<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 11(c) or Rule 14a-12
HUSSMANN INTERNATIONAL, INC.
------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
HUSSMANN INTERNATIONAL, INC.
12999 St. Charles Rock Road, Bridgeton, Missouri 63044-2483
April 2, 1999
Dear Stockholder:
It is our pleasure to invite you to attend the Annual Meeting of
Stockholders of Hussmann International, Inc. to be held on Thursday, May 13,
1999, at 10:30 a.m., local time, at the Hyatt Regency, St. Louis, One St. Louis
Union Station, St. Louis, Missouri 63103.
At the Annual Meeting, we will ask you to consider and vote upon the
election of two directors and a proposal to approve Hussmann's Stock Incentive
Plan. We will also discuss Hussmann's performance and respond to your
questions.
The formal Notice of Annual Meeting and the Proxy Statement follow. Your
vote is important, regardless of the size of your holdings. Even if you plan to
attend the Annual Meeting, you may vote your shares via a toll-free telephone
number or via the Internet or you may complete, sign and date our enclosed
proxy card and return it in the enclosed postage-paid envelope. Instructions
regarding all three methods of voting are contained on the proxy card. If you
attend the Annual Meeting and prefer to vote in person, you may do so.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Richard G. Cline /s/ J. Larry Vowell
------------------------ ---------------------------
Richard G. Cline J. Larry Vowell
Chairman of the Board President and
Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INFORMATION ABOUT HUSSMANN INTERNATIONAL, INC.............................. 4
INFORMATION ABOUT THE ANNUAL MEETING....................................... 4
Information About Attending the Annual Meeting........................... 4
Information About this Proxy Statement................................... 4
Street Name Holders and Record Holders................................... 4
Matters to be Considered................................................. 5
How Record Holders Vote.................................................. 5
Quorum Requirement....................................................... 5
Non-Votes................................................................ 5
Information About the Vote Necessary for Action to be Taken.............. 6
Revocation of Proxies.................................................... 6
Other Matters............................................................ 6
PROPOSAL 1: ELECTION OF DIRECTORS.......................................... 7
Meetings and Committees of the Board..................................... 9
Compensation of Directors................................................ 10
PROPOSAL 2: APPROVAL OF EXISTING STOCK INCENTIVE PLAN TO MAINTAIN TAX
DEDUCTIBILITY............................................................. 11
BENEFICIAL OWNERSHIP OF COMMON STOCK....................................... 16
Section 16(a) Beneficial Ownership Reporting Compliance.................. 17
EXECUTIVE COMPENSATION AND OTHER INFORMATION............................... 18
Summary Compensation Table............................................... 18
Option Grants in 1998.................................................... 19
Option Exercises in 1998 and Year-End Option Values...................... 20
Pension Plans............................................................ 20
Termination Benefits..................................................... 21
Employment Agreement..................................................... 21
Report of the Management Resources and Compensation Committee on
Executive Compensation.................................................. 22
Performance Graph........................................................ 25
CERTAIN TRANSACTIONS....................................................... 26
Distribution and Indemnity Agreement..................................... 26
Tax Sharing Agreement.................................................... 26
INDEPENDENT AUDITORS....................................................... 27
STOCKHOLDER PROPOSALS...................................................... 27
GENERAL.................................................................... 28
EXHIBIT A.................................................................. A-1
</TABLE>
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF HUSSMANN INTERNATIONAL, INC.
Date: Thursday, May 13, 1999
Time: 10:30 a.m., local time
Place: Hyatt Regency, St. Louis
One St. Louis Union Station
St. Louis, Missouri 63103
Purposes:
. To elect two directors to terms of office expiring at the 2002 Annual
Meeting of Stockholders;
. To consider a proposal to approve our existing Stock Incentive Plan for
the purpose of maintaining tax deductibility under Section 162(m) of the
Internal Revenue Code; and
. To conduct other business if properly raised.
