in
case of destruction, loss or theft, evidence to the satisfaction of the Company
of the destruction, loss or theft of such Security and of the ownership thereof.
Every substituted Security of any series or Coupon issued pursuant to
the provisions of this Section 2.08 by virtue of the fact that any Security or
Coupon is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
or Coupon shall be found at any time, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Securities
of such series or Coupons duly issued and delivered hereunder. All Securities
and Coupons shall be held and owned upon the express condition that the
foregoing provisions are exclusive with
<PAGE>
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities and Coupons, and shall preclude (to the extent lawful) any and all
other rights or remedies, notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.09. CANCELLATION OF SURRENDERED SECURITIES. All Securities
--------------------------------------
surrendered for payment, redemption, registration of transfer or exchange, and
all Coupons surrendered for payment, shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee for cancellation by it, or, if
surrendered to the Trustee, shall be canceled by it, and all Securities
delivered to the Trustee in discharge or satisfaction in whole or in part of any
Sinking Fund payment (referred to in Section 3.04) shall be canceled by the
Trustee and no Securities shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. By a Company Request the
Trustee shall deliver to the Company canceled Securities and Coupons held by the
Trustee. If the Company shall acquire any of the Securities or Coupons, however,
such acquisition shall not operate as a redemption or satisfaction of the
indebtedness or rights represented by such Securities or Coupons unless and
until the same are delivered or surrendered to the Trustee for cancellation.
SECTION 2.10. PROVISIONS OF INDENTURE AND SECURITIES FOR THE SOLE
---------------------------------------------------
BENEFIT OF THE PARTIES AND THE HOLDERS. Nothing in this Indenture or in the
- --------------------------------------
Securities, expressed or implied, shall give or be construed to give to any
Person, other than the parties hereto and the Holders, any legal or equitable
right, remedy or claim under or in respect of this Indenture, or under any
covenant, condition or provision herein contained, all its covenants, conditions
and provisions being for the sole benefit of the parties hereto and the Holders.
SECTION 2.11. COMPUTATION OF INTEREST. Except as otherwise specified
-----------------------
as contemplated by Section 2.01 for 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.
SECTION 2.12. AUTHENTICATING AGENTS. The Trustee shall, if requested
---------------------
pursuant to a Company Request, promptly appoint an agent or agents of the
Trustee who shall have authority to authenticate Securities of any series in the
name and on behalf of the Trustee. Such appointment by the Trustee shall be
evidenced by a certificate executed by a Responsible Officer of the Trustee
delivered to the Company prior to the effectiveness of such appointment
designating such agent or agents and stating that all appropriate corporate
action has been taken by the Trustee in connection with such appointment.
Wherever reference is made in this Indenture to the authentication of Securities
by the Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication on behalf of the Trustee by an
authenticating agent and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent.
Any such authenticating agent shall be an agent acceptable to the
Company and shall at all times be a corporation which is organized and doing
business under the laws of the United States of America or of any State,
authorized under such laws to act as authenticating agent, having a combined
capital and surplus of at least $1,000,000, and subject to supervision or
examination by federal or state authority.
<PAGE>
An authenticating agent may at any time resign with respect to one or
more series of Securities by giving written notice of resignation to the Trustee
and to the Company. The Trustee may at any time terminate the agency of an
authenticating agent with respect to one or more series of Securities by giving
written notice of termination to such authenticating agent and to the Company.
Upon receiving such notice of resignation or upon such termination, or in case
at any time an authenticating agent shall cease to be eligible in accordance
with the provisions of this Section, the Trustee promptly may appoint a
successor authenticating agent. 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 herein. No successor authenticating
agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each authenticating agent from time to
time reasonable compensation for its services under this Section.
The provisions of Sections 7.03, 7.04 and 7.05 shall be applicable to
any authenticating agent.
Pursuant to each appointment of an authenticating agent made under
this Section, the Securities of each series covered by such appointment may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in substantially the following form:
(ALTERNATE FORM OF TRUSTEE'S CERTIFICATE OF
AUTHENTICATION)
This is one of the Securities of the series designated herein referred
to in the Indenture.
THE BANK OF NEW YORK,
as Trustee
By_________________________________
Authenticating Agent
By_________________________________
Authorized Signatory
SECTION 2.13. COMPLIANCE WITH CERTAIN LAWS AND REGULATIONS. If any
--------------------------------------------
unregistered Securities are to be issued in any series of Securities, the
Company shall use reasonable efforts to provide for arrangements and procedures
designed pursuant to then applicable laws and regulations, if any, to ensure
that such unregistered Securities are sold or resold, exchanged, transferred and
paid only in compliance with such laws and regulations and without adverse
consequences to the Company, the Holders and the Trustee.
<PAGE>
SECTION 2.14. MEDIUM-TERM SECURITIES. Notwithstanding any contrary
----------------------
provision herein, if all Securities of a series are not to be originally issued
at one time, it shall not be necessary to deliver the Company Direction,
Officers' Certificate, supplemental indenture or Opinion of Counsel otherwise
required pursuant to Sections 2.01, 2.03, 2.04, 2.07 and Section 14.05 at or
prior to the time of authentication of each Security of such series if such
documents are delivered at or prior to the authentication upon original issuance
of the first Security of such series to be issued; provided that any subsequent
direction by the Company to the Trustee to authenticate Securities of such
series upon original issuance shall constitute a representation and warranty by
the Company that as of the date of such direction, the statements made in the
Officers' Certificate or supplemental indenture delivered pursuant to Section
2.01 shall be true and correct as if made on such date.
An Officers' Certificate or supplemental indenture, delivered pursuant
to this Section 2.14 in the circumstances set forth in the preceding paragraph,
may provide that Securities which are the subject thereof will be authenticated
and delivered by the Trustee on original issue from time to time upon the
telephonic or written order of Persons designated in such 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 Officers' Certificate or any applicable supplemental
indenture, such terms and conditions of the Securities as are specified in such
Officers' Certificate or supplemental indenture.
SECTION 2.15. CUSIP NUMBERS. The Company in issuing the Securities
-------------
of any series may use "CUSIP" numbers (if then generally in use), and, if so,
the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience
to Holders; provided that any such notice may state that no representation is
--------
made as to the correctness of such numbers either as printed on such Securities
or as contained in any notice of a redemption and that reliance may be placed
only on the other indemnification numbers printed on such Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers. The Company will promptly notify the Trustee of any change in the
"CUSIP" numbers.
ARTICLE THREE
REDEMPTION OF SECURITIES - SINKING FUND
SECTION 3.01. APPLICABILITY OF ARTICLE. The Company may become
------------------------
obligated, or reserve the right, to redeem and pay, prior to Stated Maturity,
all or any part of the Securities of any series, either by optional redemption,
Sinking Fund or otherwise, by provision therefor in the instrument establishing
such series of Securities pursuant to Section 2.01 or in the Securities of such
series. Redemption of any series shall be made in accordance with the terms of
such Securities and to the extent that this Article does not conflict with such
terms, in accordance with this Article.
SECTION 3.02. NOTICE OF REDEMPTION; SELECTION OF SECURITIES. In
----------------------------------------------
case the Company shall be obligated, or shall exercise the right, to redeem
Securities as provided for in the first sentence of Section 3.01, it shall fix a
date for redemption (unless, by the terms of the instrument establishing such
series of Securities or the terms of such Securities, such date is
<PAGE>
fixed) and the Company, or, upon a Company Request the Trustee, in the name of
and at the expense of the Company, shall give notice of such redemption to the
Holders of the Securities to be redeemed as a whole or in part, with respect to
registered Securities, by mailing a notice of such redemption not less than 30
nor more than 60 days prior to the date fixed for redemption to their last
addresses as they shall appear upon the Security Register and, with respect to
unregistered Securities, by publishing in an Authorized Newspaper notice of such
redemption on two separate days, each of which is not less than 30 nor more than
the 60 days prior to the date fixed for redemption. Any notice which is mailed
or published, as the case may be, in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
actually receives such notice. In any case, failure duly to give notice by mail,
or any defect in the notice, to the Holder of any registered Security of any
series designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Security of such
series.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impractical to mail notice of any event to Holders of
registered Securities when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
Each such notice of redemption shall specify the designation of the
series of the Securities to be redeemed (including CUSIP numbers), the date
fixed for redemption and the redemption price at which Securities are to be
redeemed, and shall state that payment of the redemption price of the Securities
or portions thereof to be redeemed will be made at the offices or agencies to be
maintained by the Company in accordance with the provisions of Section 4.03 upon
presentation and surrender of such Securities, that interest accrued to the date
fixed for redemption will be paid as specified in such notice, and that, on and
after such date, interest thereon or on the portions thereof to be redeemed will
cease to accrue. If less than all the Securities of any series are to be
redeemed, the notice to the Holders of Securities to be redeemed shall specify
the Securities to be redeemed. In case any Security is to be redeemed in part
only, such notice shall state the portion of the principal amount thereof to be
redeemed, and shall state that on and after the redemption date, upon surrender
of such Security, a new Security or Securities of the same series in authorized
denominations and in a principal amount at Stated Maturity equal to the
unredeemed portion thereof will be issued.
If less than all the Securities of like tenor and terms of any series
are to be redeemed, the Company shall give the Trustee written notice, at least
60 days (or such shorter period acceptable to the Trustee) in advance of the
date fixed for redemption, as to the aggregate principal amount at Stated
Maturity of Securities of such series to be redeemed, which shall be an integral
multiple of the minimum authorized denomination of such series, and thereupon
the Trustee shall select, in such manner as it shall deem appropriate and fair,
the Securities of such series to be redeemed in whole or in part and shall
thereafter promptly notify the Company in writing of the numbers of the
Securities so to be redeemed and, in the case of Securities to be redeemed in
part only, the principal amount at Stated Maturity so to be redeemed. If less
than all the Securities of unlike tenor and terms of a series are to be
redeemed, the particular Securities to be redeemed shall be selected by the
Company, and the Company shall notify the Trustee in writing thereof at least 45
days before the relevant redemption date.
<PAGE>
SECTION 3.03. WHEN SECURITIES CALLED FOR REDEMPTION BECOME DUE AND
----------------------------------------------------
PAYABLE. If the giving of notice of redemption shall have been completed as
- --------
provided in Section 3.02, the Securities or portions of Securities specified in
such notice shall become due and payable on the date and at the place stated in
such notice at the applicable redemption price, together with interest accrued
to the date fixed for redemption, and on and after such date fixed for
redemption (unless the Company shall default in the payment of such Securities
at the redemption price, together with interest accrued to the date fixed for
redemption) interest on the Securities or portions of Securities so called for
redemption shall cease to accrue. On presentation and surrender of such
Securities on or after the date fixed for redemption at the place of payment
specified in such notice, such Securities shall be paid and redeemed by the
Company at the applicable redemption price, together with interest accrued to
the date fixed for redemption; provided, however, that installments of interest
becoming due on the date fixed for redemption on Securities which are in
registered form shall be payable to the Holders of such Securities or of one or
more previous such Securities evidencing all or a portion of the same debt as
that evidenced by such particular Securities, registered as such on the relevant
Record Dates according to their terms and the provisions of Section 2.04.
Upon presentation of any Security which is redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the Holder of such Security, at the expense of the Company, a new
Security or Securities of the same series in authorized denominations and in a
principal amount at Stated Maturity equal to the unredeemed portion of the
Security so presented.
SECTION 3.04. SINKING FUND . In the event that the instrument
------------
establishing the terms of a particular series shall provide for a Sinking Fund,
the Company covenants that as and for a Sinking Fund for the redemption of
Securities of such series, so long as any of the Securities of such series are
Outstanding:
(a) It will pay to the Trustee or to a paying agent (or, if the
Company is acting as its own paying agent, segregate and hold in trust as
provided in Section 4.05) on or before each date set forth as a Sinking
Fund payment date in the instrument establishing such series, a sum in cash
sufficient to retire on each such date, at the Sinking Fund redemption
price provided for in such instrument and upon the conditions, if any,
applicable thereto as specified in such instrument, the principal amount of
such Securities as specified in such instrument. Each such date is herein
called a "Sinking Fund payment date", and each sum payable as provided in
this paragraph (a) is herein called a "mandatory Sinking Fund payment".
(b) If the instrument establishing any series of Securities so
provides, the Company may elect to pay to the Trustee or to a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold
in trust as provided in Section 4.05) on or before any Sinking Fund payment
date with respect to a particular series of Securities, an additional sum
in cash sufficient to retire on such Sinking Fund payment date, at the
Sinking Fund redemption price, up to any additional principal amount of
Securities set forth in such instrument. Any sum payable as provided in
this paragraph (b) is herein called an "optional Sinking Fund payment".
Any such election by the Company shall be evidenced
<PAGE>
by an Officers' Certificate (which shall conform to Section 14.05),
delivered to the Trustee not later than 60 days (or such shorter period
acceptable to the Trustee) preceding such Sinking Fund payment date, which
Officers' Certificate shall set forth the amount of the optional Sinking
Fund payment which the Company then elects to pay. The Company's election,
so evidenced, shall be irrevocable and the Company shall, upon delivery of
such Officers' Certificate to the Trustee, become bound to pay or segregate
and hold in trust as aforesaid on or before such Sinking Fund payment date
the amount specified in such Officers' Certificate. Unless otherwise
provided in the instrument establishing such series, any such right to make
an optional Sinking Fund payment shall be noncumulative and shall in no
event relieve the Company of its obligation set forth in paragraph (a) of
this Section 3.04.
All moneys paid or segregated and held in trust pursuant to this
Section 3.04 shall be applied on the Sinking Fund payment date in respect of
which such payment or segregation was made, to the redemption of Securities as
provided in this Article Three.
SECTION 3.05. USE OF ACQUIRED SECURITIES TO SATISFY SINKING FUND
--------------------------------------------------
OBLIGATION. In lieu of making all or any Sinking Fund payment in cash as may
- ----------
be required by Section 3.04(a), the Company may, not later than 60 days (or such
shorter period acceptable to the Trustee) preceding any applicable Sinking Fund
payment date relating to a particular series of Securities, deliver to the
Trustee for cancellation Securities of such series theretofore acquired by the
Company (otherwise than through the use of Sinking Fund moneys pursuant to
Section 3.07) and not theretofore made the basis for the reduction of any
Sinking Fund payment with respect to such series, accompanied by an Officers'
Certificate (which shall conform to Section 14.05) stating the Company's
election to use such Securities to reduce the amount of such Sinking Fund
payment with respect to such series (specifying the amount of the reduction of
each such payment) and certifying that such Securities have not theretofore been
made the basis for a reduction of any Sinking Fund payment with respect to such
series. Securities so delivered shall be credited against the Sinking Fund
payment due on such Sinking Fund payment date at the Sinking Fund redemption
price thereof.
SECTION 3.06. EFFECT OF FAILURE TO DELIVER OFFICERS' CERTIFICATE OR
-----------------------------------------------------
SECURITIES. In case of a failure of the Company, at or before the time
- ----------
provided in Section 3.05, to deliver an Officers' Certificate, together with any
Securities of the particular series required by Section 3.05, the Company shall
not be permitted to make any such reduction of the amount of the Sinking Fund
payment with respect to such series payable on such Sinking Fund payment date.
SECTION 3.07. MANNER OF REDEEMING SECURITIES. The Securities of any
------------------------------
series to be redeemed from time to time through the operation of any Sinking
Fund relating to such series, as in Section 3.04 provided, shall be selected by
the Trustee for redemption in the manner provided in Section 3.02 and notice
thereof shall be given by the Trustee to the Company, and the Company hereby
irrevocably authorizes the Trustee, in the name of and at the expense of the
Company, to give notice on behalf of the Company of the redemption of such
Securities, all in the manner and with the effect in this Article Three
specified, except that, in addition to the matters required to be included in
such notice by Section 3.02, such notice shall also state that the Securities
therein designated for redemption are to be redeemed through operation of such
<PAGE>
Sinking Fund. Such Securities shall be so redeemed and paid in accordance with
such notice in the manner and with the effect provided in Sections 3.02 and
3.03.
Notwithstanding the foregoing, if at any time the amount of cash to be
paid into any Sinking Fund with respect to a particular series of Securities on
any next succeeding Sinking Fund payment date for such series, together with any
unused balance of any preceding Sinking Fund payment or payments with respect to
such series which shall not, in any case, include funds held by the Trustee for
Securities of such series which previously have been called for redemption,
shall not exceed in the aggregate $100,000, the Trustee, unless requested by the
Company, shall not select Securities for or give notice of the redemption of
Securities through the operation of the Sinking Fund with respect to such series
on the next succeeding Sinking Fund payment date. Such unused balance of moneys
deposited in the Sinking Fund with respect to a particular series of Securities
shall be added to the next Sinking Fund payment for such series to be made in
cash or, at the request of the Company, shall be applied at any time or from
time to time to the purchase of Securities of such series, by public or private
purchase, in the open market or otherwise.
SECTION 3.08. SINKING FUND MONEYS TO BE HELD AS SECURITY DURING
-------------------------------------------------
CONTINUANCE OF EVENT OF DEFAULT; EXCEPTIONS. Unless all Securities of any
- --------------------------------------------
series then Outstanding are to be redeemed, neither the Trustee nor any paying
agent shall redeem any Securities of such series with Sinking Fund moneys if a
Responsible Officer of the Trustee or such paying agent at the time shall have
actual knowledge of the continuance of any Event of Default with respect to such
series, except that where the mailing or publication of notice of redemption of
any such Securities shall theretofore have been made, the Trustee or any paying
agent, if sufficient funds shall have been deposited with it for such purpose,
shall redeem such Securities. However, the Company itself shall not redeem any
such Securities with Sinking Fund moneys during the continuance of any Event of
Default with respect to such series. The Trustee shall not mail or publish any
notice of redemption if a Responsible Officer of the Trustee at the time shall
have actual knowledge of the continuance of any Event of Default with respect to
such series. Except as aforesaid, any moneys in the Sinking Fund with respect
to such series at such time and any moneys thereafter paid into the Sinking Fund
shall during such continuance be held as security for the payment of all
Securities of that series; provided, however, that in case such Event of Default
with respect to such series shall have been waived as permitted by this
Indenture or otherwise cured, such moneys shall thereafter be held and applied
in accordance with the provisions of this Article Three.
<PAGE>
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.01. EXISTENCE. Subject to Article XI, the Company will do
---------
or cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 4.02. PAYMENTS OF PRINCIPAL OF (AND PREMIUM, IF ANY) AND
--------------------------------------------------
INTEREST, IF ANY, ON SECURITIES. The Company will duly and punctually pay or
- -------------------------------
cause to be paid the principal of (and premium, if any) and interest, if any, on
Securities of each series at the place, at the time or times and in the manner
provided in the instrument establishing such series and in the Securities of
such series. The interest on the Securities, if any, shall be payable (subject
to the provisions of Section 2.04) only to or upon the written order of the
Holders thereof or, in the case of unregistered Securities with Coupons, the
Holders of Coupons relating thereto. Any installment of interest on registered
Securities of any series may at the Company's option be paid by mailing checks
for such interest payable to or upon the written order of the Person entitled
thereto pursuant to Section 2.04 to the address of such Person as it appears on
the Security Register or by wire transfer to an account designated in writing by
such Person at least 15 days prior to the relevant payment date.
SECTION 4.03. MAINTENANCE OF OFFICES OR AGENCIES FOR REGISTRATION OF
------------------------------------------------------
TRANSFER, EXCHANGE AND PAYMENT OF SECURITIES. As long as any of the Securities
- ---------------------------------------------
of any series remain Outstanding, the Company will maintain one or more offices
or agencies in St. Louis, Missouri or New York, New York, or at such other
locations as the Company may from time to time designate for any series of
Securities, where such Securities may be presented for registration of transfer
and exchange as in this Indenture provided, where such Securities may be
presented for payment and where notices and demands to or upon the Company in
respect of such Securities or of this Indenture may be served. The Trustee
shall be the agent of the Company in the city in which the Corporate Trust
Office is located for all of the foregoing purposes unless the Company shall
designate and maintain some other office and agency for such purposes and give
the Trustee written notice of the location thereof. The Company will give to
the Trustee notice of the location of each such office or agency and of any
change of location thereof.
SECTION 4.04. APPOINTMENT TO FILL A VACANCY IN THE OFFICE OF
----------------------------------------------
TRUSTEE. The Company, whenever necessary to avoid or fill a vacancy in the
- -------
office of Trustee for any one or more series of Securities, will appoint, in the
manner provided in Section 7.11, a Trustee, so that there shall at all times be
a Trustee with respect to each series of Securities hereunder.
SECTION 4.05. DUTIES AND RIGHTS OF PAYING AGENTS; COMPANY AS PAYING
-----------------------------------------------------
AGENT. (a) The Company shall cause each paying agent, if any, other than the
- ------
Trustee, for any series of Securities, to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 4.05, that such agent will:
<PAGE>
(1) hold all sums held by it as such agent for the payment of the
principal of (and premium, if any) or interest on the Securities of such
series (whether such sums have been paid to it by the Company or by any
other obligor on the Securities of such series) in trust for the benefit of
the Holders of the Securities of such series;
(2) give the Trustee notice of any default by the Company (or by any
other obligor on the Securities of such series) in making any payment of
the principal of (or premium, if any) or interest on the Securities of such
series when the same shall be due and payable; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held by it as such agent.
Whenever the Company shall have one or more paying agents for any
series of Securities, it will, on or before each due date of the principal of
(and premium, if any) or interest on Securities of such series, deposit with
such paying agent or agents a sum sufficient to pay such principal (and premium,
if any) or interest on such Securities so becoming due.
(b) If the Company shall act as its own paying agent for any series
of Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest on the Securities of such series, set aside,
segregate and hold in trust for the benefit of the Holders of the Securities of
such series a sum sufficient to pay such principal (and premium, if any) or
interest on such Securities so becoming due. The Company will promptly notify
the Trustee of any failure by the Company to take such action or the failure by
any other obligor on the Securities of such series to make any payment of the
principal of (or premium, if any) or interest on the Securities of such series
when the same shall be due and payable.
(c) Anything in this Section 4.05 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder,
as required by this Section 4.05, 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.
(d) Anything in this Section 4.05 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 4.05 is subject
to the provisions of Sections 12.04 and 12.05.
SECTION 4.06. LIMITATION ON LIENS. Subject to the provisions of
-------------------
Article Twelve (to the extent they are applicable to the Securities of any
series), the Company will not, nor will the Company permit any Restricted
Subsidiary to, issue, assume or guarantee any notes, bonds, debentures or other
similar evidences of indebtedness for money borrowed (hereinafter, "Debt")
secured by a mortgage, security interest, lien, pledge or other encumbrance
(hereinafter, "liens") upon any Principal Property or upon any shares of stock
or indebtedness of any Restricted Subsidiary (whether such Principal Property,
shares of stock or indebtedness are now owned or hereafter acquired) without in
any such case effectively providing concurrently with such
<PAGE>
issuance, assumption, or guarantee that the Securities (together with, if the
Company so determines, any other indebtedness or obligation then existing and
any other indebtedness or obligation, thereafter created, ranking equally with
the Securities) shall be secured equally and ratably with (or prior to) such
Debt so long as such Debt shall be so secured, except that the foregoing
provisions shall not apply to:
(a) Liens affecting property of a corporation, association or other
business entity existing at the time it becomes a Subsidiary or at the time
it is merged into or consolidated with or purchased by the Company or a
Subsidiary;
(b) Liens existing at the time of acquisition of the property affected
thereby or incurred to secure payment of all or part of the purchase price
of such property or to secure Debt incurred prior to, at the time of or
within 180 days after the acquisition of such property for the purpose of
financing all or part of the purchase price thereof (provided such liens
are limited to such property and improvements thereon);
(c) Liens placed within 180 days of completion of construction of
property, plants or facilities to secure all or part of the cost of
construction of such property, plants or facilities, or to secure Debt
incurred to provide funds for any such purpose;
(d) Liens which secure indebtedness owing by a Restricted Subsidiary
to the Company or to another Restricted Subsidiary;
(e) Liens existing on the date of this Indenture;
(f) Liens arising by reason of mortgages on property owned or leased
by the Company or a Restricted Subsidiary in favor of the United States of
America or any State thereof, or any department, agency or instrumentality
or political subdivision of the United States of America or any State
thereof, or in favor of any other country or any political subdivision
thereof, or in favor of holders of securities issued by any such entity,
pursuant to any contract or statute (including, without limitation,
mortgages or liens to secure pollution control or industrial revenue bonds
or similar financings) or to secure any indebtedness incurred or guaranteed
for the purpose of financing all or any part of the purchase price or the
cost of construction of the property subject to such mortgages;
(g) Mechanics', materialmen's, carriers', workmen's, vendors' or other
like liens, arising in the ordinary course of business in respect of
obligations which are not past due or which are being contested in good
faith;
(h) Liens arising by reason of any deposit with, or the giving of any
form of security to (i) any surety company or clerk of any court, or in
escrow, as collateral in connection with, or in lieu of, any bond or appeal
from any judgment or decree against the Company or a Restricted Subsidiary,
or in connection with other proceedings or actions at law or in equity by
or against the Company or a Restricted Subsidiary, or (ii) any government
or governmental department, agency
<PAGE>
or instrumentality, which deposit or security is required or permitted to
qualify the Company or a Restricted Subsidiary to conduct business (or
perform any contract with such entities), to maintain self-insurance, or to
obtain the benefit of, or comply with, any law pertaining to workers'
compensation, unemployment insurance, old age pensions, social security, or
similar matters;
(i) Liens existing on property acquired by the Company or a Restricted
Subsidiary through the exercise of rights arising out of defaults on
receivables acquired in the ordinary course of business;
(j) Liens for judgments or awards, so long as the finality of any such
judgment or award is being contested in good faith and execution thereon is
stayed;
(k) Liens for taxes or assessments or governmental charges or levies
not yet past due or delinquent or which can thereafter be paid without
penalty, or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established, if
appropriate; and any other liens of a nature substantially similar to those
described in this clause (k) which do not materially impair the use of such
property in the operation of the business of the Company and its Restricted
Subsidiaries taken as a whole or the value of such property for the
purposes of such business;
(l) Liens on receivables and general intangibles securing capitalized
lease obligations incurred by the Company or any Restricted Subsidiary; or
(m) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any lien referred to in
the foregoing clauses (a) to (l) inclusive or of any Debt secured thereby,
provided that the principal amount of Debt secured thereby shall not exceed
the principal amount of Debt so secured at the time of such extension,
renewal or replacement, and that such extended, renewed or replacement lien
shall be limited to all or part of the same property which secured the lien
extended, renewed or replaced (plus improvements on such property).
The covenant contained in this Section will be subject to the
provision for exempted indebtedness in Section 4.08.
SECTION 4.07. LIMITATION ON SALE AND LEASE-BACK. Subject to the
----------------------------------
provisions of Article Twelve (to the extent they are applicable to the
Securities of any series), the Company will not, nor will it permit any
Restricted Subsidiary to, enter into any arrangement with any Person providing
for the leasing by the Company or any Restricted Subsidiary of any Principal
Property, which Principal Property has been or is to be sold or transferred by
the Company or such Restricted Subsidiary to such Person (whether such Principal
Property is now owned or hereafter acquired), except for (i) temporary leases
for a term, including any renewal, of not more than three years, (ii) leases
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries and (iii) leases entered into within 180 days after the completion
of construction and commencement of full operation of a Principal Property
(hereinafter, a "Sale
<PAGE>
and Lease Back Transaction"), unless either (a) the Company or such Restricted
Subsidiary would be entitled, in accordance with the provisions of Section 4.06
(other than provisions with respect to exempted indebtedness), to incur Debt
secured by a lien on such property without equally and ratably securing the
Securities, or (b) the Company within 180 days after the effective date of the
Sale and Lease-Back Transaction applies an amount equal to the Value of such
transaction to the voluntary retirement of its Funded Debt. For the purposes of
this Article, "Value" shall mean an amount equal to the greater of the net
proceeds of the sale or transfer of the property leased pursuant to such Sale
and Lease-Back Transaction, or the fair value in the opinion of the Board of
Directors of the leased property at the time of entering into such Sale and
Lease-Back Transaction. For the purposes of this Article, "Funded Debt" shall
mean indebtedness (including Securities) maturing by the terms thereof more than
one year after the original creation thereof.
The covenant contained in this Section will be subject to the
provision for exempted indebtedness in Section 4.08.
SECTION 4.08. EXEMPTED INDEBTEDNESS. Notwithstanding the provisions
---------------------
contained in Sections 4.06 and 4.07, the Company and its Restricted Subsidiaries
may issue, assume, suffer to exist or guarantee Debt which would otherwise be
subject to the limitation of Section 4.06, without securing the Securities, or
may enter into Sale and Lease-Back Transactions which would otherwise be subject
to the limitation of Section 4.07, without retiring Funded Debt, or enter into a
combination of such transactions, if the sum of (i) the principal amount of all
such Debt incurred after the date hereof, and which would otherwise be or have
been prohibited by the limitations of Section 4.06 or 4.07 and (ii) the
aggregate Value of all such Sale and Lease-Back Transactions after the date
hereof does not at any such time exceed 15% of the Consolidated Net Tangible
Assets.
SECTION 4.09. ANNUAL CERTIFICATE OF COMPLIANCE. On or before April
---------------------------------
30 in each year (commencing April 30, 1999), the Company will furnish the
Trustee with an officers' certificate (executed by the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company and by the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company), covering the period during the preceding
year that any Securities were Outstanding, certifying that after reasonable
investigation and inquiry the Company has complied with all conditions and
covenants contained in this Indenture or, if such is not the case, setting forth
with reasonable particularity the circumstances of any failure so to comply and
the steps taken or proposed to be taken to eliminate such failure. Such
determination shall be made without regard to periods of grace or notice
requirements.
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. The Company will, upon
----------------------------
request of the Trustee, execute and deliver such further instruments and do such
further acts as may reasonably be necessary or proper to carry out more
effectually the purposes of this Indenture, including Sections 4.06 and 4.07.
SECTION 4.11. CALCULATION OF ORIGINAL ISSUE DISCOUNT. The Company
--------------------------------------
shall file with the Trustee promptly at the end of each calendar year (i) a
written notice specifying the amount of original issue discount (including daily
rates and accrual periods) accrued on Outstanding Securities as of the end of
such year and (ii) such other specific information relating
<PAGE>
to such original issue discount as may then be relevant under the Internal
Revenue Code of 1986, as amended from time to time.
ARTICLE FIVE
HOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 5.01. COMPANY TO FURNISH TRUSTEE INFORMATION AS TO NAMES AND
------------------------------------------------------
ADDRESSES OF HOLDERS. The Company will furnish or cause to be furnished to the
- --------------------
Trustee:
(1) semi-annually, not later than January 1 and July 1 in each year,
a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of registered Securities of each series as of
the preceding December 15 or June 15, as the case may be; and
(2) 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 in
similar form and content as of a date not more than 15 days prior to the
date such list is furnished;
provided, however, that so long as the Trustee shall be the Security Registrar
- -------- -------
for any series and all of the Securities of such series are registered
Securities, no such list shall be required to be furnished with respect to such
series.
SECTION 5.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
registered Securities of each series (i) contained in the most recent list
furnished to it as provided in Section 5.01, (ii) received by it in the capacity
of Security Registrar for such series, if so acting, and (iii) filed with it
within the two preceding years pursuant to Section 5.04 (c)(ii). The Trustee
may destroy any list furnished to it with respect to Securities of any Series as
provided in Section 5.01 upon receipt of a new list with respect to such series
so furnished.
(b) If three or more Holders (in this Section referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with the other Holders of the
Securities of a particular series (in which case the applicants must all hold
Securities of such series) or with the Holders of the Securities of all series
with respect to their rights under this Indenture or under such Securities and
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 5.02(a), or
(ii) inform such applicants as to the approximate number of Holders
of registered Securities of such series or of all registered Securities, as
the case may
<PAGE>
be, whose names and addresses appear in the information preserved at the
time by the Trustee in accordance with Section 5.02(a), and as to the
approximate cost of mailing to such Holders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of registered Securities of such series or to
each Holder of registered Securities of all series, as the case may be, whose
name and address shall appear in the information preserved at the time by the
Trustee in accordance with Section 5.02(a), a copy of the form of proxy or other
communication which is specified in such request with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender the Trustee shall mail to such applicants and file
with the Commission, together with a copy of the material proposed to be mailed,
a written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the Holders of registered
Securities of such series or of all series, as the case may be, or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of the Securities and the 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 the Company or the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders in accordance with Section 5.02(b),
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 Section 5.02(b).
SECTION 5.03. REPORTS BY COMPANY. The Company shall:
------------------
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended; or if the Company is not
required to file information, documents or reports pursuant to either of
such sections, then it shall file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents
and reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, in respect of a debt
<PAGE>
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, within 30 days after the filing
thereof with the Trustee, in the manner and to the extent provided in
Section 5.04, such summaries of any information, documents and reports
required to be filed by the Company pursuant to clauses (1) and (2) of this
Section as may be required by rules and regulations prescribed from time to
time by the Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 5.04. REPORTS BY TRUSTEE. (a) The Trustee shall transmit to
------------------
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Trustee shall, within sixty days after each April 15
following the date of this Indenture deliver to Holders a brief report, dated as
of such April 15, which complies with the provisions of such Section 313(a).
(b) The Trustee shall comply with Sections 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange, if
any, upon which the Securities are listed, with the Commission and with the
Company. The Company will promptly notify the Trustee when the Securities are
listed on any stock exchange and of any delisting thereof.
ARTICLE SIX
REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. "Event of Default," wherever used
-----------------
herein with respect to the Securities of any series, means any one of the
following events which shall have occurred and be continuing (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):
<PAGE>
(1) default in the payment of any interest upon any of the Securities
of such series when and as the same shall become due and payable, and
continuance of such default for a period of 30 days;
(2) default in the payment of all or any part of the principal of (or
premium, if any, on) any of the Securities of such series at its Maturity;
(3) default in the deposit of any sinking fund or analogous payment
for the benefit of the Securities of such series when and as the same shall
become due and payable;
(4) default in the performance, or breach, of any covenant or
warranty of the Company in the Securities of such series or in this
Indenture (other than a covenant or warranty a default in whose performance
or whose breach is elsewhere in this Section specifically provided for or
which has expressly been included in this Indenture solely for the benefit
of the Securities of other series), and continuance of such default or
breach for a period of 90 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 not less than 25% in aggregate principal amount
of the Securities of all series then Outstanding affected thereby a written
notice specifying such default or breach, requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(5) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Bankruptcy Law or (B) a decree or order
adjudging the Company a bankrupt or insolvent, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of all or substantially all 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
unstated and in effect for a period of 90 consecutive days;
(6) the commencement by the Company of a voluntary case or proceeding
under any applicable Bankruptcy Law or the consent by it to the entry of a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Bankruptcy Law, or the consent by it to
the appointment of or the taking of possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or of all or substantially all of its property, or the making
by the Company of a general assignment for the benefit of creditors;
(7) default under any indenture or instrument that evidences or under
which the Company or any Restricted Subsidiary has at the date of this
Indenture or shall hereafter have outstanding any indebtedness for money
borrowed having unpaid principal at the time of such default in excess of
the greater of $15,000,000 or 5% of the Consolidated Net Worth of the
Company, shall occur and be continuing and such indebtedness shall have
been accelerated, by action of the holder or holders thereof or any Person
duly acting on their behalf, so that the same shall be or become due and
payable
<PAGE>
prior to the date on which the same would otherwise have become due
and payable; provided, however, that such acceleration shall not have been
rescinded or annulled; and provided, further, that if such default under
such indenture or instrument shall be remedied or cured by the Company or
waived by the holders of such indebtedness, then the Event of Default
hereunder by reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without further action upon the part of either
the Trustee or any of the Holders; or
(8) any other Event of Default provided in or pursuant to the
supplemental indenture or Officers' Certificate establishing the terms of
such series of Securities as provided in Section 2.01 or in the form or
forms of Security for such series.
SECTION 6.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If
--------------------------------------------------
an Event of Default described in Section 6.01 shall have occurred and be
continuing with respect to the Securities of any series, then, and in each and
every such case, unless the principal of all of the Securities of such series
shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Securities of such series
then Outstanding, by notice in writing to the Company (and to the Trustee if
given by such Holders), may declare the entire principal of (and premium, if
any, on) all the Securities of such series then Outstanding and the interest
accrued thereon to be due and payable immediately, and upon any such declaration
the same shall become immediately due and payable.
The preceding paragraph is subject, however, to the condition that if,
at any time after the principal of the Securities of one or more series shall
have been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest upon all the Securities
of such series and the principal of (and premium, if any, on) all the Securities
of such series which shall have become due otherwise than by acceleration (with
interest upon such principal and premium and, to the extent that payment of such
interest shall be enforceable under applicable law, on overdue installments of
interest at the same rate as the rate of interest (or at the yield to Stated
Maturity, in the case of Original Issue Discount Securities) specified in the
Securities of such series, to the date of such payment or deposit) and such
additional amount as shall be sufficient to cover the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
except as a result of negligence or bad faith, and if any and all Events of
Default under this Indenture with respect to such series, other than the
nonpayment of the principal of (and premium, if any, on) the Securities of such
series which shall have become due by acceleration, shall have been cured,
waived or otherwise remedied as provided herein -- then, and in each and every
such case, the Holders of a majority in aggregate principal amount of all the
Securities of such affected series then Outstanding, by written notice to the
Company and to the Trustee, may waive all defaults or breaches with respect to
such series and rescind and annul such declaration and its consequences, but no
such waiver, rescission and annulment shall extend to or shall affect any
subsequent default or breach or shall impair any right consequent thereon.
For all purposes under this Indenture, if a portion of the principal
of any Original Issue Discount Securities shall have been accelerated and
declared due and payable pursuant to the provisions hereof, then, from and after
such declaration, unless such declaration shall have been rescinded and
annulled, the principal amount of such Original Issue Discount Securities
<PAGE>
shall be deemed, for all purposes hereunder, to be such portion of the principal
thereof as shall be due and payable as a result of such declaration; and payment
of the portion of the principal thereof as shall have become due and payable as
a result of such declaration, together with interest, if any, thereon and all
other amounts owing thereunder, shall constitute payment in full of such
Original Issue Discount Securities.
SECTION 6.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
-------------------------------------------------------
TRUSTEE. The Company covenants that if:
- -------
(1) default shall be made in the payment of any interest on any of
the Securities of any series when and as such interest shall become due and
payable, and such default shall have continued for a period of 30 days, or
(2) default shall be made in the payment of the principal of (or
premium, if any, on) any of the Securities of any series when the same
shall have become due and payable, whether at the Stated Maturity thereof
or otherwise,
the Company shall, upon demand of the Trustee, pay to or deposit with the
Trustee, for the benefit of the Holders of the Securities of such series, the
whole amount then due and payable on such Securities, including all Coupons
appertaining thereto, for principal (and premium, if any) and interest (with
interest to the date of such payment upon overdue principal and premium and, to
the extent that payment of such interest shall be enforceable under applicable
law, on overdue installments of interest at the same rate as the rate of
interest (or at the yield to Stated Maturity, in the case of Original Issue
Discount Securities) specified in the Securities of such series to the date of
such payment or deposit); and, in addition thereto, such additional amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, except those incurred as a result of any such person's
negligence or bad faith.
Until such demand shall be made by the Trustee, the Company may pay
the principal of (and premium, if any) and interest on the Securities of such
series to the Holders of such Series.
If the Company shall fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute judicial proceedings for the collection of the amounts so due and
unpaid, may prosecute such proceedings to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities of
such series 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, wherever situated.
If an Event of Default with respect to the Securities of any series
shall occur and be continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of the Securities
of such series 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.
<PAGE>
SECTION 6.04. 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 of
any series or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
of any series 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, premium or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise:
(i) to file and prove a claim for the whole amount of the principal
(and premium, if any) and interest (or if the Securities of any series are
Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of such series) owing and unpaid in respect
of the Securities of each series, and to file such other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, except
as a result of negligence or bad faith) and of the Holders allowed in such
judicial proceeding, and
(ii) 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, liquidator, assignee, trustee, 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 to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, except as a
result of negligence or bad faith, and any other amounts due the Trustee under
Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee,
except in accordance with action taken under Article Nine, 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
of any series 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 6.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
------------------------------------------------
SECURITIES. All rights of action and claims under this Indenture, or under the
- ----------
Securities of any series or any Coupons appertaining thereto, may be prosecuted
and enforced by the Trustee without the possession of any of the Securities of
such series or such 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 reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities and Coupons in respect of which
such judgment has been recovered.
In any proceedings brought by the Trustee (and also in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Securities and Coupons appertaining
<PAGE>
thereto in respect to which action was taken, and it shall not be necessary to
make any Holders of such Securities or Coupons parties to any such proceedings.
SECTION 6.06. APPLICATION OF MONEYS COLLECTED. Any moneys collected
-------------------------------
by the Trustee pursuant to this Article in respect of the Securities of any
series shall be applied in the following order, at the date or dates fixed by
the Trustee and, in the case of any distribution of such moneys on account of
the principal of (or premium, if any) or interest on the Securities of such
series, upon presentation of the several Securities and Coupons appertaining
thereto in respect of which moneys have been collected and the notation thereon
of such distribution if such principal, premium and interest be only partially
paid or upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
7.07;
SECOND: In case the principal of the Securities of such series shall
not then be due and payable, to the payment of interest on the Securities
of such series in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest at the
same rate as the rate of interest (or yield to Stated Maturity, in the case
of Original Issue Discount Securities) specified in such Securities, such
payments to be made ratably to the Persons entitled thereto, without
preference or priority;
THIRD: In case the principal of the Securities of such series shall
then be due and payable, to the payment of the whole amount then owing and
unpaid upon all the Securities of such series for principal (and premium,
if any) and interest, with interest upon overdue principal and premium,
and, to the extent that such interest has been collected by the Trustee,
upon overdue installments of interest at the same rate as the rate of
interest (or yield to Stated Maturity, in the case of Original Issue
Discount Securities) specified in the Securities of such series; and in
case such moneys shall be insufficient to pay in full the whole amount so
due and unpaid upon the Securities of such series, then to the payment of
such principal, premium and interest, without preference or priority of
principal or premium over interest, or of interest over principal or
premium, or of any installment of interest over any other installment of
interest, or of any Security of such series, ratably to the aggregate of
such principal, premium and interest; and
FOURTH: To the Company or any other Person lawfully entitled thereto.
SECTION 6.07. LIMITATION ON SUITS. Subject to Section 6.08, no
-------------------
Holder of any Security of any series or of any Coupon shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official, or for any other remedy hereunder,
unless:
(1) such Holder shall have previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities of
such series;
<PAGE>
(2) the Holders of not less than 25% in aggregate principal amount of
the Securities of such series then Outstanding shall have made written
request to the Trustee to institute such proceeding in its own name as
Trustee hereunder;
(3) such Holder or Holders shall have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity shall have failed to institute such proceeding; and
(5) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Securities of such series
then Outstanding;
it being understood and intended that no one or more of Holders of Securities of
any series or Coupons appertaining thereto shall have any right in any manner
whatsoever by virtue of, or by availing of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holder of the Securities or
the Coupons, or to obtain or to seek to obtain preference or priority over any
other such Holder or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all Holders of
Securities of the affected series and Coupons.
SECTION 6.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
----------------------------------------------------
PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture or
- --------------------
any provision of any Security of any series, the Holder of a Security of any
series or Coupon appertaining thereto shall have the right, which is absolute
and unconditional, to receive payment of the principal of (and premium, if any)
and interest on such Security or Coupon on or after the respective due dates
expressed in such Security or Coupon or, in the case of redemption, on the date
of redemption, and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired or affected without the consent of such
Holder.
SECTION 6.09. RESTORATION OF RIGHTS AND REMEDIES. In case the
----------------------------------
Trustee or any Holder shall have proceeded to enforce any right or remedy under
this Indenture and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the Trustee or to such
Holder, then, and in every such case, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder; and all rights, remedies and powers of the Company, the Trustee and
the Holders shall continue as though no such proceeding had been taken.
SECTION 6.10. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities and Coupons in the last paragraph of Section 2.08, 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 prevent the concurrent
assertion or employment of any other appropriate right or remedy.
<PAGE>
SECTION 6.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of
----------------------------
the Trustee or of any Holder of Securities or Coupons 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 6.12. CONTROL BY HOLDERS. The Holders of not less than a
------------------
majority in aggregate principal amount of the Securities of any series affected
then Outstanding 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:
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture;
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; and
(3) subject to Section 7.01, the Trustee need not take any action
which might involve the Trustee in personal liability or be unduly
prejudicial to the Holders of the Securities of the affected series not
joining in the giving of such direction.
SECTION 6.13. WAIVER OF PAST DEFAULTS. Prior to the declaration of
-----------------------
acceleration of the Maturity of any Securities of any series as provided by
Section 6.02, the Holders of not less than a majority in aggregate principal
amount of the Securities of such series at the time Outstanding with respect to
which a default or breach or an Event of Default shall have occurred and be
continuing may on behalf of the Holders of all of the Securities of such series
waive any past default or breach or Event of Default and its consequences,
except a default or breach or Event of Default in the payment of the principal
of (or premium, if any) or interest on any Security of such series.
Upon any such waiver, such default or breach 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 breach or Event of Default or impair any right
consequent thereon.
SECTION 6.14. UNDERTAKING FOR COSTS. All parties to this Indenture
---------------------
agree, and each Holder of any Security or Coupon by 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,
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 and expenses, 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; provided, however, that the provisions of
this Section shall not apply to any suit instituted by the Trustee, to any suit
<PAGE>
instituted by any Holder, or group of Holders, of the Securities of any series
holding in the aggregate more than 10% in aggregate principal amount of the
Securities of such series then Outstanding, or to any suit instituted by any
Holder for the enforcement of the payment of the principal of (or premium, if
any) or interest (including interest evidenced by a Coupon) on any Security on
or after the respective due dates expressed in such Security or Coupon or, in
the case of redemption, on or after the date of redemption.
SECTION 6.15. WAIVER OF STAY OR EXTENSION LAWS. The Company
--------------------------------
covenants (to the fullest 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 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 fullest 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 suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE SEVEN
THE TRUSTEE
SECTION 7.01. CERTAIN DUTIES AND RESPONSIBILITIES. The Trustee,
-----------------------------------
prior to the occurrence of an Event of Default with respect to a particular
series of Securities and after the curing or waiving of all Events of Default
which may have occurred with respect to such series, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default with respect to a particular series of Securities has
occurred (which has not been cured or waived), the Trustee shall exercise such
of the rights and powers vested in it by this Indenture relating to such series,
and use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect to a
particular series of Securities and after the curing or waiving of all
Events of Default which may have occurred with respect to such series:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to
<PAGE>
the Trustee 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 (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein);
(b) the Trustee shall not be liable for an 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; and
(c) the Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith relating to Securities
of any series in accordance with the direction of the Holders of not less
than a majority in principal amount of the Securities of such series then
Outstanding 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, with respect to the Securities of such
series under this Indenture.
None of the provisions of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any personal financial liability
in the performance of any duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate security or indemnity against such risk or
liability is not reasonably assured to it.
SECTION 7.02. NOTICE OF DEFAULTS. Within 90 days after the
------------------
occurrence of any default hereunder with respect to the Securities of any
series, the Trustee shall give notice of all defaults with respect to the
Securities of such series actually known to any Responsible Officer of the
Trustee (i) if any unregistered Securities of such series are then Outstanding,
to the Holders thereof by publication at least once in an Authorized Newspaper
in the Borough of Manhattan, The City of New York,(ii) if any unregistered
Securities of such series are then Outstanding, to the Holders thereof who have
filed their names and addresses with the Trustee pursuant to Section 5.04(c)(ii)
by mailing such notice to such Holders at such addresses and (iii) if any
registered Securities of such series are then Outstanding, to the Holders
thereof by mailing such notice to such Holders at their addresses as they shall
appear on the Security Register, unless in each case such defaults shall have
been cured before the mailing or publication of such notice; provided, however,
that, except in the case of a default in the payment of the principal of (or
premium, if any) or interest on any of the Securities of such series, or in the
payment of any sinking fund or analogous payment with respect to the Securities
of such series, the Trustee shall be protected in withholding such notice if and
so long as a Responsible Officer of the Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders of the
Securities of such series; and provided, further, that in the case of any
default of the character specified in Section 6.01(4) with respect to Securities
of such series, no such notice to the Holders shall be given until at least 30
days after the occurrence thereof. For the purpose of this Section, the term
"default" means any event or condition which is, or after notice or lapse of
time or both would become, an Event of Default with respect to Securities of
such series.
<PAGE>
SECTION 7.03. CERTAIN RIGHTS OF TRUSTEE. Except as otherwise
-------------------------
provided in Section 7.01:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note 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, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a Company Direction or Company
Request (unless other evidence in respect thereof is herein specifically
prescribed); and any resolution of the Board of Directors shall be
evidenced to the Trustee by a Certified Board Resolution;
(c) the Trustee may consult with counsel of its selection and the
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 accordance with such advice or
Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default with respect to
the Securities of any series and after the curing or waiving of all such
Events of Default which may have occurred, 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,
request, direction, consent, order, approval or other paper or document,
unless requested in writing to do so by the Holders of a majority in
aggregate principal amount of Securities of any series then Outstanding;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is not, in the opinion of the Trustee,
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such costs, expenses or liabilities as a condition to so
proceeding; the reasonable expense of every such investigation shall be
paid by the Company or, if paid by the Trustee, shall be repaid by the
Company upon demand;
<PAGE>
(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
the Trustee hereunder;
(h) the Trustee shall not be deemed to have notice of any default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a default or Event of Default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture; and
(i) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder.
SECTION 7.04. TRUSTEE NOT LIABLE FOR RECITALS IN INDENTURE OR IN
--------------------------------------------------
SECURITIES. The recitals contained herein and in the Securities, except the
- ----------
Trustee's certificate of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities of any series. The Trustee represents that
it is duly authorized to execute and deliver this Indenture and perform its
obligations hereunder. The Trustee shall not be accountable for the use or
application by the Company of any of the Securities of any series or of the
proceeds thereof.
SECTION 7.05. TRUSTEE, PAYING AGENT OR SECURITY REGISTRAR MAY OWN
---------------------------------------------------
SECURITIES. Subject to Sections 7.09 and 7.14, the Trustee or any paying agent
- ----------
or Security Registrar with respect to any series of Securities, in its
individual or any other capacity, may become the owner or pledgee of Securities
of such series with the same rights it would have if it were not Trustee, paying
agent or Security Registrar with respect to such Securities.
SECTION 7.06. MONEYS RECEIVED BY TRUSTEE TO BE HELD IN TRUST.
----------------------------------------------
Subject to the provisions of Section 12.04 hereof, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but 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 in writing with the Company. So long as no Event of Default with respect
to Securities of any series shall have occurred and be continuing, all interest
allowed on any such moneys shall be paid from time to time upon a Company
Direction.
SECTION 7.07. COMPENSATION AND REIMBURSEMENT. The Company covenants
------------------------------
and agrees: (a) to pay to the Trustee from time to time, and the Trustee shall
be entitled to, such compensation as shall be agreed in writing from time to
time between the Company and the Trustee for all services rendered by it
hereunder (which shall not be limited by any provisions of law in regard to the
compensation of a trustee of an express trust); (b) except as otherwise
expressly provided, the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the
<PAGE>
expenses and disbursements of its agents, attorneys and counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith; and (c) to indemnify each
of the Trustee and any predecessor Trustee for, and to hold it harmless against,
any and all loss, liability, damage, claim or expense including taxes (other
than taxes based on the income of the Trustee) incurred without negligence or
bad faith on the part of the Trustee, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim of liability in the premises. If any property
other than cash shall at any time be subject to a lien in favor of the Holders,
the Trustee, if and to the extent authorized by a receivership or bankruptcy
court of competent jurisdiction or by the supplemental instrument subjecting
such property to such lien, shall be entitled to make advances for the purpose
of preserving such property or of discharging tax liens or other prior liens or
encumbrances thereon. The obligations of the Company under this Section 7.07 to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of the Indenture.
Such additional indebtedness shall be secured by a lien, prior to that of the
Securities of any series with respect to which the indebtedness arose, upon all
property and funds held or collected by the Trustee, as such, relating to such
series except funds held in Trust for the payment of principal of (and premium,
if any) or interest on Securities of such series. When the Trustee incurs
expenses or renders services in connection with an Event of Default specified in
Section 6.01(5) or Section 6.01(6), the expenses (including the reasonable
charges and expenses of its counsel) and the compensation for the services are
intended to constitute expenses of administration under any applicable federal
or state bankruptcy, insolvency or other similar law.
SECTION 7.08. RIGHT OF TRUSTEE TO RELY ON AN OFFICERS' CERTIFICATE
----------------------------------------------------
WHERE NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED. Except as otherwise provided
- -----------------------------------------------
in Section 7.01, whenever in the administration of the provisions of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof is herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee and such Certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 7.09. 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 7.10. CORPORATE TRUSTEE REQUIRED; REQUIREMENTS FOR
--------------------------------------------
ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be
- -----------
eligible to act as Trustee under Section 310(a)(1) of the Trust Indenture Act,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. Neither the
<PAGE>
Company nor any Person directly or indirectly controlling, controlled by or
under common control with the Company shall serve as Trustee. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 7.11.
SECTION 7.11. RESIGNATION AND REMOVAL OF TRUSTEE; 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 requirement of Section 7.12.
(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 7.12 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may, at the expense of the Company,
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 the Holders of a majority in aggregate principal amount of the
Securities of such series then Outstanding by written notice delivered to the
Trustee and to the Company. If the instrument of acceptance by a successor
Trustee required by Section 7.12 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may, at the expense of the Company, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(d) If, at any time,
(1) the Trustee shall fail to comply with Section 7.09(a) with
respect to the Securities of any series after written request therefor by
the Company or by any Holder who has been a bona fide Holder of a Security
of such series for at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.10 and
shall fail to resign after written request therefor by the Company or by
any such Holder; or
(3) 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 (i) the Company by a Certified Board Resolution may
remove the Trustee with respect to all Securities of any or all series, as
appropriate or (ii) subject to Section 6.14, any Holder who has been a bona fide
Holder of a Security of an affected series for at least six months may, on
behalf of such Holder and all other Holders similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee or Trustees.
<PAGE>
(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 a Certified
Board Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of such series (it being understood that any such
successor Trustee may be appointed with respect to other 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 7.12. 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 act of the Holders of a majority in aggregate principal amount of
the Securities of such series then Outstanding 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 7.12, become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee appointed by the
Company with respect to the Securities of such series. 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 7.12, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of such Holder and all other
Holders 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
(i) if any unregistered Securities of any affected series are then Outstanding,
to the Holders thereof by publication of such notice at least once in an
Authorized Newspaper in the Borough of Manhattan, The City of New York, (ii) if
any unregistered Securities of any affected series are then Outstanding, to the
Holders thereof who have filed their names and addresses with the Trustee
pursuant to Section 5.04 by mailing such notice to such Holders at such
addresses (and the Trustee shall make such addresses available to the Company
for such purpose) and (iii) if any registered Securities of any affected series
are then Outstanding, to the Holders thereof by mailing such notice to such
Holders at their addresses as they shall appear on the Security Register. If
the Company shall fail to give such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be given at the expense of the Company. Each notice shall include the
name of the successor Trustee with respect to the Securities of such series and
the address of its Corporate Trust Office.
SECTION 7.12. ACCEPTANCE BY SUCCESSOR TO TRUSTEE. (a) In case of the
----------------------------------
appointment hereunder of a successor Trustee with respect to the Securities of
one or more series, each 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 with respect to such applicable series of the Securities 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 with respect to such applicable series; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall
upon payment of its charges then unpaid, execute, acknowledge and deliver an
instrument transferring to such successor Trustee all such rights,
<PAGE>
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to its predecessor Trustee
as provided in Section 7.11 an instrument accepting such appointment, and
thereupon the resignation or removal of the predecessor 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 predecessor Trustee with respect to all such Securities; but, on the request
of the Company or the successor Trustee, such predecessor Trustee, with like
effect as if originally named as Trustee herein, shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the predecessor Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such predecessor Trustee hereunder subject, nevertheless, to its
lien, if any, provided for in Section 7.07.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but less than all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute, acknowledge and deliver an
indenture supplemental hereto in which each successor Trustee shall accept such
appointment and which shall (i) contain such provisions as shall be deemed
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 each series to which the appointment
of such successor Trustee related, (ii) if the retiring Trustee shall not be
retiring with respect to the Securities of all series, 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 the series as to which the retiring Trustee shall not be retiring shall
continue to be vested in the retiring Trustee and (iii) add to or change any of
the provisions of this Indenture to the extent 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.
(c) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but less than all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute, acknowledge and deliver an
indenture supplemental hereto in which each successor Trustee shall accept such
appointment and which shall (i) contain such provisions as shall be deemed
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 each series to which the appointment
of such successor Trustee relates, (ii) if the retiring Trustee is not retiring
with respect to the Securities of all series, 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 the series
as to which the retiring Trustee shall not be retiring shall continue to be
vested in the retiring Trustee, and (iii) add to or change any of the provisions
of this Indenture to the extent 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
<PAGE>
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 each series to which the appointment of such successor Trustee
relates, and such retiring Trustee shall duly assign, transfer and deliver to
each successor trustee all property and money held by such retiring Trustee
hereunder with respect to the Securities of each series to which the appointment
of such successor trustee relates.
(d) 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 rights, powers and trusts referred to
in paragraph (a) or (b) of this Section, as the case may be.
(e) 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.
SECTION 7.13. SUCCESSOR TO TRUSTEE BY MERGER, 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 qualified otherwise 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 at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of the particular series
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee,
and deliver such Securities so authenticated; and in case at that time any of
the Securities of such series shall not have been authenticated, any successor
to the Trustee with respect to the Securities of such series may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in such Securities or in this Indenture provided
that the certificate of authentication of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities of the particular series in
the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
SECTION 7.14. 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 7.15. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES.