Record Date: The close of business on March 26, 1999.
The matters to be acted upon at the Annual Meeting are described in the
accompanying Proxy Statement.
By Order of the Board of Directors
/s/Burton Halpern
-----------------------
Burton Halpern
Corporate Secretary
St. Louis, Missouri
April 2, 1999
NOTE: In order to assure the presence of a quorum at the Annual Meeting,
please vote your shares via a toll-free telephone number or via the
Internet or complete, sign and date the enclosed proxy card and return
it promptly in the enclosed postage-paid envelope, even if you plan to
attend the Annual Meeting. By promptly voting, you will reduce the
expenses of this proxy solicitation. You may revoke your proxy at any
time before it is voted.
3
<PAGE>
HUSSMANN INTERNATIONAL, INC.
INFORMATION ABOUT HUSSMANN INTERNATIONAL, INC.
Hussmann is a global manufacturer and servicer of merchandising and
refrigeration systems for the commercial food industry. Products include
refrigerated and non-refrigerated display merchandisers, refrigeration systems,
beverage coolers, air handlers, condensers, coils and walk-in storage coolers
and freezers. Hussmann's 1998 sales were approximately $1.22 billion, with
approximately 9100 employees worldwide. Our principal executive office is
located at 12999 St. Charles Rock Road, Bridgeton, Missouri 63044-2483. Our
telephone number is (314) 291-2000. Our website is located at www.hussmann.com
on the Internet.
INFORMATION ABOUT THE ANNUAL MEETING
Information About Attending the Annual Meeting
Our Annual Meeting will be held on Thursday, May 13, 1999 at 10:30 a.m.,
local time, at the Hyatt Regency, St. Louis, One St. Louis Union Station, St.
Louis, Missouri 63103.
Information About this Proxy Statement
We sent you our proxy materials because our Board of Directors is soliciting
your proxy to vote your shares of Common Stock at the Annual Meeting. If you
own Common Stock in more than one account, such as individually and through one
or more brokers, you may receive more than one set of proxy materials. In order
to vote all of your shares by proxy, you should vote the shares in each
different account as described below under "Street Name Holders and Record
Holders" and "How Record Holders Vote." Also, to assist us in saving money and
to provide you with better stockholder services, we encourage you to register
your accounts in the same name and address. You may do this by contacting our
Transfer Agent and Registrar, First Chicago Trust Company of New York c/o
Equiserve, P.O. Box 2500 Jersey City, New Jersey 07303-2500; telephone (800)
446-2617 or (201) 324-1225. The TDD telephone number for the hearing impaired
is (201) 222-4955.
On April 2, 1999, we began mailing these proxy materials to all stockholders
of record at the close of business on March 26, 1999. On the record date, there
were 50,804,899 shares of Common Stock outstanding and entitled to vote. Each
share of Common Stock is entitled to one vote on each matter submitted to
stockholders at the Annual Meeting.
Street Name Holders and Record Holders
If you own shares through a broker, the registered holder of those shares is
the broker or its nominee. Such shares are often referred to as held in "street
name" and you, as the beneficial owner of those shares, do not appear in
Hussmann's stock register. For street name shares, there is a two-step process
for distributing our proxy materials and tabulating votes. Brokers inform
Hussmann how many of their clients own Common Stock in street name and the
broker forwards our proxy materials to those beneficial owners. If you receive
our proxy materials from your broker, you should vote your shares as directed
by your broker. Shortly before the Annual Meeting, your broker will tabulate
the votes it has received and submit a proxy card to us reflecting the
aggregate votes of the street name holders. If you plan to attend the Annual
Meeting and vote your street name shares in person, you should contact your
broker to obtain a broker's proxy card and bring it to the Annual Meeting.
If you are the registered holder of shares, you are the record holder of
those shares and you should vote your shares as described below under "How
Record Holders Vote."