-----------------------------------------------
Whenever the Trustee shall deem it necessary in order to conform to any law of
any jurisdiction, or the Trustee shall be advised by counsel, satisfactory to
it, that it is necessary and in the interest of the Holders of Securities of any
series or in the event that the Trustee shall have been requested to do
<PAGE>
so by the Holders of a majority in principal amount of the Securities of any
series then Outstanding, the Trustee and the Company shall execute and deliver
an indenture supplemental hereto and all other instruments and agreements
necessary or proper to constitute another bank or trust company, or one or more
Persons appointed by the Company, either to act as additional trustee or
trustees hereunder, jointly with the Trustee, or to act as separate trustee or
trustees hereunder, in any such case with such powers with respect to the
affected series of Securities as may be provided in such indenture supplemental
hereto, and to vest in such bank, trust company or Person as such additional
trustee or separate trustee, as the case may be, any property, title, right or
power of the Trustee with respect to the affected series of Securities deemed
necessary or advisable by the Trustee, subject to the provisions of this Section
below set forth. In the event the Company shall not have joined in the execution
of such indenture supplemental hereto within ten days after the receipt of a
written request from the Trustee so to do, or in case an Event of Default with
respect to the particular series of Securities shall occur and be continuing,
the Trustee may act under the foregoing provisions of this Section without the
concurrence of the Company; and the Company hereby appoints the Trustee its
agent and attorney-in-fact to act for it under the foregoing provisions of this
Section in either of such contingencies. The Trustee may execute, deliver and
perform any deed, conveyance, assignment or other instrument in writing as may
be required by any additional trustee or separate trustee for more fully and
certainly vesting in and confirming to it any property, title, right or powers
with respect to the affected series of Securities conveyed or conferred to or
upon such additional trustee or separate trustee, and the Company shall, upon
the Trustee's request, join therein and execute, acknowledge and deliver the
same; and the Company hereby makes, constitutes and appoints the Trustee its
agent and attorney-in-fact for it and in its name, place and stead to execute,
acknowledge and deliver any such deed, conveyance, assignment or other
instrument with respect to the affected series of Securities in the event that
the Company shall not itself execute and deliver the same within ten days after
receipt by it of such request so to do. Any supplemental indenture executed
pursuant to the provisions of this Section shall conform to the provisions of
the Trust Indenture Act as in effect as of the date of such supplemental
indenture.
Every additional trustee and separate trustee hereunder shall, to the
extent permitted by law, be appointed and act, and the Trustee shall act with
respect to a particular series of Securities, subject to the following
provisions and conditions:
(1) the Securities of such series shall be authenticated by the
Trustee and all powers, duties, obligations and rights conferred upon the
Trustee in respect of the receipt, custody, investment and payment of
moneys, shall be exercised solely by the Trustee;
(2) all other rights, powers, duties and obligations with respect to
the Securities of such series conferred or imposed upon the Trustee and
such additional trustee or separate trustee or any of them shall be
conferred or imposed upon and exercised or performed by the Trustee and
such additional trustee or trustees and separate trustee or trustees
jointly, except to the extent that, under any law of any jurisdiction in
which any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations with respect to the Securities of
such series shall be exercised and performed by such additional trustee or
trustees or separate trustee or trustees;
<PAGE>
(3) no power hereby given to, or with respect to which it is hereby
provided may be exercised by, any such additional trustee or separate
trustee with respect to a particular series of Securities shall be
exercised hereunder by such additional trustee or separate trustee except
with the consent of the Trustee; and
(4) no trustee with respect to a particular series of Securities
hereunder shall be personally liable by reason of any act or omission of
any other trustee with respect to such series of Securities hereunder.
If at any time the Trustee shall deem it no longer necessary in order to conform
to any such law or shall be advised by counsel that it is no longer so necessary
in the interest of the Holders of Securities of any series or in the event that
the Trustee shall have been requested to do so in writing by the Holders of a
majority in principal amount of the Securities of such series then Outstanding,
the Trustee and the Company shall execute and deliver an indenture supplemental
hereto and all other instruments and agreements necessary or proper to remove
any additional trustee or separate trustee with respect to such series. In the
event that the Company shall not have joined in the execution of such indenture
supplemental hereto, instruments and agreements, the Trustee may act on behalf
of the Company to the same extent provided above.
Any additional trustee or separate trustee with respect to any series
of Securities may at any time by an instrument in writing constitute the Trustee
its agent or attorney-in-fact, with full power and authority, to the extent
which may be authorized by law, to do all acts and things and exercise all
discretions which it is authorized or permitted to do or exercise with respect
to such series, for and in its behalf and in its name. In case any such
additional trustee or separate trustee shall die, become incapable of acting,
resign or be removed, all the assets, property, rights, powers, trusts, duties
and obligations of such additional trustee or separate trustee with respect to
such series, as the case may be, so far as permitted by law, shall vest in and
be exercised by the Trustee, without the appointment of a new successor to such
additional trustee or separate trustee unless and until a successor with respect
to such series is appointed in the manner hereinbefore provided.
Any request, approval or consent in writing by the Trustee to any
additional trustee or separate trustee of any series of Securities shall be
sufficient warrant to such additional trustee or separate trustee, as the case
may be, to take such action with respect to the particular series of Securities
as may be so requested, approved or consented to.
Each additional trustee and separate trustee appointed pursuant to
this Section shall be subject to, and shall have the benefit of, Articles Six,
Seven (other than Section 7.10) and Eight hereof and the following Sections of
this Indenture shall be specifically applicable to each additional trustee and
separate trustee: 5.04(a) (except to the extent that reference therein is made
to its eligibility under Section 7.10) and (b), 6.03, 7.01, 7.02, 7.09 and 7.14;
provided, however, that no resignation of an additional or separate trustee
pursuant to Section 7.11 hereof shall be conditioned in any sense whatever upon
the appointment of a successor to such trustee.
<PAGE>
ARTICLE EIGHT
CONCERNING THE HOLDERS
SECTION 8.01. EVIDENCE OF ACTION BY HOLDERS. (a) Whenever in this
-----------------------------
Indenture it is provided that the Holders of a specified percentage in aggregate
principal amount Outstanding of the Securities of any series may take any action
(including the making of any demand or request, the giving of any direction,
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the Holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Holders in person or by agent or
proxy appointed in writing, or (b) by the record of such Holders voting in favor
thereof at any meeting of such Holders duly called and held in accordance with
the provisions of Article Nine, or (c) by a combination of such instrument or
instruments and any such record of such a meeting of such Holders.
SECTION 8.02. PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF
---------------------------------------------------
SECURITIES. Subject to the provisions of Sections 7.01, 7.03 and 9.05, proof of
- ----------
the execution of any instrument by a Holder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee.
The ownership of a registered Security shall be proved by the Security
Register relating to the series or by a certificate of the Security Registrar.
The ownership of an unregistered Security or any Coupon attached to
such Security at its issuance shall be proved by the production of such Security
or Coupon, or, with respect to unregistered Securities only, by a certificate
executed by any trust company, bank, broker or other depositary, wherever
situated, if such certificate shall be deemed by 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 Securities therein described; or such facts
may be proved by the certificate or affidavit of the person holding such
Security, if such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such ownership of any
unregistered Security continues until (1) another certificate or affidavit
bearing a later date issued in respect of the same Security is produced, (2)
such Security is produced by some other Person or (3) such Security is no longer
Outstanding. The amount of unregistered Securities held by any Person may also
be proved in any other manner which the Trustee deems sufficient.
The Trustee may require such additional proof of any matter referred
to in this Section 8.02 as it shall deem necessary.
The record of any meeting of Holders shall be proved in the manner
provided in Section 9.06.
SECTION 8.03. WHO MAY BE DEEMED OWNER OF SECURITIES. Prior to due
-------------------------------------
presentment for registration of transfer of a registered Security of any series,
the Company, the Trustee, any paying agent and any Security Registrar may deem
and treat the Person in whose name such Security shall be registered, or, in the
case of unregistered Securities, the bearer
<PAGE>
thereof or the owner thereof determined pursuant to Section 8.02, as the
absolute owner of such Security (whether or not such Security shall be overdue
and notwithstanding any notation of ownership or other writing thereon made by
anyone) for the purpose of receiving payment of or on account of the principal
of (and premium, if any) and interest on such Security and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Security Registrar shall be affected by any notice to the contrary; and all such
payments so made to any such Holder for the time being, or upon his order, shall
be valid, and, to the extent of the sum or sums so paid, effectual to satisfy
and discharge the liability for moneys payable upon any such Security.
SECTION 8.04. SECURITIES OWNED BY COMPANY OR CONTROLLED OR
--------------------------------------------
CONTROLLING COMPANIES DISREGARDED FOR CERTAIN PURPOSES. In determining whether
- ------------------------------------------------------
the Holders of the requisite aggregate principal amount Outstanding of
Securities of any series have concurred in any direction, consent or waiver
under this Indenture, Securities of such series which are owned by the Company
or any other obligor on the Securities of such series or by any Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Company or any other obligor on the Securities of such series
shall be disregarded and deemed not to be Outstanding for the purposes of any
such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Securities of such series which a Responsible Officer of the Trustee
actually knows are so owned shall be so disregarded. Securities of such series
so owned which have been pledged in good faith may be regarded as Outstanding
for the purposes of this Section 8.04 if the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right to vote such Securities and that
the pledgee is not the Company or any other obligor on the Securities of such
series or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor.
In the case of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection for the Trustee.
SECTION 8.05. INSTRUMENTS EXECUTED BY HOLDERS BIND FUTURE HOLDERS.
---------------------------------------------------
At any time prior to (but not after) the evidencing to the Trustee, as provided
in Section 8.01, of the taking of any action by the Holders of the percentage in
aggregate principal amount of the Securities of any series then Outstanding
specified in this Indenture in connection with such action, any Holder of a
Security of such series which is shown by the evidence to be included in the
Securities of the particular series the Holders of which have consented to such
action may, by filing written notice with the Trustee at its Corporate Trust
Office and upon proof of holding as provided in Section 8.02, revoke such action
so far as concerns such Security. Except as aforesaid, any such action taken by
the Holder of any Security shall be conclusive and binding upon such Holder and
upon all future Holders and owners of such Security, and of any Security issued
upon registration of transfer thereof or in exchange or substitution therefor,
irrespective of whether or not any notation in regard thereto is made upon such
Security or such other Security. Any action taken by the Holders of the
percentage in aggregate principal amount of the Securities of any series
specified in this Indenture in connection with such action shall be conclusively
binding upon the Company, the Trustee and the Holders of all such Securities.
ARTICLE NINE
HOLDERS' MEETINGS AND CONSENTS
<PAGE>
SECTION 9.01. PURPOSES FOR WHICH MEETING 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 the provisions of this Article Nine for any of the following
purposes:
(1) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Holders of Securities of such series pursuant to any of the
provisions of Article Six;
(2) to remove the Trustee and appoint a successor trustee with
respect to Securities of such series pursuant to the provisions of Article
Seven;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.02; or
(4) to take any other action authorized to be taken by or on behalf
of the Holders of any specified aggregate principal amount Outstanding of
Securities of such series under any other provision of this Indenture or
under applicable law.
SECTION 9.02. CALL OF MEETING BY TRUSTEE. The Trustee may at any
--------------------------
time call a meeting of Holders of Securities of any series to take any action
specified in Section 9.01, to be held at such time and at such place in New
York, New York, or at such other location as the Trustee shall determine. With
respect to registered Securities of any series, notice of every such meeting,
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 mailed to such Holders at
their addresses as they shall appear on the Security Register with respect to
such Securities. With respect to unregistered Securities of any series, notice
of every such meeting shall be published in an authorized newspaper on two
separate days. Such notice shall be provided not less than 20 nor more than 120
days prior to the date fixed for the meeting.
SECTION 9.03. CALL OF MEETINGS BY COMPANY OR HOLDERS. In case at any
--------------------------------------
time the Company, pursuant to a Certified Board Resolution, or the Holders of at
least 10% in aggregate principal amount of Securities of any series then
Outstanding, shall have requested the Trustee to call a meeting of Holders of
Securities of such series to take any action authorized in Section 9.01 by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have provided the notice of such
meeting within 20 days after receipt of such request, then the Company or the
Holders of such Securities in the amount above specified may determine the time
and the place in New York, New York, for such meeting and may call such meeting
by providing notice thereof as provided in Section 9.02.
SECTION 9.04. WHO MAY ATTEND AND VOTE AT MEETINGS. To be entitled to
-----------------------------------
vote at any meeting of Holders of a particular series of Securities, a Person
shall (a) be a Holder of one or more Securities of such series or (b) be a
Person appointed by an instrument in writing as proxy by a Holder of one or more
Securities of such series. Subject to Section 8.01, the only Persons who shall
be entitled to be present or to speak at any meeting of Holders of a particular
series of Securities shall be the Persons entitled to vote at such meeting and
their counsel and any
<PAGE>
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 9.05. REGULATIONS MAY BE MADE BY TRUSTEE. 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
a particular 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 necessary. Except as
otherwise permitted or required by any such regulations, the holding of
Securities of such series shall be proved in the manner specified in Section
8.02 and the appointment of any proxy shall be proved in the manner specified in
Section 8.02.
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 as provided in Section 9.03, in which case the Company or
such Holders 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 may be elected by vote of the Holders of a majority in principal
amount of Securities of the particular series then Outstanding represented at
the meeting and entitled to vote.
Subject to the provisions of Section 8.04, at any meeting each Holder
of Securities of the particular series or proxy entitled to vote shall have 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 of such series challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of
Securities of such series held by him or instruments in writing as aforesaid
duly designating him as the Person to vote on behalf of other Holders of
Securities of the particular series. At any meeting of Holders duly called
pursuant to the provisions of Section 9.02 or Section 9.03 the presence of
Persons holding or representing Securities of the particular series in an
aggregate principal amount outstanding sufficient to take action on the business
for the transaction of which such meeting was called shall constitute a quorum,
but, if less than a quorum be present, the meeting may be adjourned from time to
time by the Holders of a majority in principal amount outstanding of the
Securities of such series represented at the meeting and entitled to vote, and
the meeting may be held as so adjourned without further notice.
SECTION 9.06. MANNER OF VOTING AT MEETINGS AND RECORD TO BE KEPT.
--------------------------------------------------
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 or proxies entitled to vote. The 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 duplicate of all
votes cast at the meeting. A record in duplicate 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
<PAGE>
meeting and showing that said notice was given as provided in Section 9.02. The
record shall be signed and verified by the affidavits of the chairman and
secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other 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.
SECTION 9.07. WRITTEN CONSENT IN LIEU OF MEETINGS. The written
-----------------------------------
authorization or consent of the requisite percentage herein provided of Holders
of Securities of any series entitled to vote at any meeting of Holders of
Securities of a particular series, evidenced as provided in Article Eight and
filed with the Trustee, shall be effective in lieu of a meeting of such Holders
with respect to any matter provided for in this Article Nine.
SECTION 9.08. NO DELAY OF RIGHTS BY MEETING. Nothing in this Article
-----------------------------
Nine contained shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Holders of Securities of any series, or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Holders of Securities of such series under any of the
provisions of this Indenture or of the Securities of such series.
ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.01. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURES MAY BE
-------------------------------------------------
ENTERED INTO WITHOUT CONSENT OF HOLDERS. The Company, when authorized by a
- ---------------------------------------
Certified Board Resolution, and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect) for one
or more of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Eleven;
(b) to appoint one or more additional or separate trustees to act
under this Indenture in the manner and to the extent contemplated by
Section 7.15;
(c) to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions for the protection of the Holders of
Securities of any or all series as the Board of Directors and the Trustee
shall consider to be for the protection of the Holders of Securities of
such series, and to make the occurrence, or the occurrence and continuance,
of a default of any such additional covenants, restrictions, conditions or
provisions a default or an Event of Default permitting the enforcement of
all or any of the several remedies provided in this Indenture as herein set
forth with respect to Securities of such series;
<PAGE>
provided, however, that in respect of any such additional covenant,
restriction, condition or provision with respect to Securities of such
series, 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 right of the Holders of a
majority in aggregate principal amount Outstanding of the Securities of
such series to waive such default;
(d) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision unless such change or elimination would not adversely
affect such provision as applied to such Securities created prior to the
execution of such supplemented indenture.
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture; to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee; or to make such other provisions in regard
to matters or questions arising under this Indenture as shall not adversely
affect the interests of Holders of Securities of any series;
(f) to modify, amend or supplement this indenture to comply with the
provisions of Sections 4.05 and 11.01;
(g) to provide for the issuance of unregistered Securities, or for
the exchange ability of registered Securities of any series with
unregistered Securities of a series issued hereunder, or vice versa, and to
make all appropriate changes for such purpose;
(h) to provide for the issuance under this Indenture of Securities of
a series having any form or terms contemplated by Sections 2.01 and 2.02;
and
(i) 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, pursuant to the requirements
of Section 7.15.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer, assignment, mortgage or pledge of any property thereunder,
but the Trustee 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. The Trustee, subject to the provisions of Sections
7.01 and 7.03, may
<PAGE>
regard an Officers' Certificate or Opinion of Counsel as conclusive evidence
that any such supplemental indenture with respect to any series of Securities
complies with the provisions of this Article Ten.
Any supplemental indenture authorized by the provisions of this
Section 10.01 may be executed by the Company and the Trustee without the consent
of the Holders of any Securities of any series then Outstanding, notwithstanding
any of the provisions of Section 10.02.
SECTION 10.02. MODIFICATION OF INDENTURE WITH CONSENT OF HOLDERS OF A
------------------------------------------------------
MAJORITY IN PRINCIPAL AMOUNT OF SECURITIES. With the consent (evidenced as
- ------------------------------------------
provided in Section 8.01) of the Holders of not less than a majority in
aggregate principal amount of the Securities of any series at the time
Outstanding, the Company, when authorized by a Certified Board Resolution, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto with respect to Securities of the particular
series (which shall conform to the provisions of the Trust Indenture Act as then
in effect) for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of any supplemental
indenture relating to such series or of modifying in any manner the rights of
the Holders of Securities of the particular series; provided, however, that no
such supplemental indenture shall (i) extend the Stated Maturity of any
Security, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of any interest thereon, or reduce any premium payable upon
the redemption thereof, or reduce the amount of an Original Issue Discount
Security that would be due and payable upon a declaration of acceleration of
Stated Maturity thereof pursuant to Section 6.02, or change the currency or
currency unit in which any Security is payable, without the consent of the
Holder of each Security so affected, or (ii) reduce the aforesaid majority in
aggregate principal amount of Securities of any series, the consent of the
Holders of which is required for any such supplemental indenture, without the
consent of the Holders of all Securities of each affected series.
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 one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any series not so affected.
Upon a Company Request, accompanied by a Certified Board Resolution
authorizing the execution of any such supplemental indenture relating to
Securities of a particular series, and upon the filing with the Trustee of
evidence of the consent of Holders of Securities of the particular series as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the Holders of Securities of a
particular series to approve under this Section 10.02 the particular form of any
proposed supplemental indenture with respect to such series of Securities, but
it shall be sufficient if such consent shall approve the substance thereof.
<PAGE>
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 10.02, the
Company shall mail a notice thereof by first-class mail to the Holders of
registered Securities of each series affected thereby at their addresses as they
shall appear on the Security Register for such Securities, or, in the case of
unregistered Securities, shall give notice in the manner provided in Section
5.04 hereof, setting forth in general terms the substance of such supplemental
indenture. Any failure of the Company to provide such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 10.03. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution
---------------------------------
and delivery of any supplemental indenture with respect to any series of
Securities pursuant to the provisions of this Article Ten, this Indenture shall
be and be deemed to be modified and amended with respect to the affected series
of Securities in accordance therewith and the respective rights, limitations of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the Holders of Securities of the series affected shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
The Trustee, subject to the provisions of Sections 7.01 and 7.03, may
regard an Officers' Certificate and Opinion of Counsel as conclusive evidence
that any such supplemental indenture with respect to any series of Securities
complies with the provisions of this Article Ten, but the Trustee 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 10.04. SECURITIES MAY BEAR NOTATION OF CHANGES BY
------------------------------------------
SUPPLEMENTAL INDENTURES. Securities authenticated and delivered after the
- -----------------------
execution, pursuant to the provisions of this Article Ten, of any supplemental
indenture with respect to any series of Securities may, and shall if required by
the Trustee, bear a notation in the form approved by the Trustee as to any
matter provided for in such supplemental indenture. New Securities of the
affected series so modified as to conform, in the opinion of the Trustee and the
Board of Directors of the Company, to any modification of this Indenture
contained in any such supplemental indenture with respect to such series of
Securities may be prepared by the Company, authenticated by the Trustee and
delivered in exchange for the Securities of the particular series then
Outstanding.
ARTICLE ELEVEN
CONSOLIDATION, MERGER, SALE, CONVEYANCE OR LEASE
SECTION 11.01. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. The
-----------------------------------------------
Company may consolidate with, or merge into, or sell, lease or convey all or
substantially all of its assets to, any person, provided that in any such case,
(i) either the Company shall be the continuing corporation, or the corporation
formed by such consolidation or into which the Company is merged or the Person
which acquires by sale, lease or conveyance all or substantially all of the
Company's assets shall be a corporation organized and existing under the
<PAGE>
laws of the United States of America or a State thereof or the District of
Columbia and such corporation shall expressly assume the due and punctual
payment of the principal of (and premium, if any) and any interest on all the
Securities, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by the Company by supplemental indenture satisfactory to the Trustee,
executed and delivered to the Trustee by such corporation, and (ii) immediately
after such merger or consolidation, or such sale, lease or conveyance, no Event
of Default or no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing.
The Company may not consolidate with, merge into, or sell, lease or
convey all or substantially all of its assets to, another Person, if as a result
of such consolidation, merger, sale, lease or conveyance, any property owned by
the Company or a Restricted Subsidiary immediately prior thereto would be
subject to a lien, unless (a) simultaneously therewith or prior thereto
effective provision shall be made for the securing (equally and ratably with any
other indebtedness of or guaranteed by the Company then entitled thereto) of the
due and punctual payment of the principal of and interest on all of the
Securities equally and ratably with (or prior to) the debt secured by such lien,
or (b) the Company would be permitted to create such lien pursuant to Section
4.06 or 4.08 without equally and ratably securing the Securities.
SECTION 11.02. SUCCESSOR CORPORATION TO BE SUBSTITUTED. In case of
---------------------------------------
any such consolidation, merger, sale, conveyance or lease referred to in Section
11.01 and upon the assumption by the successor corporation or entity, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
interest on all of the Securities and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Company,
such successor corporation or entity shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as a party. Such
successor corporation or entity thereupon may cause to be signed, and may issue
either in its own name or in the name of Hussmann International, Inc. 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 corporation or entity instead of the Company and subject to all the
terms, conditions or limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously should have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such successor corporation or entity
thereafter shall cause to be signed and delivered to the Trustee for that
purpose. All the Securities so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Securities 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 the
event of any such sale or conveyance, but not any such lease, the Company or any
successor corporation or entity which shall theretofore have such in the manner
described in this Article Eleven shall be discharged from all obligations and
covenants under this Indenture and the Securities and may be dissolved and
liquidated.
SECTION 11.03. OPINION OF COUNSEL TO BE GIVEN TRUSTEE. The Trustee,
--------------------------------------
subject to Sections 7.01 and 7.03, shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating that any such
consolidation, merger, sale, conveyance or lease and any such assumption
complies with the provisions of this Article Eleven.
<PAGE>
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE. If at any
---------------------------------------
time (a) the Company shall have delivered to the Trustee for cancellation all
Securities of any series theretofore authenticated and delivered (other than
Securities which shall have been destroyed, lost or stolen and which shall have
been replaced or paid as provided in Section 2.08 or Securities for which
payment money has theretofore been deposited in trust and thereafter repaid to
the Company as provided in Section 12.05), or (b) all Securities of any series
not theretofore delivered to the Trustee for cancellation shall have become due
and payable, or are by their terms to become due and payable within one year or
are to be called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee as trust funds the entire amount sufficient to pay at
Stated Maturity or upon redemption all such Securities not theretofore delivered
to the Trustee for cancellation, including principal (and premium, if any) and
interest due or to become due at Stated Maturity or on such redemption date, as
the case may be, and if in either case the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company, then this Indenture shall
cease to be of further effect (except the Company's obligations with respect to
such Securities under Sections 2.06, 2.08, 4.03, 4.05, 5.01, 7.07, 7.11, 7.12,
12.02 and Article 3 of this Indenture, so long as any principal of (and premium,
if any) or interest on such securities remains unpaid, and, thereafter, only the
Company's rights and obligations under Section 4.05 and 7.07) and the Trustee,
on demand of the Company accompanied by an Officers' Certificate and an Opinion
of Counsel as required by Section 14.05 and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture. Notwithstanding the satisfaction and discharge of
this Indenture, the obligations of the Company to the Trustee under Section 7.07
shall survive.
SECTION 12.02. DEFEASANCE AND DISCHARGE OF SECURITIES OR CERTAIN
-------------------------------------------------
OBLIGATIONS. Notwithstanding Section 12.01 and except as otherwise specified as
- -----------
contemplated by Section 12.01, this Section 12.02 shall be applicable to the
Securities of any series:
(a) The Company shall be deemed to have paid and discharged the
entire indebtedness on all the Outstanding Securities of that series, the
provisions of this Indenture as it relates to such Outstanding Securities
(except as to (i) the rights of Holders of Securities to receive, from the
trust funds described in subparagraph (1) below, payment of the principal
of (and premium, if any) and any installment of principal of (and premium,
if any) or interest on such Securities on the Stated Maturity of such
principal or installment of principal or interest or any mandatory sinking
fund payments or analogous payments applicable to the Securities of that
series on the day on which such payments are due and payable in accordance
with the terms of this Indenture and of such Securities, (ii) the Company's
obligations with respect to such Securities under Sections 2.06, 2.08,
4.03, 4.05, 5.01, 7.07, 7.11, 7.12, 12.02 and Article 3 of this Indenture,
so long as any principal of (and premium, if any) or interest on such
Securities remains unpaid and, thereafter, only the Company's rights and
obligations under Sections 4.05 and 7.07, and (iii)
<PAGE>
the rights, powers, trusts, duties and immunities of the Trustee with
respect to such series) shall no longer be in effect, and the Trustee, at
the expense of the Company, shall, upon a Company Direction, execute proper
instruments acknowledging the same, provided that the following conditions
have been satisfied:
(1) With reference to this Section 12.02(a), the Company has
deposited or caused to be deposited with the Trustee irrevocably
(subject to the provisions of Section 12.02(c) and the last paragraph
of Section 6.06), as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
the Securities of that series, (A) money in an amount, or (B)
Government Obligations which, through the payment of interest and
principal in respect thereof in accordance with their terms, without
consideration of any reinvestment thereof, will provide not later than
the opening of business on the due date of any payment referred to in
clause (i) or (ii) below of this subparagraph (1) money in an amount,
or (C) a combination thereof, sufficient, after payment of all taxes
in respect thereof payable by the Trustee, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge (i) the principal of (and premium, if any) and each
installment of principal (and premium, if any) and interest on the
Outstanding Securities of that series on the Stated Maturity of such
principal or installment of principal or interest or any date fixed
for redemption of such Outstanding Securities and (ii) any mandatory
sinking fund payments or analogous payments applicable to Securities
of such series on the day on which such payments are due and payable
in accordance with the terms of this Indenture and of such Securities;
(2) the Company has paid or caused to be paid all other sums
payable in respect of such Securities, and such payment and the
deposit set forth in subparagraph (1) above will not result in a
breach or violation of, or constitute a default under, this Indenture
or any other agreement or instrument to which the Company is a party
or by which it is bound;
(3) no Event of Default or event which with the giving of notice
or lapse of time, or both, would become an Event of Default with
respect to the Securities of that series shall have occurred and be
continuing on the date of such deposit and no Event of Default under
Section 6.01(5) or event which with the giving of notice or lapse of
time, or both, would become an Event of Default under Section 6.01(5)
shall have occurred and be continuing on the 91st day after such date;
(4) the Company has delivered to the Trustee an Opinion of
counsel of recognized national standing or a ruling of the Internal
Revenue Service to the effect that Holders of the Securities of that
series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and
will be subject to federal
<PAGE>
income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit, defeasance and
discharge had not occurred; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent in this Indenture provided for relating to the
defeasance and discharge of the entire indebtedness on all Outstanding
Securities of any such series as contemplated by this Section 12.02(a)
have been complied with.
(b) The Company may omit to comply with and shall be released from
its obligations under any term, provision or condition set forth in
Sections 4.06, 4.07, 4.08 and Article Eleven, and Section 6.01(4) with
respect to Sections 4.06, 4.07, 4.08 and Article Eleven shall be deemed not
to be an Event of Default, in each case with respect to the Securities of
that series, provided, that the following conditions have been satisfied:
(1) with reference to this Section 12.02(b), the Company has
deposited or caused to be deposited with the Trustee irrevocably
subject to the provisions of Section 12.02(c) and the last paragraph
of Section 6.06), as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
the Securities of that series, (A) money in an amount, or (B)
Government Obligations which, through the payment of interest and
principal in respect thereof in accordance with their terms, without
consideration of any reinvestment thereof, will provide not later than
the opening of business on the due date of any payment referred to in
clause (i) or (ii) below of this subparagraph (1) money in an amount,
or (C) a combination thereof, sufficient, after payment of all taxes
in respect thereof payable by the Trustee, in the opinion of a
nationally recognized firm of independent certified public accountants
expressed in a written certification thereof delivered to the Trustee,
to pay and discharge (i) the principal of (and premium, if any) and
each installment of principal (and premium, if any) and interest on
the Outstanding Securities of that series on the Stated Maturity of
such principal or installment of principal or interest or any date
fixed for redemption of such Outstanding Securities and (ii) any
mandatory sinking fund payments or analogous payments applicable to
Securities of such series on the day on which such payments are due
and in accordance with the terms of this Indenture and of such
Securities;
(2) such deposit shall not cause the Trustee with respect to the
Securities of that series to have a conflicting interest for purposes
of the Trust Indenture Act with respect to the Securities of any
series;
(3) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
<PAGE>
(4) no Event of Default or event which with the giving of notice
or lapse of time, or both, would become an Event of Default with
respect to the Securities of that series shall have occurred and be
continuing on the date of such deposit and no Event of Default under
Section 6.01(5) or event which with the giving of notice or lapse of
time, or both, would become an Event of Default under Section 6.01(5)
shall have occurred and be continuing on the 91st day after such date;
(5) the Company has delivered to the Trustee an Opinion of
Counsel of recognized national standing to the effect that Holders of
the Securities of such series will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to federal
income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit and defeasance had
not occurred; and
(6) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent in this Indenture provided for relating to the
defeasance contemplated by this Section 12.02(b) have been complied
with.
(c) The Trustee shall deliver or pay to the Company from time to time
upon a Company Direction any money or Government Obligations held by it as
provided in this Section 12.02 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are then in excess of the
amount thereof which then would have been required to be deposited for the
purpose for which such money or Government Obligations were deposited or
received.
SECTION 12.03. APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT
-----------------------------------------------------
OF SECURITIES. All moneys with respect to a particular series of Securities
- -------------
deposited with the Trustee pursuant to Section 12.01 or Section 12.02 shall be
held in trust and applied by it to the payment, either directly or through any
paying agent (including, except in the case of Section 12.02(a), the Company
acting as its own paying agent), to the Holders of Securities of such series for
the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal (and premium,
if any) and interest.
SECTION 12.04. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In
----------------------------------------
connection with the satisfaction and discharge of this Indenture, all moneys
then held by any paying agent (other than the Trustee, if the Trustee is serving
as a paying agent) under the provisions of this Indenture shall, upon a Company
Direction, be repaid to the Company or paid to the Trustee and thereupon such
paying agent shall be released from all further liability with respect to such
moneys.
SECTION 12.05. REPAYMENT OF MONEYS HELD BY TRUSTEE. Any moneys
-----------------------------------
deposited with the Trustee or any paying agent for the payment of the principal
of (and premium, if any) or interest on any Securities of any series and not
applied but remaining unclaimed by the Holders
<PAGE>
of Securities of that series for two years after the date upon which the
principal of (and premium, if any) or interest on such Securities shall have
become due and payable, shall be repaid to the Company by the Trustee or such
paying agent by Company Direction; and the Holders of any of the Securities of
that series entitled to receive Such payment shall thereafter look only to the
Company for the payment thereof and all liability of the Trustee or such paying
agent with respect to such moneys 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 a week
for two successive weeks (in each case on any day of the week) in an Authorized
Newspaper, a notice that such moneys have not been so applied and that after a
date named therein any unclaimed balance of said moneys then remaining will be
returned to the Company.
<PAGE>
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES
SECTION 13.01. INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS AND
----------------------------------------------------
EMPLOYEES OF COMPANY EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or
- -----------------------------------------------------
upon any obligation, covenant or agreement of this Indenture, or of any Security
or for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, stockholder, officer, director or employee, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that this Indenture and the obligations issued
hereunder are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
stockholders, officers, directors or employees, as such, of the Company or of
any successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Securities
or implied therefrom; and that any and all such personal liability, either at
common law or on equity or by constitution or statute of, and any and all such
rights and claims against, every such incorporator, stockholder, officer,
director or employee, as such, because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities or implied
therefrom, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution and delivery of this Indenture and the issue of
Securities hereunder.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
SECTION 14.01. SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY INDENTURE.
----------------------------------------------------
All the covenants, stipulations, promises and agreements in this Indenture
contained by or in behalf of the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 14.02. ACTS OF BOARD, COMMITTEE OR OFFICER OF SUCCESSOR
------------------------------------------------
CORPORATION VALID. Any act or proceeding by any provision of this Indenture
- -----------------
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
that time be the successor of the Company.
SECTION 14.03. REQUIRED NOTICES OR DEMANDS. Unless otherwise
---------------------------
provided in this Indenture, any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
any Holders to or on the Company may be given or served by being deposited
postage prepaid in a post office letter box in the United States addressed
(until another address is filed by the Company with the Trustee), as follows:
Hussmann International, Inc., 12999 St. Charles Rock Road, Bridgeton, Missouri
63044-2483, to the attention of the Treasurer. Any notice, direction, request
or demand by the Company or by
<PAGE>
any Holder to or upon the Trustee may be given or made, for all purposes, by
being deposited first-class postage prepaid in a post office letter box in the
United States or airmail postage prepaid if sent from outside the United States,
addressed to the Corporate Trust Office, Attention: Corporate Trust Trustee
Administration. Any notice required or permitted to be mailed to a Holder of
registered Securities of any series by the Company or the Trustee pursuant to
the provisions of this Indenture shall be deemed to be properly mailed by being
deposited postage prepaid in a post office letter box in the United States
addressed to such Holder at the address of such Holder as shown on the Security
Register for the particular series of Securities. Any notice required or
permitted to be given to a Holder of unregistered Securities of any series shall
be deemed to be properly given if such notice is published in an Authorized
Newspaper in New York, New York or such other cities as shall be specified with
respect to such Securities.
SECTION 14.04. INDENTURE AND SECURITIES TO BE CONSTRUED IN ACCORDANCE
------------------------------------------------------
WITH THE LAWS OF THE STATE OF NEW YORK. This Indenture and each Security shall
- --------------------------------------
be deemed to be a contract made 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 conflicts of laws principles thereof. The
descriptive headings of the Articles and Sections of this Indenture are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
SECTION 14.05. OFFICERS' CERTIFICATE AND OPINION OF COUNSEL TO BE
--------------------------------------------------
FURNISHED UPON APPLICATION OR REQUEST BY THE COMPANY. Upon any application or
- ----------------------------------------------------
request by the Company to the Trustee to take any action under any of the
provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which constitutes
a condition precedent) which relate to the authentication and delivery of the
Securities of any series, to the release or the release and substitution of
property subject to the lien of the Indenture, to the satisfaction and discharge
of the Indenture, or to any other action to be taken at the request or upon the
application of the Company have been complied with and an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent have
been complied with, except that in the case of any such application or request
as to which the furnishing of any such document is specifically required by any
provision of this Indenture relating to such application or request, no
additional certificate or opinion, as the case may be, need be furnished.
Each certificate (other than an annual certificate delivered pursuant to
Section 4.09) or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the Person
making such certificate or opinion has read such covenant or condition; (2) 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; (3) a statement that, in the opinion of such Person, 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 (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 14.06. PAYMENTS DUE ON NON-BUSINESS DAYS. In any case where
---------------------------------
the date of maturity of interest on or principal of any Security or the date
fixed for redemption of any Security shall not be a Business Day, then payment
of interest or principal (and premium, if any)
<PAGE>
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the date of maturity or the
date fixed for redemption, and no interest shall accrue for the period after
such date.
SECTION 14.07. MONEYS OF DIFFERENT CURRENCIES TO BE SEGREGATED. The
-----------------------------------------------
Trustee shall segregate moneys, funds and accounts held by the Trustee hereunder
in one currency (or unit thereof) from any moneys, funds or accounts in any
other currencies (or units thereof), notwithstanding any provision herein which
would otherwise permit the Trustee to commingle such amounts.
SECTION 14.08. PAYMENT TO BE IN PROPER CURRENCY. Other than as
--------------------------------
provided herein or in the Security, an Officers' Certificate or a supplemental
indenture, the obligation of the Company to make any payment of principal of
(and premium, if any) and interest, if any, on such Security shall not be
discharged or satisfied by any tender by the Company, or collection by the
Trustee, in any currency or currency unit other than that in which such Security
is denominated (the "Specified Currency"), except to the extent that the Trustee
timely holds for such payment the full amount of the Specified Currency when due
and payable. If any such tender or collection is made in other than the
Specified Currency, the Trustee may take such actions as it considers
appropriate to exchange such other currency or currency unit for the Specified
Currency. The costs and risks of any such exchange, including without
limitation the risks of delay and exchange rate fluctuation, shall be borne by
the Company, the Company shall remain fully liable for any shortfall or
delinquency in the full amount of the Specified Currency then due and payable
and in no circumstances shall the Trustee be liable therefor. The Company
waives any defense of payment based upon any such tender or collection which is
not in the Specified Currency, or which, when exchanged for the Specified
Currency by the Trustee, is less than the full amount of the Specified Currency
then due and payable.
Notwithstanding the foregoing, if a Specified Currency is not
available to make any payment of principal of (and premium, if any) and
interest, if any, on a Security denominated in other than Dollars due to the
imposition of exchange controls or other circumstances beyond the Company's
control, the Company shall be entitled to satisfy its obligation by making such
payment in Dollars on the basis of the Market Exchange Rate on the date of such
payment, or if such Market Exchange Rate is not then available, on the basis of
the most recently available Market Exchange Rate. For any Specified Currency,
"Market Exchange Rate" shall mean the noon buying rate in New York, New York for
cable transfers of such Specified Currency as certified for customs purposes by
the Federal Reserve Bank of New York.
SECTION 14.09. PROVISIONS REQUIRED BY TRUST INDENTURE ACT TO CONTROL.
-----------------------------------------------------
If and to the extent that any provision of this Indenture limits, qualifies or
conflicts with the duties imposed pursuant to Section 318(c) of the Trust
Indenture Act, the imposed duties shall control.
SECTION 14.10. INDENTURE MAY BE EXECUTED IN COUNTERPARTS. This
-----------------------------------------
Indenture 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 14.11. SEPARABILITY CLAUSE. In case any provision in this
-------------------
Indenture or in the Securities 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.
<PAGE>
The Trustee hereby accepts the trusts in this Indenture declared and
provided, upon the terms and conditions hereinabove set forth.
<PAGE>
IN WITNESS WHEREOF, HUSSMANN INTERNATIONAL, INC. and THE BANK OF NEW
YORK have caused this Indenture to be duly executed, all as of the day and year
first above written.
HUSSMANN INTERNATIONAL, INC.
By: /s/ Michael D. Newman
---------------------
Name: Michael D. Newman
Title: Chief Financial Officer
THE BANK OF NEW YORK, AS TRUSTEE
By: /s/ Robert A. Massimillo
------------------------
Name: Robert A. Massimillo
Title: Assistant Vice President
<PAGE>
Exhibit 10.9
HUSSMANN INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
(EFFECTIVE AS OF FEBRUARY 26, 1998)
I. GENERAL
1. PURPOSE. The primary purpose of this Plan is to establish a method
for the payment of deferred compensation to directors of Hussmann International,
Inc. (the "Company") which will assist the Company in attracting and retaining
as members of its Board of Directors those persons whose abilities, experience
and judgment will contribute to the continued progress of the Company.
2. ELIGIBILITY. Each director of the Company (other than the Chairman)
who is not an employee of the Company or any subsidiary of the Company (a "Non-
Employee Director") shall be eligible to participate in this Plan.
3. ADMINISTRATION. This Plan shall be administered by the Board of
Directors or a committee of the Board of Directors (the "Committee"), which
shall have full power and authority to interpret, construe and administer this
Plan in accordance with the provisions herein set forth. The Plan
administrator's interpretation and construction of this Plan, and actions under
this Plan, and the Plan administrator's determination of the amount or recipient
of payments to be made from this Plan, shall be conclusive and binding on all
persons for all purposes. The expenses of administering this Plan shall be paid
by the Company and shall not be charged against this Plan.
II. DEFERRAL OF RETAINER AND FEES
1. RIGHT TO DEFER COMPENSATION. Each Non-Employee Director may
participate in this Plan by executing an agreement with the Company (an
"Agreement") prior to the beginning of any calendar quarter to defer payment of
all or a portion of the compensation to which such Director is entitled for
services performed during and after such calendar quarter as a director,
consisting of the annual cash retainer (including, if applicable, the portion
attributable to services as Chairman of a Board committee) or Board and
committee meeting fees, or both such retainer and meeting fees (collectively
sometimes referred to as "compensation" or "deferred compensation"). An
Agreement shall be delivered to the Vice President-Human Resources of the
Company. A participant may not revoke or change an election to defer
compensation for a calendar quarter after the beginning of such quarter, but may
change or revoke an election for any subsequent quarter by executing with the
Company a new Agreement prior to the quarter for which the change or revocation
is to become effective. Elections to defer compensation shall be irrevocable as
to all compensation which shall have been earned while such election was in
effect.
<PAGE>
2. DEFERRED COMPENSATION ACCOUNT. The Company shall maintain a
bookkeeping account for each participant in the Plan to which there shall be
credited, as of the date the compensation would have been payable, the amount of
any compensation deferred.
3. INTEREST ON DEFERRED COMPENSATION ACCOUNT. So long as a participant
is serving as a Director of the Company, on June 30 and December 31 of each
year, accrued interest shall be credited in arrears to each Plan account in
respect of the amount of deferred compensation (and previously credited accrued
interest) then credited to such account at the prime rate of interest then
quoted by Mercantile Bank of St. Louis N.A. (the "Prime Rate"). Any such
interest shall be credited for the period from and including the most recent
January 1 or July 1, as applicable (or from and including the date as of which
any deferred compensation was credited to such account), to and including June
30 or December 31, as applicable. As of the date a participant ceases to serve
as a Director of the Company for any reason, and thereafter as of the date of
each payment to the participant, accrued interest shall be credited in arrears
to that participant's Plan account at the Prime Rate.
4. PAYMENT OF DEFERRED COMPENSATION.
(a) Except as otherwise set forth in this Plan, a participant's
account shall be paid or commence to be paid to the participant on the later of
(i) the date(s) elected by the participant in the participant's deferred
compensation Agreement or other form of election provided by the Company or (ii)
the first January occurring after the Participant ceases to serve as a Director
for any reason; provided, however, that the date(s) elected by the participant
shall be at least one year after the execution of the Agreement or other form of
election. Each participant shall receive payment of the amount credited to that
participant's account either in a single lump sum or in quarterly or annual
installments over a period not to exceed ten years, as elected by the
participant.
(b) If a participant does not make an election pursuant to Section
II.4(a), then commencing with the first January 1 occurring after the
participant ceases to serve as a Director of the Company for any reason, the
Company shall make quarterly payments of deferred compensation plus accrued
interest over a term equal to the greater of (i) three years or (ii) the number
of years and portion thereof during which the participant had in effect an
election to defer compensation under this Article II. The amount payable for
any quarter shall be determined by dividing the amount then credited to the
participant's account by the number of remaining quarters in which a payment is
to be made by the Company.
2
<PAGE>
III. STOCK UNITS
1. CREDITING OF STOCK UNITS.
(a) Each Non-Employee Director as of February 26, 1998 shall be
credited as of February 26, 1998 with the number of stock units (carried to four
decimal places) determined by dividing $18,164.38 by the Fair Market Value of a
share of Common Stock of the Company as of February 26, 1998. "Fair Market
Value" shall mean, as of any date, the average closing price per share, as
reported for New York Stock Exchange Composite Transactions, for the 20 trading
days immediately preceding the date of determination.
(b) On the date of each annual meeting of stockholders, beginning
with the 1999 annual meeting, each Non-Employee Director serving as such
immediately after such annual meeting shall be credited as of that date with the
number of stock units (carried to four decimal places) determined by dividing
$15,000 by the Fair Market Value of a share of Common Stock as of that date.
(c) Each individual who first begins to serve as a Non-Employee
Director after February 26, 1998 (the "First Service Date") shall be credited as
of the First Service Date with a number of stock units (carried to four decimal
places) equal to (i) the product of (A) the actual number of days from and after
the First Service Date through and including the date of the first annual
meeting of stockholders held after the First Service Date divided by 365 or 366,
as applicable, multiplied by (B) $15,000, which product is (ii) divided by the
Fair Market Value of a share of Common Stock as of the First Service Date.
2. DIVIDEND EQUIVALENTS. On each dividend payment date in respect of the
Common Stock, each participant in this Plan shall be credited with an amount
equal to (i) the product of the number of stock units credited to that
participant's account as of the record date for such dividend multiplied by (ii)
the per share amount of the dividend.
3. INTEREST ON DIVIDEND EQUIVALENT ACCOUNT. So long as a participant is
serving as a Director of the Company, on June 30 and December 31 of each year,
accrued interest shall be credited in arrears to each Plan account in respect of
the amount of dividend equivalents (and previously credited accrued interest)
then credited to such account at the Prime Rate. Any such interest shall be
credited for the period from and including the most recent January 1 or July 1,
as applicable (or from and including the dividend payment date applicable to any
dividend equivalents), to and including June 30 or December 31, as applicable.
As of the date a participant ceases to serve as a Director of the Company for
any reason, and thereafter as of the date of each payment to the participant,
accrued interest shall be credited in arrears to that participant's Plan account
at the Prime Rate.
4. BOOKKEEPING ACCOUNT. The Company shall maintain bookkeeping accounts
for each participant in the Plan to which there shall be credited stock units,
dividend equivalents and interest in accordance with Sections III.1, III.2 and
III.3.
3
<PAGE>
5. ADJUSTMENTS. In the event of any stock split, stock dividend, spin-
off, split-up, recapitalization, merger, consolidation, combination or exchange
of shares, liquidation or the like, the number and class of stock units credited
to each stock unit account shall be appropriately adjusted by the Board or a
committee designated by the Board.
6. PAYMENT OF ACCOUNTS.
(a) Except as otherwise set forth in this Plan, a participant's
account shall be paid or commence to be paid to the participant on the later of
(i) the date(s) elected by the participant in the participant's form of election
provided by the Company or (ii) the first January occurring after the
participant ceases to serve as a Director for any reason. Each participant
shall receive certificates for Common Stock representing the whole number of
stock units credited to that participant's stock unit account as of the
effective date of the participant's cessation of service as a Director of the
Company, either in a single lump sum or in annual installments over a period not
to exceed ten years, and cash in an amount equal to the amount credited to the
participant's dividend equivalent account, including interest previously
credited, either in a single lump sum or in quarterly or annual installments
over a period not to exceed ten years, as elected by the participant; provided,
however, that the Company shall, at the time of the first such distribution of
Common Stock, pay cash in lieu of any fractional stock unit based on the Fair
Market Value of the Common Stock as of the effective date of the participant's
cessation of service as a Director of the Company.
(b) If a participant does not make an election pursuant to Section
III.6(a), then within 30 days after the participant ceases to serve as a
Director of the Company for any reason:
(i) The Company shall distribute to the participant one or more
certificates for Common Stock representing the whole number of stock units
credited to that participant's stock unit account as of the effective date
of the participant's cessation of service and the Company shall pay cash in
lieu of any fractional stock unit based on the Fair Market Value of the
Common Stock as of the effective date of the participant's cessation of
service as a Director of the Company; and
(ii) The Company shall pay to the participant cash in an amount equal
to the amount credited to the participant's dividend equivalent account,
including interest previously credited.
4
<PAGE>
IV. MISCELLANEOUS
(a) In the event a participant dies prior to receiving payment of any
amount under this Plan to which the participant is entitled, the unpaid amount
shall be paid to the beneficiary(ies) designated by the participant in a written
instrument filed with the Vice President-Human Resources of the Company. Such
amount shall be paid at the same time and in the same manner as such amount
would have been paid had the participant survived; provided, however, that the
Plan administrator may accelerate the time of any payment in its discretion. If
such beneficiary is a natural person, any amounts remaining unpaid upon the
death of the designated beneficiary shall be paid to the estate of such
beneficiary. If a participant fails to make an effective beneficiary
designation, any amounts remaining unpaid upon the death of the participant
shall be paid to the estate of the participant.
If, in the opinion of the Plan administrator, a participant or
beneficiary who is entitled to a payment hereunder shall be mentally or
physically disabled, any payment to such participant or beneficiary may, with
the approval of the Plan administrator, be paid to the participant or
beneficiary, to his or her legal representative, or to any other person for the
benefit of the participant or beneficiary.
(b) Deferred compensation, stock units, interest and any other amounts
payable hereunder may not be voluntarily or involuntarily sold, transferred or
assigned and shall not be subject to any legal attachment, levy or garnishment.
(c) Participation in this Plan shall not confer upon any person any
right to be nominated for re-election to the Board of Directors or to be re-
elected to the Board of Directors.
(d) Notwithstanding the payment provisions of this Plan, in the event
of a "Change in Control" of the Company, as that term is defined in the Change
in Control Agreement, dated as of January 30, 1998 by and between the Company
and certain designated executives of the Company, each participant shall
thereupon be entitled to receive a lump sum payment consisting of all deferred
compensation, stock units, interest and any other amounts which have accrued to
the participant's account(s) under this Plan.
(e) Except as set forth in clause (f) below, the Company shall not be
required to reserve, or otherwise set aside, assets or funds for the payment of
its obligations hereunder. A participant's rights to receive benefits shall be
no greater than the rights of any unsecured general creditor of the Company.
(f) A participant shall not have any rights as a stockholder of the
Company with respect to any stock units. The Company shall at all times prior
to the distribution of Common Stock to a participant reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Common
Stock, the full number of shares that may be payable under this Plan.
5
<PAGE>
(g) This Plan and all determinations made and actions taken pursuant
hereto, to the extent not governed by the Internal Revenue Code or the laws of
the United States, shall be governed by the laws of the State of Delaware and
construed in accordance therewith without giving effect to principles of
conflict of laws.
(h) The Board of Directors may terminate this Plan at any time, or
amend or modify it from time to time in any respect. The amendment or
termination of this Plan shall not in any way affect the rights of participants,
or their executors, administrators, beneficiaries or similar persons, to the
extent of credits to their account at the time of amendment or termination.
(i) The Company shall pay all legal fees and expenses which a
participant may incur as a result of the Company or a subsidiary contesting the
validity or enforceability of this Plan or any related agreement.
6
<PAGE>
Exhibit 10.10
HUSSMANN INTERNATIONAL, INC.
DEFERRED COMPENSATION AND PAYMENT AGREEMENT FOR DIRECTORS
THIS AGREEMENT is made and entered into this _____ day of __________, 1998,
by and between Hussmann International, Inc., a Delaware corporation (the
"Company"), and _________________________ (the "Participant").
WITNESSETH:
WHEREAS, the Company has a Deferred Compensation Plan for Directors (the
"Plan") in which the Participant is eligible to participate; and
WHEREAS, the Participant desires to defer all or a portion of the
Participant's annual cash retainer for service as a director of the Company
("Retainer") and/or all or a portion of the meeting fees payable to the
Participant for attendance at meetings of the Board of Directors or a committee
of the Board of Directors ("Fees"), in accordance with the terms and conditions
of the Plan and this Agreement; and
WHEREAS, the Participant desires to make an election for the payment of (i)
the Participant's stock units ("Stock Units") set forth or to be set forth in a
separate Stock Unit account on the Company's books for the benefit and in the
name of the Participant ("Stock Unit Account") and (ii) dividend equivalents
("Dividend Equivalents") set forth or to be set forth in a separate Dividend
Equivalent account on the Company's books for the benefit and in the name of the
Participant ("Dividend Equivalent Account"), in accordance with the terms and
conditions of the Plan and this Agreement:
NOW, THEREFORE, the parties hereto agree as follows:
1. PARTICIPANT'S ELECTION TO DEFER RETAINER. The Participant hereby
irrevocably elects to defer payment of ____% (insert 25, 50, 75 or 100) of the
Retainer otherwise payable to the Participant. Such Retainer shall be deferred
beginning with the calendar quarter commencing _______, 19__ (insert January 1,
April 1, July 1 or October 1 and the year) and ending on ________, ____ (insert
March 31, June 30, September 30 or December 31 and the year). The Participant
may revoke or change the foregoing election for any calendar quarter by
executing a new Agreement prior to such quarter.
2. PARTICIPANT'S ELECTION TO DEFER FEES. The Participant hereby
irrevocably elects to defer payment of _____% (insert 25, 50, 75 or 100) of the
Fees otherwise payable to the Participant during the period set forth in Section
1. The Participant may revoke or change the foregoing election for any calendar
quarter by executing a new Agreement prior to such quarter.
3. AGREEMENT OF THE COMPANY TO DEFER RETAINER AND/OR FEES. The Company
agrees to establish a separate deferred compensation account on its books for
the benefit and in the name of the Participant ("Deferred Compensation Account")
in which the amount of Retainer
<PAGE>
and/or Fees deferred by the Participant ("Deferred Compensation") under this
Agreement shall be credited. Deferred Compensation shall be credited to the
Deferred Compensation Account as of the date on which such Deferred Compensation
would have been paid to the Participant but for the Participant's election to
defer payment of such amount(s).
4. INTEREST ON DEFERRED COMPENSATION ACCOUNT AND DIVIDEND EQUIVALENT
ACCOUNT. So long as the Participant is serving as a Director of the Company,
interest shall be credited to the Deferred Compensation Account and Dividend
Equivalent Account on June 30 and December 31 of each year in respect of the
amount of Deferred Compensation and Dividend Equivalents (and in each case
previously credited accrued interest) then credited to the Deferred Compensation
Account and Dividend Equivalent Account at the prime rate of interest then
quoted by Mercantile Bank of St. Louis N.A. (the "Prime Rate"). Any such
interest shall be credited for the period from and including the most recent
January 1 or July 1, as applicable (or from and including the date as of which
Deferred Compensation or Dividend Equivalents, as applicable, were credited to
the applicable Account), to and including June 30 or December 31, as applicable.
As of the date the Participant ceases to serve as a Director of the Company for
any reason, and thereafter as of the date of each payment to the Participant,
accrued interest shall be credited in arrears to the Deferred Compensation
Account and the Dividend Equivalent Account at the Prime Rate.
5. PAYMENT OF DEFERRED COMPENSATION, DIVIDEND EQUIVALENTS AND INTEREST.
The Participant hereby elects to receive payment of, and the Company hereby
agrees to pay the Participant, the total amount credited to the Deferred
Compensation Account and the Dividend Equivalent Account as follows:
(a) a lump sum payment in _______________(insert month and year at least
one year after the date of this Agreement) or, if later, during the first
January occurring after the Participant's cessation of service as a Director of
the Company; or
(b) ____ ANNUAL; ____ QUARTERLY (insert a whole number not exceeding 10 in
the case of annual payments and not exceeding 40 in the case of quarterly
payments) installments commencing on ____________________ (insert month and year
at least one year after the date of this Agreement) or, if later, the first
January 1 occurring after the Participant's cessation of service as a Director
of the Company.
6. PAYMENT OF STOCK UNITS. The Participant hereby elects to receive
certificates for Common Stock representing the whole number of Stock Units
credited to the Participant's Stock Unit Account as of the effective date of the
Participant's cessation of service as a Director of the Company, and the Company
hereby agrees to distribute to the Participant, the Stock Units as follows:
(a) a lump sum distribution in _______________ (insert month and year) or,
if later, during the first January occurring after the Participant's cessation
of service as a Director of the Company; or
2
<PAGE>
(b) _____ ANNUAL (insert a whole number not exceeding ten) installments
commencing on _____________________ (insert month and year) or, if later, the
first January 1 occurring after the Participant's cessation of service as a
Director of the Company; provided, however, that the Company shall, at the time
of the first distribution of Common Stock, pay cash in lieu of any fractional
Stock Unit based on the Fair Market Value (as defined in the Plan) of the Common
Stock as of the effective date of the Participant's cessation of service as a
Director of the Company.
7. CALCULATION OF INSTALLMENT PAYMENT AMOUNTS. The amount of any
installment payment shall equal the amount determined by dividing the current
balance in the Deferred Compensation Account and Dividend Equivalent Account or
Stock Unit Account, as applicable, as of a specified payment date (which amount
shall include in respect of the Deferred Compensation Account and Dividend
Equivalent Account interest accrued from and including the most recent date to
which interest has been credited to but excluding such payment date) by the
number of remaining installment payments. The Committee may modify installment
payments of Common Stock in respect of Stock Units to the extent necessary to
pay the Stock Unit Account in whole shares of Common Stock.
8. DEATH OF PARTICIPANT. In the event that the Participant shall die
prior to the payment of the unpaid balance in any of the Deferred Compensation
Account, the Dividend Equivalent Account or the Stock Unit Account, such unpaid
balance shall be paid to the beneficiary(ies) designated on the attached Exhibit
-------
A or, if no beneficiary(ies) is designated, to the estate of the Participant.
- -
9. INCORPORATION OF DEFERRED COMPENSATION PLAN. The terms and conditions
of the Plan are hereby incorporated by reference and form a part of this
Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ATTEST: HUSSMANN INTERNATIONAL, INC.
By: ________________________ By:_________________________
Name: ______________________ Name:_______________________
Title: _____________________ Title:______________________
____________________________
Participant's Signature
____________________________
Print Name
____________________________
Home Address
____________________________
Participant's Social Security Number
4
<PAGE>
EXHIBIT A
HUSSMANN INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
BENEFICIARY DESIGNATION FORM
You may designate a primary beneficiary and a secondary beneficiary. You may
name more than one person as a primary or secondary beneficiary. For example,
you may wish to name your spouse as primary beneficiary and your children as
secondary beneficiaries. Your secondary beneficiary(ies) will receive nothing if
any of your primary beneficiaries survive you. All primary beneficiaries will
share equally unless you indicate otherwise. The same rule applies for secondary
beneficiaries.
Part A - Designate Your Beneficiary(ies):
Primary Beneficiary(ies) (give name, address and relationship to you):
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Secondary Beneficiary(ies) (give name, address and relationship to
you):
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
I certify that my designation of beneficiary set forth above is my
free act and deed.
IF YOU ARE MARRIED AND ARE NOT NAMING YOUR SPOUSE AS THE SOLE PRIMARY
BENEFICIARY, YOUR SPOUSE MUST COMPLETE AND EXECUTE THE CONSENT ATTACHED TO THIS
FORM. IF YOU MARRY OR BECOME DIVORCED AFTER THE DATE OF THIS FORM, YOUR MARRIAGE
WILL BE DEEMED TO REVOKE ANY PRIOR BENEFICIARY DESIGNATION, AND YOUR DIVORCE
WILL BE DEEMED TO REVOKE ANY PRIOR DESIGNATION OF YOUR DIVORCED SPOUSE, IF
WRITTEN EVIDENCE OF SUCH MARRIAGE OR DIVORCE IS RECEIVED BY THE VICE PRESIDENT -
HUMAN RESOURCES BEFORE PAYMENT OF ANY DEFERRED COMPENSATION. THEREFORE, IF YOU
ARE MARRIED OR DIVORCED AFTER MAKING A BENEFICIARY DESIGNATION, YOU SHOULD FILE
A NEW DESIGNATION EVEN IF YOU WANT YOUR BENEFICIARY DESIGNATION(S) TO REMAIN THE
SAME.