4
<PAGE>
Matters to be Considered
At the Annual Meeting, stockholders will:
. Elect two directors to terms of office expiring at the 2002 Annual
Meeting of Stockholders;
. Consider a proposal to approve our existing Stock Incentive Plan (the
"Plan") for the purpose of maintaining tax deductibility under Section
162(m) of the Internal Revenue Code; and
. Transact any other business if properly raised.
How Record Holders Vote
You can vote in person at the Annual Meeting or by proxy. We recommend that
you vote by proxy even if you plan to attend the Annual Meeting. You can
always attend the Annual Meeting and revoke your proxy by voting in person.
There are three ways to vote by proxy:
. By Telephone--If you have a touch tone phone, you can vote by telephone
by calling toll-free 1-800-OK2-VOTE (1-800-652-8683), 24 hours a day, 7
days a week, and following the instructions on our proxy card
(stockholders residing outside the United States, Canada and Puerto Rico
should call 1-201-324-0377);
. By Internet--You can vote by Internet by going to the web site
http://www.vote-by-net.com and following the instructions on our proxy
card; or
. By Mail--You can vote by mail by completing, signing, dating and mailing
our enclosed proxy card.
By giving us your proxy, you are authorizing the individuals named on our
proxy card (the proxies) to vote your shares in the manner you indicate. You
may (i) vote for the election of both of our director nominees, (ii) withhold
authority to vote for both of our director nominees or (iii) vote for the
election of one of our director nominees and withhold authority to vote for
our other nominee by so indicating on the proxy card. You may vote "FOR" or
"AGAINST" or "ABSTAIN" from voting on the proposal to approve the Plan.
If you sign and return our proxy card without indicating your instructions,
your shares will be voted FOR:
. The election of our two director nominees; and
. Approval of the Plan.
If your shares are held in street name and you plan to attend the Annual
Meeting and vote your shares in person, you should contact your broker to
obtain a broker's proxy card and bring it to the Annual Meeting.
Quorum Requirement
A quorum is necessary to hold a valid meeting of stockholders. If
stockholders entitled to cast at least a majority of the shares entitled to
vote at the Annual Meeting are present in person or by proxy, a quorum will
exist. Shares owned by Hussmann are not voted and do not count for quorum
purposes. In order to assure the presence of a quorum at the Annual Meeting,
please vote your shares via the toll-free telephone number or via the Internet
or complete, sign and date our proxy card and return it promptly in the
enclosed postage-paid envelope, even if you plan to attend the Annual Meeting.
Abstentions are counted as present, and non-votes may be counted as present,
to establish a quorum.
Non-Votes
Non-votes occur when shares are specifically indicated as not being voted
as to a particular proposal. If you are the registered holder of shares, your
unvoted shares as to one or more proposals will not be counted as present at
the Annual Meeting as to those proposals, but will be considered present at
the Annual Meeting as to any proposal on which you vote and, in that case,
will count towards the presence of a quorum. If a quorum is present, your
unvoted shares as to the election of directors or the proposal to approve the
Plan will not affect the outcome of the election of directors or whether that
proposal is approved or rejected.
5
<PAGE>
If you own shares through a broker and do not vote, your broker, as the
registered holder of your shares, may represent your shares at the Annual
Meeting for the purpose of obtaining a quorum. However, if you do not instruct
your broker how to vote, your broker may vote your shares on most proposals,
but may specify that the broker is not voting your shares on certain other
proposals. These unvoted shares are called "broker non-votes." If a quorum is
present, broker non-votes as to the proposal to approve the Plan will not
affect whether that proposal is approved or rejected.
Information About the Vote Necessary for Action to be Taken
If a quorum is present at the Annual Meeting, the two persons receiving the
greatest number of votes will be elected to serve as directors. As a result,
withholding authority to vote for a director nominee and non-votes with respect
to the election of directors will not affect the outcome of the election of
directors. If a quorum is present, approval of the Plan requires the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at the Annual Meeting and entitled to vote on the
proposal. Accordingly, abstentions with respect to that proposal will be
treated as votes against that proposal. Non-votes with respect to that proposal
will not affect whether that proposal is approved or rejected.