_________________________ ___________________________________
Name (Please Print) Signature
___________________________________
Date
5
<PAGE>
This Beneficiary Designation Form shall be effective on the day it is received
by the Vice President - Human Resources of the Company at 12999 St. Charles Rock
Road, Bridgeton, Missouri 63044-2483 (Facsimile: 314/298-6484). This Form
shall be (i) delivered to the Vice President - Human Resources by personal
delivery, facsimile, United States mail or by express courier service and (ii)
deemed to be received upon personal delivery, upon confirmation of receipt of
facsimile transmission or upon actual receipt by the Vice President - Human
Resources if by United States mail or express courier service; provided,
however, that if this Form is not received during regular business hours, it
shall be deemed to be received on the next succeeding business day of the
Company.
Part B - Spouse's Consent to Designation of Beneficiary
I hereby consent to my spouse's designation of beneficiary under Part A of this
Form and I understand that the effect of this consent is that (i) if other
beneficiaries are designated in addition to myself, I may receive only a portion
of the payments payable under the Deferred Compensation Plan for Directors after
my spouse's death or (2) if I am not named as a beneficiary, I may not receive
any portion of the payments payable under the Deferred Compensation Plan for
Directors after my spouse's death.
____________________________ ___________________________________
Name (Please Print) Signature
___________________________________
Date
6
<PAGE>
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
Exhibit 13
----------
growth
- ------------------------------------------
MANAGING EVERY ASPECT OF A DYNAMIC PROCESS
[PICTURE APPEARS HERE]
<PAGE>
[PICTURE APPEARS HERE]
<TABLE>
<CAPTION>
For the Years Ended December 31, Pro Forma
- -----------------------------------------------------------------------
(Dollars in millions except per share data) 1998 1997
-------------------
<S> <C> <C>
Sales and Revenues $1,221.2 $1,096.2
Gross Profit 258.2 215.2
Operating Income 122.3 94.8
Income Before Income Tax Expense
and Minority Interests 100.0 80.4
Net Income 62.4 51.9
Pro Forma Basic Earnings Per Share 1.23 1.02
Pro Forma Diluted Earnings Per Share $ 1.20 $ 1.01
1998 1997
-------------------
Working Capital $ 193.6 $ 189.6
Total Assets 653.7 627.2
Long-term Debt 204.8 243.2
Total Shareholders' Equity $ 185.5 $ 139.1
</TABLE>
<PAGE>
1.
[PICTURE APPEARS HERE]
[GRAPH APPEARS HERE]
Sales and Revenues
in millions
Adjusted Historical*
Net Income
in millions
Sales and Revenues to Unaffiliated Customers
in millions
* See notes to consolidated financial statements
<PAGE>
2.
[PICTURE APPEARS HERE]
PROFILE OF A MARKET LEADER
Hussmann International, Inc., serves the world's commercial food industry with a
complete line of refrigeration products and systems. With 1998 revenues of $1.2
billion, Hussmann is the world's largest manufacturer of food store equipment.
Including the Company's pending acquisition of Koxka in Spain, Hussmann has
leading market share positions in many of the world's largest markets for such
products, including the United States, Canada, Mexico, the United Kingdom,
Spain, Portugal and China.
Hussmann products are sold in more than 80 countries around the globe.
The Company's product lines consist of a broad range of remote refrigerated
display cases, self-contained merchandisers, a complete array of refrigeration
systems, beverage coolers, commercial and industrial refrigeration equipment
(including air handlers, condensers and coils) and walk-in storage coolers and
freezers. The Company supports these products with an extensive network
of service and installation facilities in key markets throughout the world.
Hussmann's global manufacturing network consists of 21 plants in nine
countries: U.S., Canada, Mexico, Brazil, Spain, U.K., Australia, New Zealand and
China.
<PAGE>
3.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
There are many paths to growth, and all are part of the Hussmann strategy.
- ------------------------------------------------------------------------------
growth efficiency consolidation restructuring expansion opportunity research
TO THRIVE IN A HIGHLY COMPETITIVE GLOBAL MARKETPLACE, A COMPANY MUST FOCUS ON
THE FUTURE - FOCUS ON GROWTH. THE BEST PERFORMERS UNDERSTAND GROWTH IS NOT A
SINGLE-MINDED ENDEAVOR. IT IS NOT JUST ABOUT INCREASING TOPLINE REVENUES.
RATHER, IT IS A DYNAMIC PROCESS, INCORPORATING EVERY ASPECT OF THE COMPANY'S
STRATEGY AND OPERATIONS.
THIS IS THE APPROACH BEING TAKEN AT HUSSMANN. AS THE WORLD'S LARGEST
MANUFACTURER OF FOOD STORE EQUIPMENT, HUSSMANN LEADS THE INDUSTRY IN SALES
VOLUME INCREASES - A REFLECTION OF HOW ITS SUPERIOR PRODUCTS FARE IN AN
ATTRACTIVE, GROWING MARKET. BUT VOLUME IS JUST PART OF THE SUCCESS STORY.
THE COMPANY IS ALSO DRIVING GROWTH THROUGH NEW MANUFACTURING EFFICIENCIES.
EXPANSION INTO NEW GEOGRAPHIES. THE RESTRUCTURING AND CONSOLIDATION OF KEY
OPERATIONS. THE EXPLORATION OF ATTRACTIVE NEW MARKETS. AND RESEARCH AND
DEVELOPMENT INTO THE TECHNOLOGIES THAT WILL DRIVE TOMORROW'S GROWTH. THIS ANNUAL
REPORT SHOWS HOW THE COMPANY IS PURSUING ALL OF THESE AVENUES TO CREATE VALUE
FOR HUSSMANN SHAREHOLDERS.
<PAGE>
4.
LETTER TO THE SHAREHOLDERS
- ------------------------------------------------------------------------------
Hussmann's Pro Forma Net Income Improves 20 Percent in 1998; Stage Is Set For
Future Growth
TO OUR FELLOW SHAREHOLDERS:
We are pleased to report Hussmann turned in a record setting performance in our
inaugural year as an independent company. We made outstanding progress across
all phases of our business.
Hussmann has been a leader in the refrigerated food store equipment business for
more than 90 years, but for most of the past three decades, we have operated as
a subsidiary of a holding company. That changed on January 30, 1998, when we
were spun off from Whitman Corporation and were challenged to prove ourselves as
a stand-alone business. Prove it, we did -- with strong year-over-year increases
in sales and revenues and net income and other initiatives to position the
Company for continued growth. Let's take a closer look at the highlights of our
1998 performance, starting with financial results.
During 1998, we posted sales and revenues of $1.2 billion, up 11 percent
compared to 1997. Excluding a $2 million after-tax restructuring charge taken in
the fourth quarter of 1998 and a $2 million adjustment to estimated tax benefits
recorded during 1997, Hussmann's net income totaled $62.4 million in 1998, a 20
percent increase compared to the prior year. Pro forma diluted earnings per
share reached $1.20, up 19 percent versus 1997's pro forma results.
Hussmann's 1998 numbers illustrate two important points about our business:
. Solid revenue growth shows the fundamentals of our market are quite
attractive. Demand for food store equipment remains high in key world areas.
. Net income performance shows we were effective at pressing our advantage as
the market leader. We strive to make smart, disciplined decisions and
investments to improve our margins, increase operating efficiencies, win new
business and create value for our customers and shareholders.
The year's results were driven by Hussmann's improved performance in North
America (U.S. and Canada), a market which generated nearly 75 percent of the
Company's sales and revenues and an even greater portion of our operating
income. Our business in this core market benefited from a number of positive
marketplace trends, such as expanded perishable sections in grocery stores, high
levels of capital spending for both new store construction and remodels, and
increasing competition among regional and national grocery chains.
We expect these trends to continue for some time to come, generating elevated
demand for food store equipment. Hussmann stands to benefit more than most from
today's outstanding selling environment because we offer the industry's highest
value products, anchored by our Impact(R) line of refrigerated merchandisers.
Hussmann has consistently gained market share in each of the last several years.
Our operations in Mexico enjoyed a record setting year. Sales of both
supermarket cases, as well as refrigerated bottle coolers in Mexico and
surrounding Latin American countries, grew substantially in 1998. In addition,
we got our business back on track in the United Kingdom, where an aggressive
restructuring effort turned 1997's $6.2 million operating loss into $1.2 million
of operating income in 1998.
Beyond the successes we achieved in our established markets, we also made
considerable progress in our efforts to develop new business in other key
regions of the world.
. We announced plans to acquire Koxka, the leading food store equipment
manufacturer in Spain. This business gives us a strong base on which to build
a more competitive position in Europe, the world's second largest market for
food store equipment.
. With our acquisition of 65 percent of McAlpine Investments, Ltd., we
strengthened our presence in Australia and New Zealand, growing markets for
our products and services.
. We made substantial investments to transfer our world-class product
technology to Fast Frio, our Brazilian joint venture acquired in 1997. Brazil
is the tenth largest economy in the world, with a growing, modern population
and an expanding need for products from our industry.
<PAGE>
5.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
. Our small business in Asia managed to post an operating profit in 1998.
Despite immense economic turmoil in the region, sales grew by 9 percent in
Asia-Pacific for the year. Long-term, we expect our Chinese operation will
play a strategically important role in helping Hussmann serve emerging
markets throughout the region.
. Our improved manufacturing base in Brazil, combined with our purchase of
Koxka, is allowing us to address difficulties with our Chilean operation.
Throughout 1998, we experienced declining sales and operating results in
Chile as that nation's economy was hit badly by weakening export sales to
Asia and declining worldwide copper prices, its chief export. We announced a
restructuring initiative at year end which will: 1) result in the closure of
a small manufacturing plant and several service facilities; 2) combine our
remaining Chilean sales operations with Koxka's existing sales and
distribution business in Chile; and 3) shift a portion of the manufacturing
requirements for Chile and other Andean nations to Hussmann Brazil.
No less significant than these international moves were the strides we made to
enhance the performance of the business overall. Proof of our commitment can be
seen in gross margins, which improved 1.5 points to 21.1 percent in 1998.
Some of this improvement resulted from our ability to secure favorable prices on
key commodities such as copper, aluminum, sheet metal and glass. But the actions
we took to boost productivity and reduce costs were equally important factors in
our margin expansion. For example, we achieved lower manufacturing costs through
investments in automation at our largest production facility. We consolidated
our refrigeration systems operations to realize greater manufacturing
efficiencies. And we are implementing company-wide purchasing and productivity
programs making virtually all of our operations more profitable.
In our 1997 report, we told you about the ambitious "Target 2000" challenge
adopted in 1995: to achieve annual sales and revenues of more than $1.5 billion
and operating income of $165 million by the end of the year 2000. This goal was
set at the end of 1994, when Hussmann posted sales of $860 million and $83
million in operating income.
Once Target 2000 is achieved, Hussmann will have grown sales by 75 percent and
operating income will have more than doubled.
It's an aggressive goal. To get there, we'll need to increase sales by slightly
greater than 11 percent annually and grow operating income at double that rate
for the next two years. We are confident we can make it happen by focusing on a
range of activities such as continued cost reductions, internally-generated
growth initiatives, and assimilating recent acquisitions. We remain committed to
delivering the returns you expect on your investment in Hussmann.
[PICTURE OF J. LARRY VOWELL AND RICHARD G. CLINE APPEARS HERE]
J. Larry Vowell Richard G. Cline
President and Chief Executive Officer Chairman of the Board of Directors
<PAGE>
6.
[PICTURE APPEARS HERE]
Bridgeton, Missouri
<PAGE>
7.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
EFFICIENCY
- --------------------------------------------------------------------------------
Capital investments drive substantial improvements in operating margins
One of Hussmann's most important accomplishments in 1998 was margin expansion.
Simply put, the Company is earning more on every dollar of sales -- 21.1 percent
gross profit margin in 1998, compared to 19.6 percent in 1997. This outstanding
performance reflects the impact of Hussmann's comprehensive initiatives to
improve efficiency across its operations.
The effort began more than five years ago, with a concentrated focus on updating
and automating production processes at Hussmann's flagship manufacturing plant
in suburban St. Louis.
The Bridgeton, MO, plant is the largest food equipment manufacturing facility in
the world -- with more than 1.6 million square feet of floor space under one
roof. It's also one of the most efficient plants of its kind, thanks to capital
investments totaling more than $50 million since 1993.
Computer operated machinery and robotics technology have been installed
throughout the plant. These advanced technologies are having a dramatic impact
on both production volumes and product quality. For example, sheet metal
fabrication time has been cut from six weeks to three days on Hussmann's best-
selling products, and the quality of the parts has improved ten-fold. As a
direct result of new, more efficient manufacturing techniques, the Bridgeton
plant has set a record for production volume each year since 1995.
Hussmann is now moving quickly to capture similar efficiencies at other
manufacturing facilities around the world. The Company has established its
market-leading Impact product line as a global product platform. Investments in
plants in Brazil, the U.K. and China have allowed the Company to standardize
this single product platform worldwide, driving continued improvements in
operating efficiency.
An equally important opportunity is the investment Hussmann is making in a
global information system referred to as ERP, Enterprise Resource Planning. In
2000, the Company will complete a $33 million effort to replace/enhance its
computer and information systems worldwide. This new ERP infrastructure will
link all Hussmann sites into a single, seamless system -- making it possible to
achieve new efficiencies in purchasing, engineering design, financial controls
and many other critical business functions.
By focusing on high-impact projects such as ERP and production automation,
Hussmann continues to achieve an attractive return on invested capital,
averaging more than 14 percent over the past five years on a pro forma basis. In
short, these investments are paying off -- in the form of increased capacity,
improved productivity and a strengthened reputation as the leader in product
quality and innovation.
[PICTURE APPEARS HERE]
Robotics technology in use at the
Company's flagship plant in Bridgeton, MO
<PAGE>
8.
CONSOLIDATION
- -----------------------------------------------------------------------------
A realigned manufacturing network promises ongoing savings
Two of Hussmann's most important product lines -- refrigerated display cases and
refrigeration systems -- will benefit from a project announced in 1998 to
realign and consolidate the Company's manufacturing operations in North America.
The project will alleviate capacity issues in display case production caused by
strong growth trends in recent years. It will also address a number of
inefficiencies in Hussmann's existing manufacturing network.
The centerpiece of the consolidation project: a new 360,000 square foot
manufacturing plant near Atlanta, GA, that began producing refrigeration systems
in the third quarter of 1998. Formerly, these products were manufactured at five
different plants in North America: Bridgeton, MO; Chino, CA; Montgomery, AL;
Brantford, Ontario; and a smaller existing facility in Atlanta.
By consolidating the production of refrigeration systems at just two sites --the
new, larger plant in Atlanta, and the current plant in Chino -- Hussmann expects
to achieve significant new efficiencies and economies of scale. In fact, the
project will ultimately produce ongoing cost savings of about $2.8 million
annually.
Another major benefit of the plant consolidation project will be realized at
Bridgeton, where Hussmann has experienced capacity issues for several years on
its best-selling product line. Despite heavy investments which resulted in
increased production capabilities, the Bridgeton plant has been operating at
capacity since 1995 in the manufacturing of the Company's increasingly popular
Impact line of refrigerated display cases.
A series of capital investments and projects to alleviate bottlenecks have led
to incremental production capacity at Bridgeton. Even so, the demand for Impact
cases continues to challenge the Company's ability to meet demand during peak
periods. The new refrigeration systems plant in Atlanta will allow Hussmann to
expand its case manufacturing capacity -- by freeing up the nearly 150,000
square feet of floor space in Bridgeton which was devoted to refrigeration
systems. As a result, both product lines stand to benefit from the efficiencies
created by the consolidation project.
The Company is now in the process of installing another production line for
refrigerated display cases at the Bridgeton plant. This new line will expand
production capacity by 20 percent, minimize lead time fluctuations and provide
for future growth. In addition, the new capacity will allow the Company to begin
to produce several new products and offer enhancements to existing lines. This
new capacity will in effect make Bridgeton a dedicated facility for refrigerated
display cases.
As a result of the consolidation project, several of Hussmann's manufacturing
facilities in North America will achieve new efficiencies by specializing in
particular product lines. In addition to the changes at Bridgeton, Atlanta and
Chino, Hussmann's Montgomery plant will now focus on walk-in storage coolers and
freezers, and the Brantford plant will strictly produce specialty display cases.
[PICTURE APPEARS HERE]
Large parallel refrigeration systems being produced and
prepared for shipping at Hussmann's new facility near Atlanta
<PAGE>
9.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
[PICTURE APPEARS HERE]
<PAGE>
10.
[PICTURE APPEARS HERE]
London, England
<PAGE>
11.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
RESTRUCTURING
- --------------------------------------------------------------------------------
Decisive action restores profitability in a difficult market
Even healthy businesses can sometimes encounter external challenges which
threaten their future success. That's exactly the situation Hussmann faced
recently in the United Kingdom -- one of the world's larger markets for food
store equipment and home to several of Europe's leading supermarket chains. But
thanks to a broad-based restructuring initiative, Hussmann now has this part of
its business back on track.
As recently as 1995, Hussmann's business in the U.K. was generating over $150
million in annual sales and nearly $6 million in operating income. Then came
"greenspace" legislation: new laws in the U.K. which dramatically curtailed the
construction of supermarkets on undeveloped tracts outside of established urban
areas.
The new laws had an immediate impact on Hussmann's business. Demand for product
dropped 30 percent within two years and 1995's operating income reversed to a $6
million loss in 1997. As reported last year, Hussmann launched an aggressive
restructuring program to downsize its U.K. operations and effectively target a
much smaller base of profitable business.
The overhaul included a range of actions:
. Hussmann closed an oversized and inefficient manufacturing facility in
Glasgow, Scotland, shrinking its manufacturing space in the U.K. by 73
percent, and significantly reducing fixed operating costs.
. The Company introduced new production capacity and processes at Milton
Keynes, England, outfitting the plant to manufacture Impact display cases
based on the global product platform established in the United States.
. Hussmann's branch network was cut from 20 locations to just eight across the
U.K. As a result, the Company's local resources and overhead expenses now
more appropriately reflect the size of the business opportunities going
forward.
. Hussmann's marketing tactics have been revised, with an overall objective of
improving the Company's sales mix -- reducing its dependence on lower-margin
service and contracting business, while increasing the focus on higher-margin
manufacturing sales. The introduction of Impact display cases has won new
business for Hussmann, and the Company is building on the sales momentum
generated by this key product line.
Initially, Hussmann expected it to take about two years to return the U.K.
operations to profitability. By acting quickly and decisively, the timetable was
cut in half. In 1998, Hussmann posted more than $1 million in operating income
in the U.K. With this unit stabilized and with the recently announced
acquisition of Koxka (a leading manufacturer headquartered in Spain with a
significant presence on the European continent), Hussmann is well positioned to
accelerate growth plans throughout all of Europe.
[PICTURE APPEARS HERE]
Hussmann has a large service and contracting business in the U.K.
and a manufacturing plant in Milton Keynes, England.
<PAGE>
12.
EXPANSION
- --------------------------------------------------------------------------------
Acquisitions provide a rapid entry into attractive international markets
Hussmann has grown to become the world's largest food store equipment
manufacturer in part by using a proven acquisition strategy to enter and develop
promising new geographic markets.
Over the years, acquisitions have enabled Hussmann to build market-leading
positions throughout the globe. More recently, the Company has used the same
approach to set the stage for expansion into important world areas such as
continental Europe, Latin America and Asia-Pacific.
Late in 1998, Hussmann announced plans to acquire Koxka, the largest commercial
refrigeration manufacturer in Spain. Koxka currently has the number one market
position in both Spain and Portugal and has a growing presence in France and
Germany, among other attractive markets. This acquisition which will close in
March or April of 1999, will give Hussmann an excellent opportunity to compete
for business in continental Europe - the world's second largest market for
refrigeration equipment. In the past, several dominant competitors, including
Koxka, have blocked Hussmann's efforts to build a major European presence
outside the U.K. By combining Koxka with its U.K. operations, Hussmann will
immediately become Europe's third largest competitor.
The Koxka acquisition creates many other opportunities to capture synergies and
generate growth globally. Hussmann can use its technology in product areas such
as beverage coolers and refrigeration systems to strengthen Koxka's existing
product lines. Likewise, Koxka's self-contained or superette products (sold
primarily to smaller food markets and specialty stores) can now be offered
through Hussmann's distribution network in the U.K., Latin America and Asia-
Pacific.
To strengthen the Company's base of business in Australia and New Zealand, as
well as among the island nations of the South Pacific, Hussmann acquired a
majority interest in McAlpine Investments, Ltd. (MIL) in 1998. MIL is a leading
distributor of commercial refrigeration products in Australia and New Zealand,
two growing markets for Hussmann products. MIL also manufactures a limited range
of products, including walk-in cooler panels and specialty display cases.
Hussmann made significant progress in developing new growth opportunities in
Latin America during 1998. The Company completed the integration of Fast Frio,
Brazil's second-largest case and refrigeration manufacturer. After acquiring a
majority stake in the business in 1997, Hussmann invested several million
dollars to transfer technology and install new production capabilities at Fast
Frio's manufacturing plant in 1998. The Company also invested aggressively in
sales promotion and marketing programs to introduce Hussmann's products and
build an initial market share position.
Hussmann can now produce world-class Impact display cases, refrigeration systems
and bottle coolers for customers in Brazil and surrounding nations. By the
fourth quarter of 1998, the operation posted a small operating profit and is
moving to gain the number one market share position in Brazil, home to the
world's tenth largest economy.
[PICTURE APPEARS HERE]
In 1998, Hussmann began to aggressively introduce its products and
technology into Brazil following the 1997 joint venture acquisition of Fast
Frio.
<PAGE>
13.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
[PICTURE APPEARS HERE]
<PAGE>
14.
[PICTURE APPEARS HERE]
Mexico City, Mexico
<PAGE>
15.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
OPPORTUNITY
- --------------------------------------------------------------------------------
A Promising product line is poised to generate significant growth
Hussmann's mainstay product lines - supermarket display cases and refrigeration
systems - are healthy, growing businesses. Even so, they don't represent the
Company's only opportunities for growth. In fact, Hussmann is now making
strategic investments in a part of its business - refrigerated bottle coolers -
that may be poised for break-out gains in sales and market share.
Hussmann has proven strengths in this product segment. For example, its bottle
cooler product line is competitively well positioned, and the Company has
manufactured these products for 30+ years in Mexico, where it is the leading
supplier to major soft drink companies and breweries. Recent developments are
creating even more opportunities to sell these products to bottlers in Mexico
and Latin America, as well as to affiliates of the world's largest soft drink
companies, Coca-Cola and Pepsi.
Hussmann's independence led to one such opportunity. Under the Company's former
corporate ownership structure, Hussmann was affiliated with Pepsi General
Bottling - a relationship that caused Hussmann to lose millions of dollars in
annual sales to Coca-Cola and its affiliates throughout the world. As a newly-
independent company in 1998, Hussmann re-established contacts with Coca-Cola and
started to recapture those lost sales.
Hussmann is exploring other opportunities to expand bottle cooler sales as well.
The Company has strengthened or established relationships with major brewers
such as Modelo, makers of Mexico's Corona beer, and Brahma, the largest brewery
in Brazil and that country's largest Pepsi bottler.
In 1998, Hussmann added a key component to its market development effort by
appointing a global product manager for the bottle cooler product line. The
product manager will be responsible for extending Hussmann's base of business
beyond Mexico and Latin America. Already, the Company is in discussions to serve
as a preferred supplier to bottlers in developing markets around the globe, as
well as to support both Coke and Pepsi's aggressive plans for international
expansion.
To gear up for the expected growth in this product line, Hussmann is now
building an additional bottle cooler manufacturing plant in Mexico, and is in
the process of adding a bottle cooler production line at the Company's joint
venture in Brazil. Over the next several years, Hussmann's goal is to more than
double the revenues generated through the sale of bottle cooler products.
Eventually, it could become Hussmann's next $100 million product line - a
powerful engine driving the Company's continued growth.
[PICTURE APPEARS HERE]
Refrigerated bottle coolers are presenting new opportunities
for growth in Latin America and elsewhere.
<PAGE>
16.
[PICTURE APPEARS HERE]
Bridgeton, Missouri
<PAGE>
17.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
RESEARCH
- --------------------------------------------------------------------------------
Tomorrow's success is taking shape today in Hussmann design centers
Hussmann is recognized throughout the supermarket industry as the leader in
product design and innovation. It is a reputation built on a combination of
strategic investments and strong ties to the marketplace.
Each year, the Company invests millions of dollars in new product development at
its technology design centers in the U.S., Canada and Mexico. Hussmann is
careful to ensure this research and development work is rooted in real-world
opportunities. The Company actively solicits input from customers at its annual
Global Product Design Conference. Hussmann also gathers insights into emerging
trends and market needs from its field sales force and from other key customers
around the world.
The result of these efforts? In the past two years alone, Hussmann has
introduced 22 new products, not including numerous enhancements and additions to
its best-selling Impact line of merchandisers.
Impact's beauty is more than skin-deep. It offers customers important benefits
such as the industry's best energy performance (up to a 30 percent improvement
over previous generations of equipment), excellent design flexibility, and full
compliance with both environmental and food storage regulations. This innovative
product line, which was conceived, designed and engineered in Hussmann's
research centers, creates manufacturing advantages for Hussmann, as well. Impact
has been introduced as the Company's global product platform, providing a level
of standardization and quality unmatched in the industry.
The industry's best merchandiser got even better in 1998, when Hussmann
introduced a significant improvement to the Impact line. The Company's new,
patent pending modular defrost technology squeezes out an additional 7 percent
energy savings - on top of Impact's market-leading energy performance- through
an ingenious defrost cycle. This new technology virtually eliminates peaks and
valleys in power demand, permitting more efficient energy consumption and
unparalleled stability in food temperatures.
Beyond advancing the state-of-the-art in its core business, Hussmann continues
to develop products which target emerging consumer trends. For example, the
Company is expanding its range of products designed to display prepared foods.
These products appeal not only to Hussmann's traditional supermarket customers,
but also to convenience stores, specialty food marts and the growing number of
restaurants featuring take-out meals and gourmet groceries.
Other product lines benefiting from Hussmann's commitment to research and
development include refrigeration systems, bottle coolers and self-contained
display units.
To keep its products on the cutting edge, Hussmann employs more than 100 design
professionals at its various research centers. The centers are equipped with
computer-aided engineering tools and sophisticated testing labs, all of which
combine to speed the Company's time-to-market with new products and extend
Hussmann's position as the industry leader in product innovation.
[PICTURE APPEARS HERE]
Research and development employees construct equipment prototypes
and test the operating efficiency of a refrigerated display merchandiser.
<PAGE>
18.
1998 FINANCIALS
- --------------------------------------------------------------------------------
COMMUNITY COMMITMENT
Throughout its more than 90 years in business, Hussmann has worked actively to
improve the quality of life in the communities where it has a corporate
presence. The Company generously supports the United Way and other local
charities through financial contributions, volunteer activities of its
employees, and donations of food supplies and equipment. Hussmann also has long-
standing relationships with the Boy Scouts of America and Junior Achievement,
both at the national and local level. The Company's executives serve on each
organization's Board of Directors, and support their leadership development
programs through extensive employee involvement and major financial
contributions.
<TABLE>
<S> <C>
Financial Contents
Five Year Summary 19
Management's Discussion 20
and Analysis
Introduction 20
Pro Forma Financial Information 21
Pro Forma Results of Operations 23
Non-recurring and 23
Restructuring Charges
Consolidated Statements 28
of Operations
Consolidated Balance Sheets 29
Consolidated Statements 30
of Cash Flows
Consolidated Statements 31
of Shareholders' Equity and
Comprehensive Income
Notes to Consolidated 32
Financial Statements
Management's Responsibilities 42
for Financial Reporting
Independent Auditors' Report 42
General Information 43
</TABLE>
<PAGE>
19.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
The following table presents selected historical consolidated and combined
financial information of Hussmann International, Inc. and its subsidiaries
("Hussmann"or the "Company") or the group of companies that became wholly and
majority-owned subsidiaries of Hussmann International, Inc. on January 30, 1998,
which for all periods presented (except as of December 31, 1998), was composed
of wholly-owned subsidiaries of Whitman Corporation ("Whitman"), including
Hussmann Corporation and its wholly and majority-owned subsidiaries and other
Hussmann companies owned by Whitman but directly managed by Hussmann
Corporation. Prior to the formation of Hussmann, the historical financial
statements were combined for financial reporting purposes. For all periods
presented herein, the financial statements and financial information will be
referred to as consolidated.
The consolidated historical financial information for the years ended
December 31, 1994 through 1997 may not necessarily reflect future results of
operations or financial position of Hussmann or what the results of operations
or financial position of Hussmann would actually have been had Hussmann operated
as an independent, publicly held company during those periods.
<TABLE>
PROFORMA (A) AS OF AND FOR THE YEARS ENDED DECEMBER 31,
In millions, except per share data ------------------- -----------------------------------------------
1998 1997 1998 (b) 1997 (b) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS DATA:
Sales and revenues $1,221.2 $1,096.2 $1,221.2 $1,096.2 $1,005.7 $921.7 $859.5
Gross profit 258.2 215.2 257.2 206.7 203.9 179.3 178.1
Gross profit percent 21.1% 19.6% 21.1% 18.9% 20.3% 19.5% 20.7%
Depreciation and amortization 23.0 22.4 23.0 22.4 20.2 19.6 17.3
Non-recurring charges - - 1.4 47.8 - - -
Operating income 122.3 94.8 119.9 43.0 93.8 78.7 82.5
Operating income percent 10.0% 8.6% 9.8% 3.9% 9.3% 8.5% 9.6%
Whitman charges - - 1.5 28.4 26.7 28.6 28.3
Interest expense 18.9 15.6 18.8 18.9 18.0 16.8 15.6
Net income (loss) $ 62.4 $ 51.9 $ 57.5 $ (12.8) $ 34.1 $ 23.9 $ 23.6
Pro forma basic earnings per share 1.23 1.02 1.13 - - - -
Pro forma diluted earnings per share 1.20 1.01 1.11 - - - -
Dividends per share - Hussmann Common Stock .08 - .08 - - - -
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 193.6 $ 189.6 $ 193.6 $ 179.5 $ 233.6 $194.2 $174.3
Property and equipment, net 168.4 161.0 168.4 159.9 138.4 127.3 117.2
Total assets 653.7 627.2 653.7 614.0 611.4 547.4 503.6
Loans and advances - Whitman - - - 173.8 211.4 186.9 150.6
Long-term debt (including current portion) 204.8 243.2 204.8 3.2 2.2 1.2 0.5
Total shareholders' equity $ 185.5 $ 139.1 $ 185.5 $ 186.6 $ 192.6 $161.1 $173.2
CASH FLOWS PROVIDED BY (USED IN):
Operating activities $ 44.7 $ 76.3 $ 26.1 $ (4.0) $ 9.3
Capital investments (30.6) (38.6) (33.5) (29.3) (32.7)
Investing activities (33.4) (63.0) (27.3) (36.7) (32.6)
Dividends paid to Whitman (80.6) (2.2) (8.3) (7.3) (11.8)
Financing activities $ (22.5) $ (21.5) $ 14.3 $ 32.9 $ 4.3
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The 1998 and 1997 pro forma information reflects the adjustments as if
Hussmann were an independent, publicly held company, excluding the effects
of the non-recurring, restructuring charges and Whitman charges, and
including the borrowings under the Credit Facility for 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this annual report.
(b) Included in the years ended December 31, 1998 and 1997 are non-recurring,
restructuring charges of $2.4 million ($2.0 million after-tax) and $56.3
million ($47.0 million after-tax), respectively. Also included in 1998 is
an adjustment to the estimated tax benefits recorded for the restructuring
in the U.K. during 1997. See notes to consolidated financial statements.
<PAGE>
20.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
INTRODUCTION
Hussmann manufactures, sells, installs and services merchandising and
refrigeration systems for the world's commercial food industry. Products include
refrigerated and non-refrigerated display merchandisers, refrigeration systems
and controls, beverage coolers, air handlers, evaporative condensers, heat
exchange coils and walk-in storage coolers and freezers. Hussmann operates in
three geographic segments: U.S. and Canada, Europe (U.K.) and Other
International, which includes Mexico, Latin America, Asia-Pacific, New Zealand,
and Australia. During 1998 and 1997, approximately 74% and 78% respectively, of
consolidated sales and revenues were derived from the U.S. and Canada.
In general, the markets in which Hussmann participates are highly
competitive with competition based primarily on quality, technology, energy
conservation and price. Hussmann's competitors vary according to product and
geographic area, and include companies which manufacture a variety of products
for the commercial food industry and those which specialize in a particular
product. Hussmann sells its products primarily to supermarkets and convenience
stores, including international, national and local retailers. In addition,
Hussmann's sales are historically seasonal, with the greatest demand for its
products occurring in the third and fourth quarters of the year. This demand
results from customers' seasonal construction cycles and the desire to complete
stores prior to the year-end holiday season. Approximately 2% and 3% of
Hussmann's 1998 sales and revenues were generated in Brazil and the Asia-Pacific
region, respectively. The recent economic volatility in these parts of the world
is not expected to have a material effect on 1999 operating results. In Brazil,
the majority of the Company's sales are to well-capitalized, national and
international companies, with long-term commitments to the country and the
surrounding regions. Further, despite the volatility in Asia-Pacific, Hussmann
increased sales and revenues in that region during 1998 by 9%, excluding
acquisitions.
As previously stated, on January 30, 1998, Hussmann was spun off from
Whitman and became an independent, publicly held company. The following pro
forma consolidated statements of operations provide a reconciliation of what
Management believes 1998 and 1997 operating results would have been had Hussmann
been an independent, publicly held company for the periods presented, excluding
the impact of the restructuring and non-recurring charges, and including the
impact of the borrowings under the credit facility. Management believes the 1998
and 1997 pro forma consolidated operating results provide a more meaningful
presentation for purposes of analyzing Hussmann's financial performance.
<PAGE>
21.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended December 31, 1997 (Unaudited; in millions, except share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues $1,096.2 $ - $ 1,096.2
Cost of goods sold 889.5 (8.5) (a) 881.0
- --------------------------------------------------------------------------------------------------------------------------
Gross profit 206.7 8.5 215.2
Selling, general and administrative expenses 115.9 4.5 (b) 120.4
Non-recurring charges 47.8 (47.8) (a) -
- --------------------------------------------------------------------------------------------------------------------------
Operating income 43.0 51.8 94.8
- --------------------------------------------------------------------------------------------------------------------------
Whitman charges 28.4 (28.4) (b) -
Interest expense:
Whitman 17.3 (17.3) (b) -
Other 1.6 14.0 (c) 15.6
- --------------------------------------------------------------------------------------------------------------------------
Total interest expense 18.9 (3.3) 15.6
Other income, net 1.2 - 1.2
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before income tax expense and minority interests (3.1) 83.5 80.4
Income tax expense 9.4 18.8 (d) 28.2
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interests (12.5) 64.7 52.2
Minority interests (0.3) - (0.3)
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (12.8) $ 64.7 $ 51.9
- --------------------------------------------------------------------------------------------------------------------------
Pro forma weighted average shares - Basic - - 50,731,000
Pro forma basic earnings per share - - $ 1.02
- --------------------------------------------------------------------------------------------------------------------------
Pro forma weighted average shares - Diluted - - 51,159,000
Pro forma diluted earnings per share - - $ 1.01
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) To eliminate restructuring related inventory write-downs and other non-
recurring charges.
(b) To record the estimated additional administrative expenses that would have
been incurred by Hussmann as a publicly held, independent company and to
eliminate Whitman charges and interest paid to Whitman.
(c) To record the interest expense on funds assumed to be borrowed under
Hussmann's credit facility. It was assumed $240 million was borrowed at an
interest rate of 6%.
(d) To record the income tax effect of adjustments (a), (b) and (c).
<PAGE>
22.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the year ended December 31, 1998 (Unaudited; in millions, except share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues $ 1,221.2 $ - $ 1,221.2
Cost of goods sold 964.0 (1.0) (a) 963.0
- ---------------------------------------------------------------------------------------------------------------------------
Gross profit 257.2 1.0 258.2
Selling, general and administrative expenses 135.9 - 135.9
Non-recurring charges 1.4 (1.4) (a) -
- ---------------------------------------------------------------------------------------------------------------------------
Operating income 119.9 2.4 122.3
- ---------------------------------------------------------------------------------------------------------------------------
Whitman charges 1.5 (1.5) (b) -
Interest expense:
Whitman 1.0 (1.0) (b) -
Other 17.8 1.1 (c) 18.9
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 18.8 0.1 18.9
Other expense, net (3.4) - (3.4)
- ---------------------------------------------------------------------------------------------------------------------------
Income before income tax expense and minority interests 96.2 3.8 100.0
Income tax expense 39.0 (1.1) (d) 37.9
- ---------------------------------------------------------------------------------------------------------------------------
Income before minority interests 57.2 4.9 62.1
Minority interests 0.3 - 0.3
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 57.5 $ 4.9 $ 62.4
- ---------------------------------------------------------------------------------------------------------------------------
Pro forma weighted average shares - Basic 50,841,000 - 50,841,000
Pro forma basic earnings per share $ 1.13 $ 0.10 $ 1.23
- ---------------------------------------------------------------------------------------------------------------------------
Pro forma weighted average shares - Diluted 52,006,000 - 52,006,000
Pro forma diluted earnings per share $ 1.11 $ 0.09 $ 1.20
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) To eliminate the current year Chilean restructuring charge which includes
inventory write-downs and other non-recurring charges.
(b) To eliminate Whitman charges and interest paid to Whitman.
(c) To record the interest expense on funds assumed to be borrowed under
Hussmann's credit facility. It was assumed $240 million was borrowed at an
interest rate of 6% for the period of January 1 through January 30, 1998.
(d) To record the income tax effect of adjustments (a), (b), and (c), and the
adjustment to the estimated tax benefits recorded in prior year related to
the restructuring in the U.K. of approximately $2 million.
<PAGE>
23.
- -------------------------------------------------------------------------------
NON-RECURRING AND RESTRUCTURING CHARGES
During the fourth quarter of 1998, due to an overall deterioration in the
economy of Chile, Hussmann announced plans to restructure its Chilean
operations. Ultimately, the jobs of 155 of 175 Chilean employees will be
terminated, a small manufacturing operation will be closed, the Company will
exit unprofitable service and contracting businesses and certain assets will be
written down to their estimated market value. Hussmann's remaining sales
operation in Chile will merge with Koxka C.E., S.A. ("Koxka"; see note 21 of the
notes to consolidated financial statements), a pending acquisition with a sales
and distribution business in Chile, to form a new regional sales center. The
sales center will serve the Andean countries of Chile, Peru, Ecuador, Colombia
and Bolivia. Much of the product supply for Chile, Peru and Bolivia will shift
to Brazil, now that Hussmann's Brazilian operation is fully functional and
producing Hussmann product lines. The ability to economically supply product out
of Brazil, as well as the pending acquisition of Koxka, will allow Hussmann to
move quickly to strategically address the redefined market in Chile and improve
the profitability in Brazil.
In addition, during 1998, the Company adjusted its estimates of tax
benefits originally recorded for the 1997 restructuring of the U.K. operations.
The approximate $2.0 million adjustment to the income tax provision has been
reflected as a pro forma adjustment to the December 31, 1998, historical
information and has been included in the pro forma financial statements above.
In the second half of 1997, Hussmann recorded charges totaling $56.3
million (substantially all of which were non-cash) related to the recognition of
goodwill impairment, the closure of certain sales and service branches in the
U.K., the restructuring of its U.K. operations and the consolidation of certain
operations in North America. Hussmann's 1997 operating loss in the U.K. was $6.2
million, excluding the aforementioned charges. The declining sales in the U.K.
were attributable to changes in legislation in the U.K., which significantly
limited new grocery store construction outside of existing urban areas.
Of the total, $30.7 million ($29.6 million on an after-tax basis) related
to the recognition of goodwill impairment and the closure of sales and service
branches in the U.K. The remaining portion related to Management's decision
during the fourth quarter of 1997 to restructure the U.K. operations and the
consolidation of certain North American operations. The U.K. restructuring plan
included closing a manufacturing facility in Glasgow, Scotland, and the
consolidation of two other manufacturing facilities in Milton Keynes, England.
These actions resulted in the elimination of approximately 320 jobs, primarily
in the U.K. The total costs were approximately $25.6 million ($17.4 million on
an after-tax basis) which includes $12.6 million for the write-down of inventory
and equipment, $10.9 million in severance and termination benefits, and $2.1
million for lease termination and other closing costs. The U.K. restructuring
was completed by the second quarter of 1998 and resulted in lower employee costs
and improved manufacturing productivity.
PRO FORMA RESULTS OF OPERATIONS - 1998 COMPARED TO 1997
Sales and Revenues. Sales and revenues to unaffiliated customers in 1998 of
$1,221.2 million were $125.0 million or 11% over 1997 sales and revenues of
$1,096.2 million. The U.S. and Mexico had record years, with solid volume growth
particularly in the production and sale of supermarket cases, and the U.K.
experienced a remarkable turnaround following last year's extensive
restructuring. Acquisitions in Mexico and New Zealand/Australia also contributed
to sales growth in 1998. The following is a summarized analysis of the increase
in sales and revenues (in millions).
<TABLE>
<CAPTION>
1998 Sales Increase
and Change (Decrease)
revenues from 1997 from 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Canada $ 901.7 $ 49.0 6%
Europe (U.K.) 144.8 21.2 17
Other International 174.7 54.8 46
- ----------------------------------------------------------------------
Total $1,221.2 $125.0 11%
- ----------------------------------------------------------------------
</TABLE>
UNITED STATES AND CANADA
Sales and revenues in the United States and Canada grew 6% during the year
to a record $901.7 million. The majority of this growth was in supermarket cases
produced in the Company's largest manufacturing facility located in Bridgeton,
Missouri. Total supermarket case growth for Hussmann was approximately 10% for
the year. The Company's sales growth in the U.S. and Canada was partially
mitigated by flat sales in refrigeration systems, as the Company implemented its
planned manufacturing consolidation of refrigeration systems in 1998.
EUROPE (U.K.)
The 17% increase in sales and revenues in the Company's U.K. operations
came on the heels of the substantial restructuring efforts announced in the last
half of 1997. Additionally in 1998, volume improvement was driven by increased
equipment orders (which typically have higher margins than service and
contracting) from the Company's newly reconfigured U.K. plant which began
production in March 1998.
OTHER INTERNATIONAL
Other International sales and revenues improved $54.8 million or 46% during
the year, driven by record setting sales in Mexico and recent acquisitions in
this segment. Sales and revenues in Other International increased $43.9 million
from the acquisitions of Industrias Gilvert in Mexico and McAlpine Investments
Ltd. ("MIL", see note 4 of
<PAGE>
24.
- --------------------------------------------------------------------------------
the notes to consolidated financial statements) in New Zealand/ Australia,
partially offset by a decline in Chilean sales. Sales and
revenues in Asia-Pacific, excluding acquisitions, increased 9% during 1998,
despite the economic turmoil in that region.
GROSS PROFIT. Gross profit increased 20% or $43.0 million in 1998. This
increase is partly related to the 11% overall improvement in sales and revenues.
In addition, gross profit margins improved 1.5 points, driven mainly by leverage
over fixed manufacturing costs, gains from other operating efficiencies and a
favorable market for purchased raw materials.
TOTAL SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES . Total SG&A
increased $15.5 million to $135.9 or 13% over the comparable 1997 period. The
increase was related to acquisitions, increased bonuses and commissions for the
record setting year in 1998, compensation costs related to a restricted stock
program implemented by Whitman and additional costs and expenses associated with
Hussmann's implementation of a company-wide information system.
OPERATING INCOME. Operating income in 1998 of $122.3 million
was $27.5 million or 29% over 1997 operating income of $94.8 million. Increases
in the U.S., the U.K. and Mexico drove the overall improvement in operating
income during 1998. The following is a summarized analysis of operating income
by business segment (in millions).
<TABLE>
<CAPTION>
1998 Increase
Operating Change (Decrease)
income from 1997 from 1997
- ---------------------------------------------------------
<S> <C> <C> <C>
U.S. and Canada $135.6 $27.8 26%
Europe (U.K.) 1.2 7.4 Fav
Other International 12.5 (4.7) (27)
Corporate (27.0) (3.0) -
- ---------------------------------------------------------
Total $122.3 $27.5 29%
- ---------------------------------------------------------
</TABLE>
UNITED STATES AND CANADA
Operating income in the United States and Canada increased 26% during the
year to $135.6 million. This improvement was driven by substantially higher
volume and margins at the Company's largest manufacturing plant in Bridgeton,
Missouri, and substantial improvements in margins at the Company's specialty
case manufacturing operation.
EUROPE (U.K.)
The Company's European segment recorded operating income in three of the
four quarters in 1998 and returned to profitability for the full year in 1998.
Restructuring efforts announced in the last half of 1997, as well as increased
volume, helped the segment attain operating income of $1.2 million in 1998,
compared to an operating loss of $6.2 million in 1997. Volume improvements at
the Company's reconfigured manufacturing facility in Milton Keynes, England,
were driven by increased equipment orders from a major retail customer.
Increased capacity at the Milton Keynes facility brought on increased production
in March 1998, after the Company closed its larger manufacturing facility in
Glasgow, Scotland, which occupied 300,000 square feet of manufacturing space.
The new operationally efficient facility in Milton Keynes now services
substantially the same market with 80,000 square feet of manufacturing capacity.
OTHER INTERNATIONAL
Operating income in Other International was down $4.7 million or 27% to
$12.5 million for the year. Operating income was significantly impacted during
the year by hyperinflationary accounting in Mexico and an overall operating
decline in the Company's Chilean operation. Hussmann, like all U.S. based
companies, is required to report results from a foreign operation in U.S.
dollars if the country in question has experienced cumulatively high levels of
inflation over the previous three years. This accounting convention reduced
earnings significantly in this year's fourth quarter and for the year. Despite
the effects of dollar functional accounting on its results, Hussmann Mexico
still recorded in excess of a 20% improvement in operating income for the full
year on the strength of improved sales of supermarket cases and refrigerated
bottle coolers.
Losses in Chile were heavily weighted in the final half of 1998, in
particular the fourth quarter as a deteriorating Chilean economy accounted for a
decrease in sales from $11.7 million in 1997 to $5.1 million in 1998.
Additionally, operating income in Other International was reduced by start-up
losses in Brazil relating to the required spending to introduce Hussmann
technology and products into the Brazilian market. In Brazil, Hussmann began
producing Impact cases and refrigeration systems in 1998 and invested
aggressively throughout the year to establish its market position. The product
introduction plan is progressing, with Brazilian sales up more than 12% for the
year.
INTEREST EXPENSE. Interest expense of $18.9 million in 1998 increased $3.3
million or 21% from 1997. This increase relates primarily to higher levels of
debt and interest rates in the Company's international operations and the
negative effects of the timing of cash flow.
EFFECTIVE INCOME TAX RATE. Hussmann's effective income tax rate, excluding
the aforementioned adjustment to U.K.'s 1997 restructuring charges and the
Chilean restructuring reserve, was 37.9% in 1998, or 2.7 percentage points
higher than the 1997 effective tax rate of 35.2%. This increase relates
primarily to higher levels of taxable income being generated in the U.S., (which
typically has higher effective tax rates), the effects of hyperinflationary
accounting in Mexico, and lower taxable income or net losses in countries having
lower effective tax rates.
<PAGE>
25.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS - ACTUAL 1997 COMPARED TO ACTUAL 1996
SALES AND REVENUES. Sales and revenues in 1997 of $1,096.2 million were
$90.5 million or 9% over 1996 sales and revenues of $1,005.7 million. Sales and
revenue increases in the U.S., Brazil and Mexico drove the overall improvement.
The following is a summarized analysis of the increase in sales and revenues (in
millions).
<TABLE>
<CAPTION>
1997 Increase
Sales and Change (Decrease)
revenues from 1996 from 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Canada $ 852.7 $ 54.4 7%
Europe (U.K.) 123.6 (16.0) (11)
Other International 119.9 52.1 77
- ---------------------------------------------------------------------------
Total $1,096.2 $ 90.5 9%
- ---------------------------------------------------------------------------
</TABLE>
The 7% increase in sales and revenues in the U.S. and Canada was
principally driven by continued strong U.S. supermarket demand. The decrease in
sales and revenues in the U.K. of 11% was due to a continued soft market in the
U.K., plus start-up delays at the plant in Milton Keynes, England. The increase
in sales and revenues of 77% or $52.1 million in Other International was
principally due to the acquisition of Fast Frio in Brazil in January 1997,
(which had $24.0 million of sales and revenues in 1997), and increased sales in
Mexico which were 31% or $20.5 million above 1996.
GROSS PROFIT AND OPERATING INCOME. As a percent of sales and revenues, 1997
gross profit margin was 19% compared to 20% in 1996. U.S. and Canada gross
profit percentage in 1997 of approximately 20% was consistent with 1996. The
U.S. market has been particularly price competitive since 1995. Productivity
improvements from the new Impact product line were mostly offset by inflation in
material costs which was not offset by customer price increases. Gross profit
percentages in both the U.K. and Other International were below 1996 levels due
to lower sales volume, manufacturing inefficiencies, inventory write-downs
related to the restructuring in the U.K. and a negative change in sales mix in
Mexico driven by strong growth in exports from bottle coolers.
Total selling, general and administrative ("SG&A") expenses, (including
amortization expense), increased by 5% from $110.1 million in 1996 to $115.9
million in 1997. The increase in SG&A expenses is primarily due to operating
costs in Brazil.
Operating income in 1997 of $43.0 million would have been $99.3 million
excluding non-recurring charges of $47.8 million and U.K. restructuring-related
inventory write-downs of $8.5 million. This would have represented an increase
of $5.5 million or 6% from 1996 operating income of $93.8 million. The U.K.
operations had an operating loss of $55.4 million in 1997 compared to $0.0 in
1996. The recognition of goodwill impairment ($26.0 million), restructuring
($18.5 million), and the consolidation of sales and service branches ($4.7
million), were the primary contributing factors to the decrease. Lower volume
combined with start-up driven manufacturing inefficiencies at the Milton Keynes
plant also contributed to the decrease. Operating income for Other International
of $17.2 million increased $2.9 million or 20% over 1996 operating income of
$14.3 million, attributable mainly to increased exports from Mexico in 1997
compared to 1996 and the inclusion of the acquisition of Fast Frio in Brazil.
INTEREST EXPENSE. Interest expense of $18.9 million increased $0.9 million
or 5% from 1996 to 1997 primarily due to additional funds advanced from Whitman
to support capital expenditures and acquisitions. Effective Income Tax Rate.
Hussmann's pro forma effective income tax rate, excluding non-recurring charges,
was 35.2% in 1997, or 1.2 points higher than the 1996 effective rate of 34.0%,
due principally to a one-time Mexican deferred tax adjustment in 1996, offset in
part by slightly higher effective state income tax rates in the U.S.
LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATIONS. Hussmann generated net cash from operations of
$44.7 million, $76.3 million, and $26.1 million during the years ended December
31, 1998, 1997 and 1996, respectively. The decrease in 1998 cash flow from
operations is attributable to the use of cash to fund working capital
(inventory, receivables and payables) requirements during 1998 compared to 1997.
The $50.2 million improvement in 1997 cash flows from operating activities was
principally driven by improvement in cash flow from working capital.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities
was $33.4 million, $63.0 million and $27.3 million during the years ended
December 31, 1998, 1997 and 1996, respectively. Capital investments of $30.6
million, $38.6 million and $33.5 million, respectively, were the principal
component of investing activities. Additionally, in 1997 Hussmann paid $26.4
million, net for acquisitions, including a 70% interest in Fast Frio in Brazil,
100% of Industrias Gilvert in Mexico, and the remaining 25% interest in Frio-Lux
in Chile. In 1998 and 1996, there were no material acquisitions.
Management expects capital investments to approximate $40 million per year
during 1999 and 2000, excluding any net cash used for acquisitions and capital
investments made with respect to any such acquisitions. As previously mentioned,
Hussmann has recently entered into a definitive agreement to purchase Koxka. The
acquisition of Koxka should be consummated late in first quarter 1999, with a
purchase price of approximately $145 million. Subsequent to the
<PAGE>
26.
- --------------------------------------------------------------------------------
consolidation of Koxka, Management will continue to evaluate potential
acquisitions that fit Management's strategies for growth. During 1998,
approximately 29% of capital investments represents the cost of converting to an
integrated company-wide information system and approximately 16% represents the
cost of expanding production of refrigerated display cases at the Bridgeton,
Missouri, plant and consolidating production of refrigeration systems.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash (used in) provided by
financing activities was $(22.5) million, $(21.5) million and $14.3 million
during the years ended December 31, 1998, 1997 and 1996, respectively. The
significant activity during 1998 related to the settlement of obligations with
Whitman and replacing the intercompany financing with additional borrowings.
During the spin-off, Hussmann repaid the Whitman obligations with $240 million
borrowed from its $350 million Credit Facility (defined below). In addition, in
June 1998, the Company issued $125 million of its $250 million principal amount
shelf registration of senior notes (the "Senior Notes"). The proceeds from the
offering were used to pay down the existing Credit Facility. Prior to the Spin-
off, Whitman served as the primary source of financing for Hussmann. Under
Whitman's cash management system, Hussmann advanced cash not needed for current
operations to Whitman at the then current commercial bank prime lending rate and
Whitman advanced cash to Hussmann on the same basis. For 1997, there was a
decrease in advances from Whitman of $37.6 million due to improved cash flow
resulting from higher sales volumes and improved working capital management.
Prior to 1997, due to Hussmann's investing activities, such as capital
investments, and the allocation of expenses by Whitman to Hussmann, Hussmann was
a net cash user and, accordingly, there was a net increase in advances from
Whitman of $24.5 million during the year ended December 31, 1996. These advances
are included in loans and advances - Whitman on Hussmann's consolidated balance
sheets.
AVAILABLE CASH AND BORROWINGS. Hussmann's cash and cash equivalents totaled
$26.1 million as of December 31, 1998, compared to $38.4 million as of December
31, 1997.
Prior to the spin-off, Hussmann entered into a five-year unsecured
revolving credit facility (the "Credit Facility") with a syndicate of commercial
banks and financial institutions that enables Hussmann to borrow funds at
variable interest rates on a revolving credit basis up to an aggregate principal
amount of $350 million. At December 31, 1998, $280 million was available for
additional borrowings under the Credit Facility.
In June 1998, Hussmann issued $125 million 6-3/4% Senior Notes due June
2008. The $125 million Senior Notes were part of the $250 million shelf
registration filed by Hussmann with the Securities and Exchange Commission (the
"SEC")on May 29, 1998 (the "Shelf Registration"). The proceeds from the Senior
Notes were used to repay borrowings incurred under the Credit Facility.
Management believes cash flows from operations, unused amounts available
under the Credit Facility and the Shelf Registration will be sufficient to
satisfy Hussmann's working capital, capital investments, acquisitions and other
financing requirements for the foreseeable future. Management believes Hussmann
will be able to access capital markets on satisfactory terms, although there can
be no assurance that will be the case.
Hussmann's products use copper wiring and tubing. As a result, Hussmann's
results are subject to fluctuations in the price of copper. Hussmann uses
hedging instruments to mitigate a portion of these risks.
In February 1998, the Board of Directors of Hussmann approved a plan to
expand production capacity of refrigerated display cases at its Bridgeton,
Missouri plant by 20% and consolidate the production of refrigeration systems
from five to two North American manufacturing locations. The reconfiguration of
the Bridgeton plant and realignment of refrigeration production will require
$12.6 million of capital investment. The Bridgeton refrigeration production has
been split between a new 360,000 square foot plant in Suwanee, Georgia, and an
existing facility in Chino, California. The new Bridgeton case line is scheduled
to begin production during the second or third quarter of 1999. The new plant in
Suwanee began production of refrigeration systems in the third quarter of 1998.
NON-U.S. OPERATIONS. The most significant non-U.S. operations are located
in Canada, Mexico and the U.K., with smaller operations located in, among other
countries, New Zealand, Australia, Brazil, Chile, China and Singapore. Because
Hussmann's non-U.S. entities conduct the majority of their business in their
respective local currencies, Hussmann is subject to foreign currency risks when
translating its non-U.S. entity financial statements into U.S. dollars for
financial reporting purposes. In addition to the foreign currency translation
risks faced by Hussmann, other risks associated with non-U.S. operations include
the potential for restrictive actions taken by host country governments, the
risks relating to non-U.S. economic and political conditions, and the risks
relating to limits on the transfer of funds from non-U.S. entities to Hussmann.
Hussmann did not use foreign currency risk management instruments to manage its
exposure to changes in currency exchange rates in 1998. However, as the
significance of Hussmann's foreign operations grows, Management will continue to
monitor whether it would be appropriate to use foreign currency risk management
instruments to mitigate its larger exposures.
<PAGE>
27.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
YEAR 2000
The Company has assessed the Year 2000 ("Y2K") issue as it relates to
information technology ("IT") and has determined it must modify or upgrade
certain portions of the hardware and software in its information systems. The
Company is utilizing both internal and external resources to complete the
reprogramming, upgrades and testing necessary to complete this modification and
replacement process. The Company's Y2K efforts are being carried out by the
Company's Y2K Team which has created a plan to complete Y2K reprogramming and
testing of the Company's information systems ("the Plan") by June 30, 1999.
Progress against the Plan is monitored and reported to Management and to the
Audit and Finance Committee of the Board of Directors on a regular basis. The
Y2K Team believes it remains on schedule, according to the Plan. As of December
31, 1998, the Company has incurred approximately $2.0 million related to Y2K
work and anticipates the cost of its remaining Y2K work (which will be incurred
over the next 12 months) to total about $5.0 million. This amount will not have
a material adverse effect on Hussmann's results of operations, financial
condition or cash flows.
The Company is continuing to address its non-IT Y2K issues. The Company's
Y2K Team is reviewing equipment embedded with microprocessors, products sold and
service contracts entered into to determine what exposure, if any, the Company
has in this area. At this time the Company is unable to estimate the total costs
related to its non-IT Y2K issues, however, based upon results of reviews
performed to date, Management does not believe such costs will be material.
Also as part of the non-IT Y2K Plan, the Company is in the process of
determining and assessing the Y2K compliance status of third parties with which
it does business. The Company has contacted its key suppliers and customers to
evaluate their Y2K readiness. Contingency plans to help protect the Company's
business from Y2K-related interruptions have been developed. The Company will
reassess its contingency plans as it completes its review process.