Revocation of Proxies
If you are a registered holder of Common Stock, you may revoke your proxy by
giving written revocation to Hussmann's Corporate Secretary at any time before
your proxy is voted, by executing a later-dated proxy card which is voted at
the Annual Meeting or by attending the Annual Meeting and voting your shares in
person or through telephone or Internet voting. If your shares are held by a
broker, you must contact your broker to revoke your proxy.
Other Matters
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the proposals discussed in this
Proxy Statement. Under our By-laws, generally no business besides the two
proposals discussed in this Proxy Statement may be transacted at the Annual
Meeting. However, if any other matter properly comes before the Annual Meeting,
your proxies will act on such matter in their discretion.
6
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors comprises seven members divided into three classes,
with one class of directors elected each year for a three-year term. Six of our
seven directors are not Hussmann employees. Only non-employee directors serve
on the Audit and Compliance Committee, the Management Resources and
Compensation Committee and the Finance and Pension Committee.
The terms of J. Joe Adorjan and Archie R. Dykes expire at the 1999 Annual
Meeting. Messrs. Adorjan and Dykes are now directors of Hussmann. If either
nominee fails to stand for election, the proxies named in our proxy card
currently intend to vote for a substitute nominee designated by the Board of
Directors. Alternatively, the Board of Directors may reduce the number of
directors to be elected at the Annual Meeting.
The following sets forth information as to each nominee for election at the
Annual Meeting and each director continuing in office.
Nominees for election at the Annual Meeting to terms expiring in 2002:
<TABLE>
<CAPTION>
Director
Name Since Age Principal Occupation and Directorships
---- -------- --- --------------------------------------
<C> <C> <C> <S>
J. Joe Adorjan... 1998 60 Mr. Adorjan is Chairman of Borg-Warner Security
Corporation which provides security services.
Before joining Borg-Warner in 1995, he served
as President of Emerson Electric Company from
1992-1995 and as Chairman and Chief Executive
Officer of ESCO Electronics Corporation from
1990-1992. He is also a director of Goss
Graphic Systems, Inc., ESCO Electronics
Corporation, The Earthgrains Company and
Illinova Corporation.
Archie R. Dykes.. 1998 68 Dr. Dykes is Chairman of Capital City Holdings,
Inc., Nashville, Tennessee, a venture capital
organization. Dr. Dykes served as Chairman and
Chief Executive Officer of the Security Benefit
Group of Companies from 1980 through 1987. He
served as Chancellor of the University of
Kansas from 1973 to 1980. Before that he was
Chancellor of the University of Tennessee. Dr.
Dykes is a director of the Fleming Companies,
Inc., Whitman Corporation, Midas, Inc. and the
Employment Corporation. He is also a member of
the Board of Trustees of the Kansas University
Endowment Association and the William Allen
White Foundation. He formerly served as Vice
Chairman of the Commission on the Operation of
the United States Senate and as a member of the
Executive Committee of the Association of
American Universities.
</TABLE>
The Board of Directors recommends a vote FOR each of our nominees for
Director.
7
<PAGE>
Directors whose present terms continue until 2000:
<TABLE>
<CAPTION>
Director
Name Since Age Principal Occupation and Directorships
---- -------- --- --------------------------------------
<C> <C> <C> <S>
Richard G. Cline....... 1998 64 Chairman of the Board of Hussmann. Mr.
Cline served as President and Chief
Operating Officer of NICOR Inc. since
1985, and became Chairman of the Board
and Chief Executive Officer in 1986. He
retired as Chief Executive Officer in May
1995 and continued to serve as Chairman
until his retirement from NICOR at the
end of 1995. NICOR is engaged in natural
gas distribution and containerized liner
shipping. For the previous 22 years, Mr.