The expected costs of the projects and the date on which Hussmann plans to
complete all of the Y2K work are based on Management's best estimates, which are
derived from numerous assumptions about future events, including the
availability of certain resources, third-party modification plans, and other
factors. However, there can be no guarantee these estimates will be achieved and
actual results could differ materially from those plans. Certain of the non-IT
Y2K issues have far reaching implications, some of which cannot be anticipated
or predicted with any degree of certainty. Specific factors that might cause
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, and the ability to identify and correct all
relevant computer codes. In addition, there can be no assurances the systems or
products of third parties on which the Company relies will be timely converted
or that a failure by a third party, or a conversion incompatible with the
Company's systems, would not have a material adverse effect on the Company.
NEW ACCOUNTING STANDARD
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). This
SOP provides guidance on accounting for the costs of computer software developed
or obtained for internal use. Specifically, it addresses when and what types of
costs associated with internally developed software should be expensed or
capitalized. The SOP addresses both internal costs and external costs and the
stages of completion of the entire project. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. Management believes the costs being
incurred on the company-wide integrated computer system are being properly
accounted for in accordance with SOP 98-1. This SOP should not have a material
impact on the consolidated financial statements of the Company going forward,
other than which has already been disclosed.
SAFE HARBOR STATEMENT
Management has made and will make certain forward-looking statements in its
reports filed with the SEC, reports to shareholders and in certain other
contexts relating to future revenues, costs, expenses, production schedules,
profitability, financial resources, and the Y2K issue, among others. These
statements are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on Management's beliefs and assumptions
using information currently available. Accordingly, Hussmann's actual results
may differ materially from those projected, expressed or implied in such
forward-looking statements due to known and unknown risks and uncertainties that
exist in Hussmann's operations and business environment, including among other
factors: 1) the failure by Hussmann to produce anticipated cost savings or
improve productivity; 2) the timing and magnitude of capital investments; 3)
economic and market conditions in the U.S. and worldwide; 4) currency exchange
rates; 5) changes in customer spending levels and demand for new products; 6)
cost and availability of raw materials; 7) the continuation of growth in
significant developing markets such as in Latin American and Asia-Pacific; 8)
overall competitive activities; 9) failure of the Company, its suppliers or
vendors to achieve Y2K compliance in a timely manner and 10) other risks
described in the Company's filings with the SEC.
<PAGE>
28.
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the years ended December 31 (in millions, except share data)
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues $ 1,221.2 $1,096.2 $1,005.7
Cost of goods sold 964.0 889.5 801.8
- -------------------------------------------------------------------------------------------------
Gross profit 257.2 206.7 203.9
Selling, general and administrative expenses 134.7 114.4 108.6
Amortization expense 1.2 1.5 1.5
Non-recurring charges 1.4 47.8 -
- -------------------------------------------------------------------------------------------------
Operating income 119.9 43.0 93.8
- -------------------------------------------------------------------------------------------------
Whitman charges 1.5 28.4 26.7
Interest expense:
Whitman 1.0 17.3 16.7
Other 17.8 1.6 1.3
- -------------------------------------------------------------------------------------------------
Total interest expense 18.8 18.9 18.0
Other income (expense), net (3.4) 1.2 2.9
- -------------------------------------------------------------------------------------------------
Income (loss) before income tax expense and minority interests 96.2 (3.1) 52.0
Income tax expense 39.0 9.4 17.6
- -------------------------------------------------------------------------------------------------
Income (loss) before minority interests 57.2 (12.5) 34.4
Minority interests 0.3 (0.3) (0.3)
- -------------------------------------------------------------------------------------------------
Net income (loss) $ 57.5 $ (12.8) $ 34.1
- -------------------------------------------------------------------------------------------------
Pro forma weighted average shares - Basic* 50,841,000 - -
Pro forma basic - EPS* $ 1.13 - -
- -------------------------------------------------------------------------------------------------
Pro forma weighted average shares - Diluted* 52,006,000 - -
Pro forma diluted - EPS* $ 1.11 - -
- -------------------------------------------------------------------------------------------------
</TABLE>
* Discussion regarding the computation of pro forma earnings per share is
contained in note 2 of notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
<PAGE>
29.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
As of December 31 (in millions, except share data)
<TABLE>
<CAPTION>
ASSETS 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 26.1 $ 38.4
Receivables, net of allowance for doubtful accounts
of $2.7 and $1.9, respectively 285.3 208.8
Inventories 106.9 146.7
Other current assets 11.5 7.4
- ----------------------------------------------------------------------------------------------------------
Total current assets 429.8 401.3
Property and equipment, net 168.4 159.9
Goodwill, net 29.4 25.1
Other assets 26.1 27.7
- ----------------------------------------------------------------------------------------------------------
Total assets $ 653.7 $ 614.0
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities long-term debt $ 16.9 $ 6.2
Accounts payable 137.5 126.8
Income taxes payable 9.1 14.2
Accrued expenses 72.7 74.6
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 236.2 221.8
Loans and advances - Whitman - 173.8
Long-term debt 200.7 3.2
Other liabilities 31.3 28.6
- ----------------------------------------------------------------------------------------------------------
Total liabilities 468.2 427.4
Shareholders' equity:
Preferred stock, $.001 par value, 20,000,000
shares authorized, none issued or outstanding - -
Common stock, $.001 par value, 150,000,000
shares authorized, 51,006,000 issued, 50,763,000
shares outstanding 0.1 -
Additional paid-in capital 90.6 52.3
Retained earnings 161.0 188.1
Cumulative translation adjustment (59.3) (53.8)
Minimum pension liability adjustment, net of tax (2.9) -
Treasury stock, at cost: 243,000 shares (4.0) -
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity 185.5 186.6
- ----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders` equity $ 653.7 $ 614.0
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
30.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31 (in millions)
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 57.5 $ (12.8) $ 34.1
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 23.0 22.4 20.2
Non-recurring charges 1.4 47.8 -
Changes in assets and liabilities, exclusive of acquisitions:
Receivables, net (68.1) (3.6) (13.9)
Inventories 40.9 11.6 (30.4)
Accounts payable (0.3) 10.0 4.4
Income taxes payable (5.1) 3.8 6.7
Other assets and liabilities (4.6) (2.9) 5.0
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 44.7 76.3 26.1
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital investments (30.6) (38.6) (33.5)
Proceeds from sales of property and equipment 0.5 2.0 6.2
Companies acquired, net of cash (3.3) (26.4) -
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (33.4) (63.0) (27.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in short-term debt 9.9 4.3 (1.9)
Net increase (decrease) in loans and advances from Whitman - (37.6) 24.5
Settlement of Whitman obligations, net (221.7) - -
Proceeds from issuance of long-term debt 430.4 - -
Principal payments on long-term debt (234.1) - -
Acquisition of treasury stock (4.0) - -
Capital contribution from Whitman - 14.0 -
Dividends paid (3.0) (2.2) (8.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (22.5) (21.5) 14.3
- ----------------------------------------------------------------------------------------------------------------------------------
Effects of foreign exchange rate changes on cash and cash equivalents (1.1) (0.5) (0.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (12.3) (8.7) 13.0
Cash and cash equivalents, beginning of year 38.4 47.1 34.1
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 26.1 $ 38.4 $ 47.1
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
31.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY AND COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31 (in millions)
Common Minimum
Stock No. Additional Cumulative Pension Treasury
of Shares Common Paid-in Retained Translation Liability, Stock,
(in thousands) Stock Capital Earnings Adjustment net at cost Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 - - $ 38.3 $ 176.0 $ (53.2) - - $161.1
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 34.1 34.1
Cumulative translation adjustment 4.7 4.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 34.1 4.7 - - 38.8
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends paid to Whitman (8.3) (8.3)
Stock plans, net 1.0 1.0
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 - - 38.3 202.8 (48.5) - - 192.6
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net loss (12.8) (12.8)
Cumulative translation adjustment (5.3) (5.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive loss - - - (12.8) (5.3) - - (18.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends paid to Whitman (2.2) (2.2)
Capital contribution from Whitman 14.0 14.0
Stock plans, net 0.3 0.3
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 - - 52.3 188.1 (53.8) - - 186.6
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 57.5 57.5
Cumulative translation adjustment (5.5) (5.5)
Minimum pension
liability adjustment, net - (2.9) (2.9)
- ----------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - 57.5 (5.5) (2.9) - 49.1
- ----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock 50,731 0.1 0.1
Dividends declared (4.0) (4.0)
Settlement with Whitman 34.5 (80.6) (46.1)
Repurchase of common stock (243) (4.0) (4.0)
Stock plans, net 275 3.8 3.8
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 50,763 $0.1 $ 90.6 $ 161.0 $ (59.3) $(2.9) $(4.0) $185.5
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
32.
(In millions, except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) NATURE OF BUSINESS
Hussmann manufactures, sells, installs and services merchandising and
refrigeration systems for the commercial food industry throughout the world.
Hussmann operates manufacturing facilities in the U.S., Canada, the U.K.,
Mexico, Brazil, China, New Zealand and Australia.
On January 30, 1998, Whitman Corporation ("Whitman") distributed (the
"Distribution") 50.7 million shares of common stock of Hussmann ("Hussmann
Common Stock") to Whitman's shareholders at the rate of one share of Hussmann
Common Stock and associated Right (as defined below) for every two shares of
Whitman common stock. As a result of the spin-off (the "Spin-off"), Hussmann
became an independent, publicly held company.
These financial statements present the operations of Hussmann
International, Inc. and its subsidiaries (as required by the context,
"Hussmann"or the "Company"refers to Hussmann International, Inc. or to the group
of companies that became wholly and majority-owned subsidiaries of Hussmann
International, Inc. on January 30, 1998), which for all periods presented
(except as of December 31, 1998), was composed of wholly-owned subsidiaries of
Whitman Corporation, including Hussmann Corporation and its wholly-owned
subsidiaries and other Hussmann companies owned by Whitman but directly managed
by Hussmann Corporation. Prior to the formation of Hussmann, the historical
financial statements were combined for financial reporting purposes. For all
periods presented herein, the financial statements will be referred to as
consolidated financial statements.
(2) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires Management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Certain
prior year amounts have been reclassified to conform to current year
presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include accounts of Hussmann and its
wholly and majority-owned subsidiaries. Investments of less than 50% in joint
ventures are accounted for using the equity method. All significant intercompany
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of deposits with banks and financial
institutions which are unrestricted as to withdrawal or use, and which have
original maturities of three months or less.
INVENTORIES
Inventories are valued at the lower of cost (principally determined on the
first-in, first-out or average methods) or net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method. Expenditures for maintenance and repairs are expensed
as incurred. The approximate ranges of annual depreciation rates are 2% to 5%
for buildings and improvements and 8% to 33% for machinery and equipment. Gains
or losses from the sale of property and equipment are reported in other income
(expense), net.
GOODWILL
Goodwill represents the excess of cost over fair market value of the net
assets of businesses acquired. Such amounts are amortized on a straight-line
basis over the periods estimated to be benefited. Amortization periods range
from 10 to 40 years. Goodwill is stated net of accumulated amortization of $10.0
and $8.8 as of December 31, 1998 and 1997, respectively.
CARRYING VALUES OF LONG-LIVED ASSETS
Hussmann evaluates the carrying values of long-lived assets and
identifiable intangibles used in the business whenever events and circumstances
indicate the carrying amount of an asset may not be recoverable. Recoverability
of the asset is measured by a comparison of the carrying amount of the asset to
the future net cash flows expected to be generated. If such asset is considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount exceeds the fair value of the asset. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
disposal costs.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Assets and liabilities of non-U.S. operations whose functional currency is
other than the U.S. dollar are translated to U.S. dollars using exchange rates
in effect at the balance sheet date. Results from operations are translated at
average exchange rates prevailing during the period. The resulting translation
adjustments are recorded as a component of shareholders' equity. For those non-
U.S. entities of Hussmann operating in countries where economies are considered
to be highly inflationary, foreign currency translation gains and losses are
included in results from operations as other income (expense), net.
<PAGE>
33.
HUSSMANN INTERNATIONAL, INC. 1998 REPORT
- --------------------------------------------------------------------------------
REVENUE RECOGNITION
Revenue is recognized when products are shipped or when services are
performed. Revenue for installation projects is recognized generally upon the
completion of the project and acceptance by the customer. Generally, products
sold carry a one-year warranty while installation projects carry a three-month
warranty. Hussmann estimates and records provisions for warranties in the period
the sale is reported, based on historical experience.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. These costs
amounted to $6.4, $5.6 and $6.0 in 1998, 1997 and 1996, respectively.
INCOME TAXES
Hussmann's U.S. operations have been included in the consolidated U.S.
Federal and certain state unitary income tax returns of Whitman for the years
ended December 31, 1997 and 1996, and for the period ended January 30, 1998. For
those periods in which Hussmann was part of Whitman, Hussmann's income tax
expense was allocated to Hussmann as if Hussmann had filed separate income tax
returns.
No provision has been made for U.S. income taxes on the undistributed
earnings of non-U.S. subsidiaries (approximately $73.0 at December 31, 1998)
which currently is not intended to be remitted to the U.S., primarily because
retention of a significant portion of these earnings is considered essential for
continuing operations and the additional taxes are considered to be immaterial
based upon available foreign tax credits. No deferred tax liability has been
recognized with regard to the potential remittance of such undistributed income.
PRO FORMA EARNINGS PER SHARE
Hussmann adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share" ("SFAS 128"), effective January
1, 1998. In accordance with SFAS 128, basic earnings per share is calculated
using the weighted average number of common shares outstanding during the
period. Diluted earnings per share is calculated using the weighted average
number of common shares outstanding during the period plus shares issuable upon
the assumed exercise of dilutive common stock options using the treasury stock
method.
Although the Spin-off did not occur until January 30, 1998, for purposes of
presentation, Hussmann has calculated earnings per share on a pro forma basis
assuming the Spin-off occurred January 1, 1998, for both basic and diluted
earnings per share. The number of shares of Hussmann Common Stock used in the
calculation of pro forma earnings per share for the year ended December 31,
1998, is as follows (in thousands):
<TABLE>
<CAPTION>
1998
<S> <C>
Pro forma weighted average shares outstanding - Basic 50,841
- ------------------------------------------------------------------
Dilutive effect of stock options 1,165
- ------------------------------------------------------------------
Pro forma weighted average shares outstanding - Diluted 52,006
- ------------------------------------------------------------------
</TABLE>
Options to purchase 482,000 shares of Hussmann Common Stock at $17.94 per
share were outstanding since June 1998, but were not included in the computation
of pro forma diluted - EPS, due to the exercise price of these options being
greater than the average market price of Hussmann Common Stock. These options
expire in 2008.
STOCK-BASED COMPENSATION
Hussmann measures the compensation cost of equity instruments issued under
employee compensation plans under the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations, in accounting for its fixed stock option plans. Compensation
expense related to restricted stock awards is recognized over the applicable
vesting periods.
COMPREHENSIVE INCOME
On January 1, 1998, Hussmann adopted SFAS No. 130, Reporting Comprehensive
Income ("SFAS 130"). SFAS 130 establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. This statement requires Hussmann to report separately, the
translation adjustments of SFAS 52, Foreign Currency Translation and changes to
the minimum pension liability adjustment as components of comprehensive income.
Management has chosen to disclose the requirements of this statement within the
consolidated statements of shareholders' equity and comprehensive income.
(3) TRANSACTIONS WITH WHITMAN
CASH MANAGEMENT AND ADVANCES
Prior to the Spin-off, Whitman managed all excess cash for Hussmann. Cash
balances owed to Whitman were advanced at the then current commercial bank prime
lending rate. All advances to or from Whitman are included in loans and
advances - Whitman in the consolidated balance sheets. Interest expense on such
advances is included in interest expense: Whitman in the consolidated
statements of operations.
DIVIDENDS PAID TO / CAPITAL CONTRIBUTIONS FROM WHITMAN
For the years ended December 31, 1998, 1997 and 1996, Hussmann paid
dividends to Whitman and Whitman made capital contributions to Hussmann, as
summarized in the consolidated statements of shareholders' equity and
comprehensive income.
<PAGE>
34.
- --------------------------------------------------------------------------------
NOTE PAYABLE TO WHITMAN
Included in loans and advances - Whitman at December 31, 1997, is a junior
subordinated note in the amount of $117.3 which was repaid in conjunction with
the Spin-off.
WHITMAN CHARGES
Whitman allocated portions of its general and administrative expenses to
its subsidiaries. Hussmann's share of such costs were $1.5, $28.4, and $26.7 in
1998, 1997 and 1996, respectively. Such charges represent an allocation of
Whitman's estimated total expenses, and were charged to Whitman's subsidiaries
based on budgeted revenues. Whitman considered this method to be a reasonable
basis for allocation.
(4) ACQUISITIONS
As previously reported on Form 8-k, filed on August 31, 1998, with the
Securities and Exchange Commission (the "SEC"), Hussmann acquired a 65% interest
in Mcalpine Investments, Ltd. ("MIL") on August 17, 1998, for approximately
$3.5. Mil consists of two separate operating companies engaged in the sale,
installation, manufacture and service of commercial refrigeration products for
the retail food industries in New Zealand, Australia and various island nations
throughout the South Pacific. MIL's headquarters are located in Auckland, New
Zealand. Mil has been an independent distributor and licensee of the company for
several years, with combined sales and revenues of approximately $64.0 for the
year ended December 31, 1997.
This acquisition was accounted for using the purchase method of accounting,
and accordingly, the results of operations are reflected in the consolidated
statements of operations since the date of acquisition. The purchase price has
been allocated to the assets acquired and the liabilities assumed of MIL based
upon their estimated fair market value, and the excess cost over net tangible
assets (approximately $5.9) is being amortized on a straight line basis over
ten years.
In 1997, Hussmann acquired a 70% interest in Fast Frio, a refrigeration
manufacturer and distributor in Brazil, 100% of Industrias Gilvert, a
manufacturer of refrigeration coils and related equipment located in Mexico, and
the remaining 25% interest in Frio-Lux, an equipment distributor in Chile. The
amount paid for 1997 acquisitions totaled $26.4, net of cash acquired. These
acquisitions are individually and in the aggregate, immaterial to Hussmann
consolidated. There were no significant acquisitions completed in 1996.
(5) INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and work in process $ 81.2 $ 118.9
Finished goods 25.7 27.8
- --------------------------------------------------------------------------------------------------------
$ 106.9 $ 146.7
- --------------------------------------------------------------------------------------------------------
</TABLE>
(6) PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 5.3 $ 5.4
Buildings and improvements 81.8 80.3
Machinery and equipment 212.3 193.9
- --------------------------------------------------------------------------------------------------------
Total property and equipment 299.4 279.6
Accumulated depreciation (157.6) (135.4)
Construction in progress 26.6 15.7
- --------------------------------------------------------------------------------------------------------
$ 168.4 $ 159.9
- --------------------------------------------------------------------------------------------------------
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Salaries and wages $ 25.0 $ 16.8
Restructuring 10.4 29.3
Other 37.3 28.5
- --------------------------------------------------------------------------------------------------------
$ 72.7 $ 74.6
- --------------------------------------------------------------------------------------------------------
</TABLE>
(8) SHORT-TERM BORROWINGS
AND LINES-OF-CREDIT
Short-term borrowings at December 31, consist primarily of various short-term
international bank borrowings as follows:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $12.8 $ 6.2
Weighted average interest rate at December 31 7.7% 6.4%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Hussmann also has additional unsecured, uncommitted lines-of-credit
available under agreements with various commercial banks and financial
institutions for short-term borrowings up to $60.0 domestically, of which $0.0
is outstanding at December 31, 1998, and up to $30.0 internationally, of which
$12.8 is outstanding at December 31, 1998.
(9) LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
6-3/4% senior notes, due 2008 $125.0 $ -
Revolving credit facility, due 2003 70.0 -
Other 9.8 3.2
Less current maturities (4.1) -
- -----------------------------------------------------------------------------
$200.7 $ 3.2
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
35.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
6-3/4% Senior Notes
In June 1998, Hussmann issued $125.0 aggregate principal amount 6-3/4%
Senior Notes. This issuance represents one-half of the $250.0 Shelf Registration
filed by Hussmann with the SEC on May 29, 1998. The Senior Notes are senior
unsecured obligations of Hussmann. The Senior Notes are redeemable at Hussmann's
option at amounts equal to the greater of 100% of the principal amount of the
Senior Notes or the sum of the present values of the remaining scheduled
payments of principal and interest, discounted to the date of redemption on a
semi-annual basis, plus any accrued but unpaid interest to the date of
redemption. Interest is paid semi-annually on June 1 and December 1 until
maturity in June 2008.
REVOLVING CREDIT FACILITY
On January 23, 1998, Hussmann entered into a five-year, unsecured revolving
credit facility (the "Credit Facility") with a syndicate of commercial banks and
financial institutions for borrowings up to $350.0. At December 31, 1998, there
were $70.0 in borrowings outstanding under the Credit Facility, with $280.0
available for additional borrowings. The debt bears interest at variable rates,
which ranged from 5.3% to 5.9% during 1998. An annual commitment fee of 0.1125%
is payable quarterly on the entire amount of the facility. Hussmann paid
approximately $0.4 in commitment fees under the Credit Facility during 1998.
Borrowings under the Credit Facility are subject to certain financial and
non-financial covenants and restrictions, including leverage, interest coverage,
limitations on subsidiary indebtedness, and certain other general business
restrictions.
(10) OPERATING LEASES
Hussmann leases certain facilities and equipment under non-cancelable
operating leases. Rent expense incurred under such leases during 1998, 1997 and
1996 was $11.9, $9.5 and $9.6, respectively. Future minimum lease obligations
under operating leases having original and remaining terms of one year or more
at December 31, 1998 are as follows:
<TABLE>
<S> <C>
- --------------------------------------------------
1999 $ 9.0
2000 6.1
2001 4.7
2002 4.4
2003 4.1
Thereafter 37.7
- --------------------------------------------------
$66.0
- --------------------------------------------------
</TABLE>
(11) SHAREHOLDERS' EQUITY
PREFERRED STOCK
Hussmann has 20,000,000 authorized shares of $.001 per share par value
preferred stock. There are no shares of preferred stock issued or outstanding.
The Board of Directors may authorize the issuance of preferred stock in one or
more series, without further action by the shareholders.
COMMON STOCK
On January 8, 1998, the Board of Directors of Whitman declared a
distribution of one share of Hussmann Common Stock for every two shares of
Whitman common stock outstanding. As previously stated, on January 30, 1998,
Hussmann was spun off from Whitman and 50,731,000 shares of Hussmann Common
Stock were distributed to Whitman shareholders. Effective January 29, 1998,
Hussmann's Board of Directors authorized 150,000,000 shares of Hussmann Common
Stock with a par value of $.001 per share. As of December 31, 1998, 51,006,000
shares of common stock are issued and there are 50,763,000 shares outstanding.
Holders of Hussmann Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of the shareholders. Subject to the
rights of any holder of preferred stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors. In
the event of liquidation, dissolution or wind up of the Company, holders of
Hussmann Common Stock are entitled to share ratably in the distribution of all
assets remaining after payment of liabilities, subject to the rights of the
holders of preferred stock.
During the second quarter of fiscal 1998, the Company's Board of Directors
authorized the repurchase of shares of HussmannCommon Stock at a level
sufficient to offset any dilution caused by the exercise of stock options. As
of December 31, 1998, 243,000 shares of Hussmann Common Stock have been
repurchased into the treasury.
(12) STOCK-BASED COMPENSATION
STOCK OPTIONS AND RESTRICTED STOCKUP
In connection with the Spin-off, Hussmann adopted, and Whitman, as then
sole shareholder of Hussmann, approved the Hussmann International Stock
Incentive Plan (the "Plan"). The Plan authorizes the issuance of up to 5,512,945
shares of Hussmann Common Stock pursuant to the grant of incentive stock
options, non-qualified stock options, stock appreciation rights, restricted
stock and performance awards.
On January 30, 1998, outstanding stock options and restricted stock granted
under the Whitman Stock Incentive Plan (the "Whitman Plan") were replaced with
new non-qualified Hussmann stock options and restricted stock of equivalent
value, with necessary adjustments made to the number and exercise price of the
Hussmann options to preserve the economic value of the prior Whitman options and
restricted stock as of the Spin-off.
<PAGE>
36.
- --------------------------------------------------------------------------------
Option grants under the Plan are at the market price on the date of grant.
The options granted to replace those granted under the Whitman Plan are
generally exercisable over a period of three years. The majority of options
issued during 1998 under the Plan are exercisable at the end of a seven-year
period, or sooner if certain shareholder return targets are met. The earliest
these options may fully vest is in three years, and only if total shareholder
return (as defined within the option agreement) meets or exceeds 15% for the
three-year period. Once vested, the options are exercisable over a period of ten
years from the grant date.
As of December 31, 1998, there were 55,000 shares of restricted stock in
which the restrictions had not lapsed. The restricted share awards vest over a
three-year period from the date of grant. Compensation cost is recognized over
the vesting period. No further shares of restricted stock have been awarded
under the Plan.
As stated in note 2, Hussmann applies APB 25 in accounting for its stock
based incentive plan. Had compensation costs for the stock options issued during
1998 under the Plan been determined based upon the fair value methodology
prescribed under SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS
123"), Hussmann's net income for the year ended December 31, 1998, would have
been impacted as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
Reported net income $57.5
Pro forma net income $54.9
Reported earnings per share - Diluted $1.11
Pro forma earnings per share - Diluted $1.06
- ------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted (which is amortized to
expense over the estimated option vesting period) was estimated on the date of
grant using the Black-Scholes option-pricing model for a peer group of
companies. Hussmann used data from a peer group of companies because of a lack
of historical information for Hussmann Common Stock. The following assumptions
were used:
<TABLE>
<CAPTION>
1998
- ------------------------------------------------------------------------
<S> <C>
Risk-free interest rate 5.45%
Expected life of option 6 Yrs.
Expected volatility 26.5%
Expected dividend yield 1.0%
Weighted average fair market value of options granted in 1998 $ 5.87
- ------------------------------------------------------------------------
</TABLE>
In accordance with SFAS 123, the weighted-average fair value of stock
options granted is required to be based on a theoretical statistical model using
the assumptions noted above. Because stock options do not trade on a secondary
market, employees receive no benefit and derive no value from holding stock
options without an increase in the market price of Hussmann Common Stock, not
unlike all shareholders.
The following table summarizes stock option activity under the Plan for the
period ending December 31, 1998:
<TABLE>
<CAPTION>
Weighted-
Average
Shares Exercise
(in thousands) Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, January 30, 1998 3,056 $11.40
Granted 3,205 15.12
Exercised (178) 10.02
Canceled (46) 13.34
- ------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1998 6,037 $13.40
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding
- ---------------------------------------------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number of Remaining Average Exercisable Average
Exercise Shares Life Exercise Shares (in Exercise
Prices (in thousands in Years) Price thousands) Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.07-$7.68 461 3.0 $ 6.94 461 $ 6.94
$8.49-$9.87 493 6.0 9.38 485 9.38
$12.48-$13.69 2,723 8.2 13.27 946 13.31
$15.06-$17.94 2,360 9.2 15.65 2 16.86
- ---------------------------------------------------------------------------------------------------------
Total Options 6,037 8.0 $13.40 1,894 $10.75
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SHAREHOLDER RIGHTS AGREEMENT AND SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
In 1997, Hussmann adopted a Rights Agreement providing for the issuance of
one Preferred Stock Purchase Right (a "Right") with each share of Hussmann
Common Stock. Each Right entitles the registered holder to purchase from
Hussmann one one-hundredth of a share of Series A Junior Preferred Stock (a
"Preferred Share") at a price of $150 per one one-hundredth of a Preferred
Share, subject to adjustment. The Rights will become exercisable on the Rights
Distribution Date, which is the earlier of the tenth day following a public
announcement that a person(s) has acquired beneficial ownership of 15% or more
of the outstanding shares of Hussmann Common Stock (an "Acquiring Person"), or
ten business days after the commencement of a tender offer or exchange offer
that would result in a person(s) acquiring beneficial ownership of 15% or more
of the outstanding shares of Hussmann Common Stock.
If a person becomes an Acquiring Person, each Right holder (other than the
Acquiring Person) will be entitled to receive, upon exercise of the Right, a
number of shares of Hussmann Common Stock having a market value of two times the
exercise price of the Right. If Hussmann is acquired in a merger or other
business combination, each Right holder (other than the Acquiring Person) will
be entitled to receive,
<PAGE>
37.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
upon exercise of a Right, a number of the acquiring company's common shares
having a market value at that time of two times the exercise price of the Right.
In general, Hussmann can redeem all Rights for one cent per Right at any
time until 10 days following the first public announcement that a person has
become an Acquiring Person. The Hussmann Board of Directors, without the consent
of the Rights holders, is also authorized to reduce the stock ownership
thresholds to 10% or increase them to not more than 20%. The Rights will expire
on December 31, 2007. Until a Right is exercised, the holder of a Right (merely
by being a Right holder) will not have rights as a shareholder of Hussmann
including voting or dividend rights.
Each Preferred Share will be entitled to a minimum preferential quarterly
dividend payment of at least $1.00 per share, but will be entitled to an
aggregate dividend of 100 times the dividend declared per share of Hussmann
Common Stock. Each Preferred Share will have 100 votes, to be voted together
with the Hussmann Common Stock. In the event of a merger or other transaction in
which shares of Hussmann Common Stock are exchanged, each Preferred Share will
be entitled to receive 100 times the amount received per share of Hussmann
Common Stock.
(13) INCOME TAXES
Income tax expense (benefit) as of December 31 consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. Federal $24.8 $ 12.2 $10.1
Non-U.S. 9.4 5.5 5.6
U.S. state and local 4.0 1.8 1.2
- -----------------------------------------------------------------------------
Total current 38.2 19.5 16.9
- -----------------------------------------------------------------------------
Deferred:
U.S. Federal 0.4 (2.2) 0.1
Non-U.S. 0.3 (7.5) 0.6
U.S. state and local 0.1 (0.4) -
- -----------------------------------------------------------------------------
Total deferred 0.8 (10.1) 0.7
- -----------------------------------------------------------------------------
$39.0 $ 9.4 $17.6
- -----------------------------------------------------------------------------
</TABLE>
The items which give rise to differences between the income tax expense in
the consolidated statements of operations and income taxes computed at the U.S.
statutory rate are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense computed
at U.S. statutory rate $33.7 $(1.2) $18.1
State and local taxes, net of U.S. benefit 2.7 0.9 0.8
Higher (lower) non-U.S. effective tax rates 2.3 (0.3) (1.7)
Non-deductible non-recurring charges - 9.7 -
Other items, net 0.3 0.3 0.4
- -------------------------------------------------------------------
$39.0 $ 9.4 $17.6
- -------------------------------------------------------------------
</TABLE>
Pretax income (loss) from non-U.S. operations amounted to $11.5, $(30.3), and
$23.3 for the years ended December 31, 1998, 1997 and 1996, respectively.
Significant components of the Company's deferred tax assets and liabilities
at December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets attributable to:
Postretirement benefit accruals $ 6.3 $ 5.6
Restructuring accrual 5.3 10.8
Other accruals 9.9 7.6
Net operating losses 6.3 -
Other 4.5 -
- --------------------------------------------------------------------------------
Total deferred tax assets 32.3 24.0
- --------------------------------------------------------------------------------
Deferred tax liabilities attributable to:
Property and equipment, principally depreciation
method differences (8.5) (7.2)
Pensions (5.1) (7.2)
Inventories (7.8) (5.9)
Other (0.7) (0.9)
- -------------------------------------------------------------------------------
Total deferred tax liabilities (22.1) (21.2)
- -------------------------------------------------------------------------------
Net deferred tax assets $ 10.2 $ 2.8
- -------------------------------------------------------------------------------
Net deferred tax assets included in:
Other current assets $ 3.9 $ -
Other assets 6.3 2.8
- -------------------------------------------------------------------------------
Net deferred tax assets $ 10.2 $ 2.8
- -------------------------------------------------------------------------------
</TABLE>
Management believes it is more likely than not that all deferred tax assets will
be realized and accordingly, no valuation allowance has been recorded.
(14) DEFINED BENEFIT AND DEFINED
CONTRIBUTION PLANS
HUSSMANN-SPONSORED DEFINED BENEFIT PENSION PLANS
Substantially all of Hussmann's U.S. employees are covered under various
defined benefit pension plans sponsored and primarily funded by Hussmann. Plans
covering salaried employees provide a normal
<PAGE>
38.
- --------------------------------------------------------------------------------
retirement benefit of 1% of covered compensation for each year of credited
service (excluding the years 1989 - 1991) up to a maximum of 20 years. Plans
covering hourly employees generally provide benefits of stated amounts for each
year of service. Plan assets are invested primarily in common stocks, corporate
bonds and government securities. The Company utilizes information available at
September 30 to measure its pension obligation and the funded status of its
pension plans.
The following tables detail the change in the projected pension benefit
obligation, the change in plan assets, and the funded status of the pension
plans at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
CHANGE IN BENEFIT OBLIGATION
1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Benefit obligation, beginning of year $151.3 $137.3
Change in foreign currency exchange rate (1.1) (1.4)
Service cost 5.2 4.8
Interest cost 11.0 11.2
Plan amendments 1.3 -
Actuarial loss 14.9 9.2
Plan spin-off (0.2) -
Benefits paid (10.6) (9.8)
- -----------------------------------------------------------------
Benefit obligation, end of year $171.8 $151.3
- -----------------------------------------------------------------
<CAPTION>
CHANGE IN PLAN ASSETS
1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets, beginning of year $172.0 $148.3
Change in foreign currency exchange rate (0.9) (1.5)
Actual return on plan assets 6.8 31.0
Plan spin-off (0.2) -
Company contribution 2.5 4.0
Plan participants' contributions 0.9 -
Benefits paid (10.6) (9.8)
- -----------------------------------------------------------------
Fair value of plan assets, end of year 170.5 172.0
- -----------------------------------------------------------------
Funded status (1.3) 20.7
Unrecognized transition asset (0.1) (0.2)
Unrecognized net actuarial loss (gain) 2.0 (19.2)
Unrecognized prior service cost 11.9 12.0
- -----------------------------------------------------------------
Prepaid benefit cost $ 12.5 $ 13.3
- -----------------------------------------------------------------
Net amount recognized in the balance
sheet consists of:
Prepaid pension cost $ 14.9 $ 15.7
Accrued pension liability (14.0) (6.4)
Intangible asset 6.9 4.0
Minimum pension liability 4.7 -
- -----------------------------------------------------------------
$ 12.5 $ 13.3
- -----------------------------------------------------------------
</TABLE>
The following tables provide the actuarial assumptions used in the
determination of net periodic pension cost for Hussmann-sponsored pension plans:
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
<TABLE>
<CAPTION>
U.S. Plans 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 6.5% 7.0% 7.5%
Expected return on plan assets 9.5 9.5 9.5
Rate of compensation increase 4.0 4.5 6.0
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ------------------------ -----------------------
Non-U.S. Plans Canada U.K. Mexico Canada U.K. Mexico Canada U.K. Mexico
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Rate 6.3% 8.5% 19.2% 6.5% 9.5% 18.7% 8.0% 9.5% 23.9%
Expected return on
plan assets 9.0 8.5 20.4 9.0 9.5 20.4 9.0 9.5 25.7
Rate of compensation
increase 4.0 4.0 14.7 4.0 4.5 14.7 5.5 7.0 20.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table details the components of net periodic pension cost as
of December 31:
<TABLE>
<CAPTION>
COMPONENTS OF NET PERIODIC PENSION COST
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5.2 $ 4.8 $ 4.2
Interest cost 11.0 11.2 10.4
Expected return on plan assets (13.5) (12.8) (11.6)
Amortization of transition asset (0.1) (0.1) (0.1)
Amortization of prior service cost 1.3 1.3 0.9
Amortization of actuarial loss (0.8) (0.1) (0.5)
Plan spin-off (0.2) - -
- ------------------------------------------------------------------------------------------------------------------------------------
$ 2.9 $ 4.3 $ 3.3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The aggregate benefit obligation, and aggregate fair value of plan assets
for Hussmann pension plans with accumulated benefit obligations in excess of
plan assets are as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $49.5 $35.2
Accumulated benefit obligation 49.0 33.5
Fair value of plan assets 38.2 30.1
- --------------------------------------------------------
</TABLE>
MULTI-EMPLOYER PENSION PLANS
Hussmann participates in a number of multi-employer pension plans which
provide benefits to certain union employees. Benefits are determined and funded
annually based on terms of the plans or as stipulated in collective bargaining
agreements. Amounts contributed to these plans totaled $3.6, $3.7 and $3.4 in
1998, 1997 and 1996, respectively.
<PAGE>
39.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
HUSSMANN-SPONSORED DEFINED CONTRIBUTION PLANS
Substantially all U.S. salaried employees, certain U.S. hourly employees
and certain Canadian employees who meet certain eligibility requirements may
elect to participate in voluntary, contributory defined contribution plans to
which Hussmann makes full or partial matching contributions. The Company's
matching contributions to these plans amounted to $3.6, $3.7 and $3.1 during
1998, 1997 and 1996, respectively.
(15) POSTRETIREMENT PLANS
Hussmann provides substantially all former U.S. salaried employees who
retired prior to July 1, 1989, and selected other employees in the U.S. and
Canada with certain life and health care benefits. U.S. salaried employees
retiring after July 1, 1989, are generally required to pay the full cost of
these benefits. Eligibility for these benefits varies with the employee's
classification prior to retirement. The postretirement benefit plans are
unfunded plans, and as such, there are no plan assets. Benefits paid under
Hussmann's postretirement benefit plans are independent of participant
compensation levels. As such, the projected benefit obligation is equivalent to
the accumulated benefit obligation.
The following table details the change in the accumulated post-retirement
benefit obligation plans at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
CHANGE IN BENEFIT OBLIGATION
1998 1997
- ------------------------------------------------------
<S> <C> <C>
Benefit obligation, beginning of year $15.3 $13.7
Service cost 0.1 0.1
Interest cost 1.0 1.0
Participant contributions 0.4 -
Actuarial (gain) loss (0.4) 1.8
Benefits paid (1.3) (1.3)
- ------------------------------------------------------
Benefit obligation, end of year $15.1 $15.3
- ------------------------------------------------------
Unamortized prior service cost 0.1 0.1
Unrecognized net actuarial loss (0.8) (0.9)
- ------------------------------------------------------
Accrued benefit cost $14.4 $14.5
- ------------------------------------------------------
</TABLE>
The discount rates used in the determination of net periodic benefit cost
for Hussmann-sponsored postretirement benefit plans for the years ended December
31, 1998, 1997 and 1996 are 7.0%, 7.0%, and 7.5%, respectively.
For 1999 measurement purposes, an 8.0% annual rate of increase in the per
capita cost of covered health care benefits was assumed for U.S. non-Medicare
eligible plan participants, a 6.5% rate of increase was assumed for Medicare
eligible U.S. plan participants and an 8.3% rate of increase was assumed for all
other plan participants. The rates used for non-Medicare eligible and Medicare
eligible plan participants were assumed to decrease gradually until reaching
6.0% and 4.5%, respectively, in 2003, and remain at those levels thereafter. The
rates used for all other plan participants were assumed to decrease gradually
until reaching 5.5% in 2006, and remain at that level thereafter.
<TABLE>
<CAPTION>
COMPONENTS OF NET PERIODIC BENEFIT COST
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 0.1 $ 0.1 $ 0.1
Interest cost 1.0 1.0 1.0
- -----------------------------------------------------------------------------------------------------
$ 1.1 $ 1.1 $ 1.1
- -----------------------------------------------------------------------------------------------------
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the post-retirement benefits plan. A one-percentage point
change in assumed health care cost trend rates would have the following effects
at December 31, 1998:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
Point Point
Increase Decrease
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on service and interest cost components $ 0.1 $(0.1)
Effect on postretirement benefit obligation 0.6 0.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
MULTI-EMPLOYER POSTRETIREMENT MEDICAL AND LIFE INSURANCEUP
Hussmann also participates in a number of multi-employer postretirement
plans designed to provide health care and survivor benefits to union employees
during their working lives and after retirement. Amounts contributed to these
plans totaled $4.6, $5.2 , and $5.1 during 1998, 1997 and 1996, respectively.
(16) NON-RECURRING CHARGES
The 1998 non-recurring charge relates to the recognition of employee
termination costs and the write-down of certain assets in Chile. The 1997 charge
recognizes goodwill impairment, the closure of certain sales and service
branches in the U.K., the restructuring of the U.K. operations, and the
consolidation of certain North American operations.
During the fourth quarter of 1998, due to an increasingly weakening economy
in Chile and the pending acquisition of Koxka, Management decided to restructure
its operations and terminate a substantial portion of its employees located in
Chile, close a small manufacturing operation and write-down certain assets to
their estimated fair market value. Therefore, during the fourth quarter of 1998,
Hussmann recorded a non-recurring charge of $2.4 ($2.0 on an after-tax basis) to
restructure operations in Chile. The $2.4 charge consisted of an inventory
write-down of $1.0, and the remaining portion related to employee termination
costs and the write-down of certain assets.
<PAGE>
40.
- --------------------------------------------------------------------------------
During the third quarter of 1997, Hussmann recorded non-recurring charges
of $30.7 ($29.6 on an after-tax basis) consisting of approximately $26.0
relating to the recognition of goodwill impairment and $4.7 related to the
closure of sales and service branches in the U.K.
In addition, during the fourth quarter of 1997, Management decided to
restructure the U.K. operations. The restructuring plan included closing a
manufacturing facility in Scotland and the consolidation of two manufacturing
facilities in Milton Keynes, England. Additionally, the charge also included
the consolidation of certain North American operations. These actions resulted
in the elimination of approximately 320 jobs, primarily in the U.K. The total
costs were approximately $25.6 ($17.4 on an after-tax basis) which includes
$8.5 for the write-down of inventory, $4.1 for the write-down of equipment,
$10.9 in severance and termination benefits, and $2.1 for lease termination and
other closing costs. Other than severance cost, the majority of the charges
recorded for the restructuring were non-cash. Also during 1998, Hussmann
adjusted its estimates of the tax benefits to be realized from the U.K.
restructuring. The approximate $2.0 adjustment was reflected in the 1998 tax
provision.
(17) OTHER FINANCIAL INFORMATION
Other financial information is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid $ 17.7 $ 18.3 $ 18.0
Income taxes paid 28.3 15.7 8.5
Capitalized interest 0.8 - -
Interest income 2.1 1.8 2.1
Foreign exchange gain (loss) $(4.3) $ 0.4 $ 0.3
- -----------------------------------------------------------------------------------------
</TABLE>
(18) CONTINGENCIES
Hussmann is involved in certain claims and legal proceedings arising in the
normal course of business. Although it is impossible to predict the ultimate
outcome of these matters, in the opinion of Management, after appropriate
consultation with legal counsel, the outcome of any such proceedings
individually or in the aggregate will not have a material adverse effect on
Hussmann's results of operations or financial condition.
(19) BUSINESS SEGMENT INFORMATION
As the products and services sold by Hussmann are similar throughout the
world, Hussmann manages the business with separate senior management teams
responsible for geographic regions. Therefore, the following segments correspond
to these geographic regions.
Summarized information about Hussmann's operations in each of these
business segments as of December 31 is as follows:
<TABLE>
<CAPTION>
Sales and revenues Operating income
------------------------- -------------------------
1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
U.S. and Canada $ 901.7 $ 852.7 $ 798.3 $135.6 $102.8 $ 94.4
Europe (U.K) 144.8 123.6 139.6 1.2 (55.4) -
Other Interantional 174.7 119.9 67.8 10.1 17.2 14.3
- ------------------------------------------------------------------------------------
Total before corporate
and other expenses $1,221.2 $1,096.2 $1,005.7 $146.9 $ 64.6 $108.7
- ------------------------------------------------------------------------------------
Corporate adminis-
trative expenses (27.0) (21.6) (14.9)
- ------------------------------------------------------------------------------------
Total operating income 119.9 43.0 93.8
Whitman charges (1.5) (28.4) (26.7)
Interest expeses) (18.8) (18.9) (18.0)
Other (expense), net (3.4) 1.2 2.9
- ------------------------------------------------------------------------------------
Income (loss) before
income tax expense
and minority interests $ 96.2 $ (3.1) $ 52.0
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Depreciation and
Identifiable assets amortization Capital Investments
------------------------ ------------------------ -----------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. and Canada $ 358.3 $ 332.1 $ 350.3 $ 13.6 $ 13.8 $ 12.5 $ 14.9 $ 16.3 $ 19.4
Europe (U.K.) 79.4 77.1 115.0 1.6 2.7 2.9 2.7 1.1 6.2
Other International 160.9 134.8 84.1 4.3 2.8 2.0 4.8 9.5 6.8
Corporate 55.1 70.0 62.0 3.5 3.1 2.8 8.2 11.7 1.1
- ------------------------------------------------------------------------------------------------------------------
$ 653.7 $ 614.0 $ 611.4 $ 23.0 $ 22.4 $ 20.2 $ 30.6 $ 38.6 $ 33.5
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
During the years presented, no individual customer accounted for more than
10% of Hussmann's consolidated sales and revenues. Sales and revenues, long-
lived assets, and deferred tax assets related to Hussmann operations located in
the U.S. consist of the following:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues $829.9 $779.8 $727.5
Long-lived assets 118.1 109.8 99.8
Deferred tax assets 18.7 22.1 12.2
- --------------------------------------------------------------------------------------
</TABLE>
Sales and revenues, long-lived assets, and deferred tax assets related to
Hussmann operations located outside of the United States consist of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and revenues $391.3 $316.4 $278.2
Long-lived assets 79.7 75.2 77.3
Deferred tax assets 13.6 1.9 1.6
- --------------------------------------------------------------------------------------
</TABLE>
Sales and revenues are attributed to the location from which products are
shipped or services are provided.
<PAGE>
41.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
- --------------------------------------------------------------------------------
(20) SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
FINANCIAL RESULTS
The following table presents Hussmann's sales and revenues, gross profit
and net income (loss) on a quarterly basis:
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Sales and revenues $245.9 $292.9 $333.2 $349.2 $1,221.2
Gross profit 40.8 63.6 75.3 77.5 257.2
Net income $ 4.2 $ 15.7 $ 20.2 $ 17.4 $ 57.5
- -------------------------------------------------------------------
1997
Sales and revenues $198.6 $250.8 $283.8 $363.0 $1,096.2
Gross profit 34.9 48.4 62.6 60.8 206.7
Net income (loss) $ (0.7) $ 5.7 $(15.9) $(1.9) $(12.8)
- -------------------------------------------------------------------
1996
Sales and revenues $194.6 $226.0 $261.5 $323.6 $1,005.7
Gross profit 34.5 48.1 56.0 65.3 203.9
Net income (loss) $ (1.8) $ 6.6 $ 13.2 $ 16.1 $ 34.1
- -------------------------------------------------------------------
</TABLE>
STOCK PRICES
Hussmann's stock is traded on the New York Stock Exchange (the "NYSE")
under the ticker symbol "HSM". Hussmann Common Stock began trading on the NYSE
on January 30, 1998, following the Spin-off. The following table presents the
high and low market closing prices for Hussmann Common Stock and cash dividend
information for each quarter of 1998.
<TABLE>
<CAPTION>
Dividends
1998 High Low Declared
- ----------------------------------------------
<S> <C> <C> <C>
First quarter $18.75 $13.63 $0.02
Second quarter 19.50 17.00 0.02
Third quarter 18.94 12.63 0.02
Fourth quarter $19.38 $12.00 $0.02
- ----------------------------------------------
</TABLE>
(21) SUBSEQUENT EVENT
As previously reported on Form 8-K, filed with the SEC on January 8, 1999,
Hussmann signed a definitive agreement on January 6, 1999, to acquire Koxka for
approximately $145.0. Koxka, a company headquartered in Spain and listed on the
Madrid Stock Exchange, is the leading commercial refrigeration company in Spain
and Portugal. The acquisition is expected to be completed in March 1999.
<PAGE>
42.
- --------------------------------------------------------------------------------
MANAGEMENT'S RESPONSIBILITIES
FOR FINANCIAL REPORTING
The integrity and objectivity of the consolidated financial statements
included herein are the responsibility of Management. The statements have been
prepared in conformity with generally accepted accounting principles and, where
appropriate, include certain estimates based on the informed judgment of
Management. Financial information appearing elsewhere in this annual report is
consistent with the consolidated financial statements.
In meeting its responsibility for the reliability of the consolidated
financial statements, Management relies on a system of internal accounting
controls. This system is designed to provide reasonable assurance that assets
are safeguarded and transactions are executed in accordance with Management's
authorization and recorded properly to permit the preparation of the
consolidated financial statements in accordance with generally accepted
accounting principles. The design of this system recognizes errors and
irregularities may occur and estimates and judgments are required to assess the
relative cost and expected benefits of such controls. Management believes the
accounting controls provide reasonable assurance that errors and irregularities
which could be material to the consolidated financial statements are prevented
or would be detected within a reasonable period of time.
For all periods presented (except as of December 31, 1998), Hussmann
International, Inc. and its subsidiaries, or the group of companies that became
subsidiaries of Hussmann International, Inc. on January 30, 1998, was composed
of wholly and majority-owned subsidiaries of Whitman Corporation, including
Hussmann Corporation and other Hussmann companies owned by Whitman but directly
managed by Hussmann Corporation. While under Whitman ownership, the Board of
Directors of Whitman, acting through its Audit Committee, had the responsibility
for determining that Management fulfilled its duties in connection with the
preparation of the consolidated financial statements of Whitman. As a separate,
stand-alone, public company, Hussmann's Board of Directors and Audit and Finance
Committee have assumed those responsibilities.
Hussmann's independent auditors, KPMG LLP, were engaged to audit the
consolidated financial statements of Hussmann and to issue their report thereon.
To express their opinion on the consolidated financial statements and issue
their report in conformity with generally accepted auditing standards, the
independent auditors must review and evaluate Hussmann's accounting controls and
conduct such tests and other procedures as they deem necessary. KPMG's report
appears on the following column.
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
HUSSMANN INTERNATIONAL, INC.:
We have audited the accompanying consolidated balance sheet of Hussmann
International, Inc. (Hussmann) as of December 31, 1998, and the combined balance
sheet of Hussmann as of December 31, 1997, and the related combined statements
of operations, cash flows, and shareholders' equity and comprehensive income for
each of the years in the three-year period ended December 31, 1998. These
financial statements are the responsibility of Hussmann'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 audits 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, the consolidated and combined financial statements referred
to above present fairly, in all material respects, the financial position of
Hussmann as of December 31, 1998 and 1997, respectively, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
January 29, 1999
St. Louis, Missouri
<PAGE>
43.
HUSSMANN INTERNATIONAL, INC. 1998 ANNUAL REPORT
GENERAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL OFFICES
Hussmann International, Inc.
12999 St. Charles Rock Road
Bridgeton, MO 63044-2483
314/291-2000
www.hussmann.com
DATE AND STATE OF INCORPORATION
Hussmann Corporation - 1929 -- Missouri
Hussmann International, Inc. - August 1997 -- Delaware
NUMBER OF SHAREHOLDERS
14,485 as of March 5, 1999
NUMBER OF EMPLOYEES
9,100 worldwide
NOTICE OF ANNUAL MEETING
May 13, 1999
Hyatt Regency - Union Station
One St. Louis Union Station
St. Louis, MO 63103
INDEPENDENT ACCOUNTANTS
KPMG LLP
St. Louis, MO
FISCAL YEAR END
December 31, 1998
FORM 10-K INFORMATION AND INVESTOR INQUIRIES
Shareholders may obtain, without charge, an additional copy of the Company's
most recent Annual Report or a copy of the Form 10-K as filed with the
Securities and Exchange Commission, excluding exhibits, by directing inquiries
to:
HUSSMANN INTERNATIONAL, INC.
ATTN: INVESTOR RELATIONS
12999 ST. CHARLES ROCK ROAD
BRIDGETON, MO 63044-2483
314/291-2000
TRANSFER AGENT AND REGISTRAR
Shareholder inquiries should be directed as indicated below.
For address changes and other miscellaneous inquiries:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
C/O EQUISERVE
P.O. BOX 2500
JERSEY CITY, NJ 07303-2500
201/324-1225
800/446-2617
201/222-4955 (TDD Hearing Impaired)
Shareholders may also communicate with First Chicago
through the Internet.
WWW.EQUISERVE.COM
[email protected]
EXCHANGE LISTING
New York Stock Exchange, Inc.
(Ticker Symbol-HSM)
<PAGE>
Exhibit 21
SUBSIDIARIES OF HUSSMANN INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Name Place of Incorporation
<S> <C>
Hussmann Corporation Missouri
Krack Corporation Illinois
Hussmann International Sales Corporation Barbados
Luoyang Hussmann Refrigeration Co., Ltd.* China
Guangzhou Hussmann Refrigeration Co., Ltd. China
Refrigeracion Frio Lux S.A.I. Chile
Hussmann Del Peru, S.A. Peru
Hussmann Tempcool Holdings PTE LTD* Singapore
Hussmann Netherlands B.V. Netherlands
Hussmann-Mexico, S. de R.L. de C.V. Mexico
American Refrigeration Products, S. de R.L. de C.V. Mexico
Industrias Frigorificas, S.A. de C.V. Mexico
Gilmart, S.A. de C.V. Mexico
Industrias Gilvert, S.A. de C.V. Mexico
Hussmann Refrigeration International B.V. Netherlands
Hussmann Fast-Frio do Brasil Ltda.* Brazil
Fastecnica Instalacoes e Assistencia Tecnica Ltda.* Brazil
Hussmann Canada Inc. Canada
Hussmann Holdings Limited England
Hussmann (Europe) Limited England
Hussmann Refrigeration (Hungary) Ltd.* Hungary
Hussmann Australasia Limited* New Zealand
McAlpine Hussmann Limited New Zealand
McAlpine Hussmann Pty Limited Australia
McAlpine Hussmann (Australia) Pty Limited Australia
McAlpine Australia Pty Limited Australia
</TABLE>
* Each of the above subsidiaries is 100% owned or controlled except as
follows: Hussmann Tempcool Holdings PTE LTD (50%), Hussmann Fast Frio do Brasil
Ltda. (84%), Fastecnica Instalacoes e Assistencia Tecnica S/C Ltda. (84%),
Hussmann Refrigeration (Hungary) Ltd. (60%), Luoyang Hussmann Refrigeration Co.,
Ltd. (55%) and Hussmann Australasia Limited (65%).
<PAGE>
Exhibit 23
----------
Independent Auditors' Consent
The Board of Directors
Hussmann International, Inc.:
We consent to incorporation by reference in the registration statement Nos. 333-
44623, 333-44799, and 333-58359 on Form S-8 and registration statement No. 333-
52987 on Form S-3 of Hussmann International, Inc. of our report dated January
29, 1999, relating to the consolidated balance sheet as of December 31, 1998 and
the combined balance sheet as of December 31, 1997 of Hussmann International,
Inc. and subsidiaries, and the related combined statements of operations, cash
flows, and shareholders' equity and comprehensive income for each of the years
in the three-year period ended December 31, 1998, which report appears in the
December 31, 1998 annual report on Form 10-K of Hussmann International, Inc.
/s/ KMPG LLP
St. Louis, Missouri
March 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMMARY COMBINED AND CONSOLIDATED FINANCIAL INFORMATION
EXTRACTED FROM HUSSMAN INTERNATIONAL'S COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH COMBINED AND
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 26 38
<SECURITIES> 0 0
<RECEIVABLES> 288 211
<ALLOWANCES> 3 2
<INVENTORY> 107 147
<CURRENT-ASSETS> 430 401
<PP&E> 326 295
<DEPRECIATION> 158 135
<TOTAL-ASSETS> 654 614
<CURRENT-LIABILITIES> 236 222
<BONDS> 201 177<F2>
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 186 187
<TOTAL-LIABILITY-AND-EQUITY> 654 614
<SALES> 1,221 1,096
<TOTAL-REVENUES> 1,221 1,096
<CGS> 964 890
<TOTAL-COSTS> 964 890
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 19<F1> 19<F1>
<INCOME-PRETAX> 96 (3)
<INCOME-TAX> 39 9
<INCOME-CONTINUING> 57 (13)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 58 (13)
<EPS-PRIMARY> 1.13 0
<EPS-DILUTED> 1.11 0
<FN>
<F1>AMOUNTS INCLUDE INTEREST EXPENSE PAID TO WHITMAN OF $1.0 AND $17.3 FOR THE
YEARS ENDED DECEMBER 31, 1998 AND 1997, RESPECTIVELY.
<F2>$174.0 OF THIS BALANCE REPRESENTS AMOUNTS DUE WHITMAN, HUSSMANN'S FORMER
PARENT.
</FN>
</TABLE>
<PAGE>
Exhibit 99
----------
HUSSMANN COMPLETES KOXKA ACQUISITION; WILL RECORD
ONE-TIME CHARGE FOR NON-CAPITALIZED ACQUISITION COSTS
ST. LOUIS, MO, March 30, 1999...Hussmann International has completed the
acquisition of Grupo Koxka (Koxka), the leading commercial refrigeration company
in Spain and Portugal for $145 million. Through a cash tender offer, Hussmann
secured virtually 100 percent of the outstanding shares of stock in Koxka, a
publicly traded company on the Madrid Stock Exchange.
Koxka manufactures a complete line of commercial and industrial refrigeration
products, including standard and custom merchandising display cases for
supermarkets, beverage coolers, ice cream merchandisers and an array of other
self-contained food merchandisers. In 1998, Koxka had sales of approximately
$135 million, EBITDA (earnings before interest, income taxes, depreciation and
amortization) of approximately $20 million and net income of approximately
$11 million.
The acquisition gives Hussmann the leading industry position in Spain and
Portugal and a strong competitive base in continental Europe. Prior to
Hussmann's acquisition of Koxka, Hussmann's presence in Europe, the second
largest market for commercial refrigeration, had been primarily limited to its
$140 million operation in the United Kingdom.
In its first quarter of 1999, which will be reported on April 28, Hussmann
will record a one-time charge of approximately $10 million (pre-tax) for losses
associated with the financial instruments used to hedge the purchase price of
Koxka. Because Koxka was a publicly traded company in Spain, the purchase price
was denominated in Spanish Pesetas. In order to avoid foreign exchange exposure,
Hussmann hedged the Peseta exposure to lock in a U.S. Dollar purchase price of
$145 million. Uncertainty in exchange rates, particularly prior to the launch of
the new European currency in January, also influenced Hussmann's decision to
guarantee the $145 million purchase price. During the period the
<PAGE>
hedging instruments were outstanding, the Spanish Peseta weakened significantly
against the U.S. Dollar.
Generally accepted accounting principles allow only direct costs of the
acquisition to be capitalized in determining the purchase price. These costs
will be approximately $135 million. Any gains or losses realized when settling
the hedging instruments are not considered direct costs and must be reflected in
the income statement of the corresponding period. Hussmann will record these
costs, approximately $10 million, in its first quarter 1999.
For the year ended December 31, 1998, Hussmann reported record sales and
revenues of $1.2 billion and record net income of $62.4 million on a pro forma
basis. Diluted earnings per share on a pro forma basis for the full year 1998
was $1.20. Hussmann International, Inc. (HSM-NYSE) is the world's leading
manufacturer of food store equipment and commercial refrigeration products.