Cline was an executive of Jewel
Companies, Inc., becoming Chairman,
President and Chief Executive Officer in
1984. Mr. Cline is also Chairman of
Hawthorne Investors, Inc., a private
management advisory and investment firm
he founded in 1996. Additionally he is a
director of Whitman Corporation, Kmart
Corporation, Ryerson Tull, Inc. and
Central DuPage Health System; and is a
Trustee of Northern Institutional Funds
and a past chairman of the Federal
Reserve Bank of Chicago. Mr. Cline is
also a director and past president of the
University of Illinois Foundation.
Victoria B. Jackson.... 1998 44 Ms. Jackson received her BBA degree from
Belmont University in 1977 and an MBA
degree from Vanderbilt University in
1981. Following graduation from college,
she joined DSS/ProDiesel, a diesel parts
remanufacturing and distribution company
based in Nashville, Tennessee, and served
as its President and Chief Executive
Officer until February 1999. Ms. Jackson
is also a director of Whitman
Corporation, J. H. Heafner Company and
AmSouth Bancorporation. She has
previously served as Chairman of
Tennessee's Alcohol and Beverage
Commission, as a director of the
Association of Diesel Specialists and as
a member of the Board of Directors of the
Federal Reserve Bank of Atlanta.
Lawrence A. Del Santo.. 1998 65 Mr. Del Santo is the former Chairman and
Chief Executive Officer of Vons
Companies, Inc., a supermarket retailer
that operates stores in Southern
California, where he was employed from
1994-1997. From 1984-1994, he was an
executive of American Stores Company,
serving as Senior Executive Vice
President and Chief Operating Officer
beginning in 1993. He is also a director
of Supervalu, Inc. and PETsMART, Inc.
</TABLE>
8
<PAGE>
Directors whose present terms continue until 2001:
<TABLE>
<CAPTION>
Director
Name Since Age Principal Occupation and Directorships
---- -------- --- --------------------------------------
<C> <C> <C> <S>
R. Randolph Devening.. 1998 57 Mr. Devening is President and Chief
Executive Officer of Foodbrands America,
Inc., which produces, markets and
distributes perishable food products for
the food service and retail store
delicatessen market. Mr. Devening has been
with Foodbrands America since 1994. From
1989 through 1994 Mr. Devening served as
Chief Financial Officer of Fleming
Companies, Inc., and became its Vice
Chairman in 1993. He is also a director of
ENTEX Information Services, Inc.,
Arkwright Mutual Insurance Company and
Hancock Fabrics, Inc.
J. Larry Vowell....... 1998 58 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.
</TABLE>
Meetings and Committees of the Board
The Board of Directors is responsible for the management of Hussmann. The
Board meets on a regular basis to review Hussmann's operations, strategic and
business plans, acquisitions and dispositions, and other significant
developments affecting Hussmann, and to act on matters requiring approval of
the Board. The Board also holds special meetings when important matters require
Board action between scheduled meetings. Members of senior management are
regularly invited to Board meetings to discuss the progress of and future plans
relating to their areas of responsibility.
The Board of Directors met eight times in 1998. All directors attended at
least 75% of the aggregate number of meetings of the Board and the Committees
on which that director served.
To facilitate independent director review, and to make the most effective
use of the directors' time and capabilities, the Board has established an
Executive Committee, an Audit and Compliance Committee, a Management Resources
and Compensation Committee, and a Finance and Pension Committee. None of the
members of the Audit and Compliance Committee, Management Resources and
Compensation Committee or Finance and Pension Committee (i) is, or has been, an
employee of Hussmann; (ii) has received compensation from Hussmann other than
for his or her board service; (iii) has an immediate family member who is or
has been employed by Hussmann in any of the past five years; (iv) is a partner,
controlling shareholder or executive officer of an organization to which
Hussmann has made or from which Hussmann has received significant payments in
any of the past five years; or (v) is an executive officer of another company
having a compensation committee which includes a Hussmann executive officer.
The following table sets forth the membership of each committee.
<TABLE>
<CAPTION>
Management
Resources Finance
Audit and and and
Executive Compliance Compensation Pension
Name Committee Committee Committee Committee
- ---- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
J. Joe Adorjan...................... X X X
Archie R. Dykes..................... X* X
Richard G. Cline.................... X*
Victoria B. Jackson................. X X
Lawrence A. Del Santo............... X X*
R. Randolph Devening................ X X*
J. Larry Vowell..................... X
</TABLE>
- --------
* Chairperson
9
<PAGE>
The Executive Committee of the Board acts, except as limited by applicable
law, in lieu of the full Board and between meetings of the Board. The Committee
met once in 1998.
The Audit and Compliance Committee reviews the audit report of Hussmann as
prepared by its independent auditors, recommends the selection of independent
auditors each year and reviews audit and any non-audit fees paid to the
independent auditors of Hussmann. The Committee reviews Hussmann's internal
audit reports and reports its findings and recommendations to the Board for
appropriate action. The Committee met three times in 1998.
The Management Resources and Compensation Committee is responsible for
management evaluation and succession planning, supervising the compensation
policies of Hussmann, administering employee incentive plans, reviewing
officers' salaries, approving significant changes in salaried employee benefits
and recommending to the Board such other forms of remuneration as it deems
appropriate. The Committee met three times in 1998.
The Finance and Pension Committee supervises the financial affairs of
Hussmann and receives and reviews reports of those persons who supervise and
manage Hussmann's pension plans. The Board has delegated to the Finance and
Pension Committee and certain officers its authority to approve financing
transactions involving the borrowing up to $200 million in any one transaction.
The Committee periodically reports to the Board any action taken to approve
financing transactions in excess of $25 million. The Committee met three times
in 1998.
The Board of Directors is responsible for considering nominations of
prospective board members. The Board will consider nominees recommended by
other directors, stockholders and management who present for evaluation by the
Board appropriate data with respect to the suggested candidate, provided that
nominations by stockholders must be made in accordance with our By-Laws. See
"Stockholder Proposals."
Compensation of Directors
Directors other than Messrs. Cline and Vowell receive an annual retainer of
$30,000, plus $1,000 for each committee meeting attended. The Chairperson of
each committee is paid an additional $3,000 annual retainer. Directors may
elect to defer receipt of all or a portion of their retainer and meeting fees.
Interest is credited to these deferred compensation accounts at the prime rate.
Immediately after each annual meeting of stockholders, directors other than
Messrs. Cline and Vowell are granted Common Stock units with a fair market
value of $15,000. Dividend equivalents are credited to these Common Stock unit
accounts and interest is credited on dividend equivalents at the prime rate.
Deferred compensation accounts, dividend equivalents and interest are paid in
cash on dates selected by the Directors. The Common Stock units are paid in
Common Stock on the later of the date selected by the director or during the
first January occurring after the director ceases to serve as a director.
Directors may also receive awards pursuant to Hussmann's Stock Incentive Plan.
Hussmann has entered into an agreement with Mr. Cline providing for his
service as Chairman of the Board through at least January 30, 2000. He is
compensated at a rate of $400,000 annually. Additionally, in January 1998, he
was granted a ten-year nonqualified option to purchase 200,000 shares of Common
Stock at the market price on the date of grant. Mr. Cline's cash compensation
and stock options are in lieu of all other compensation as a director. Mr.
Cline is not an employee of Hussmann and does not participate in Hussmann's
management incentive or general employee benefit plans.
10
<PAGE>
PROPOSAL 2
APPROVAL OF EXISTING STOCK INCENTIVE PLAN
TO MAINTAIN TAX DEDUCTIBILITY
The Stock Incentive Plan (the "Plan") has been approved and adopted by the
Board of Directors as well as Whitman Corporation ("Whitman"), the former sole
stockholder of Hussmann. The Plan became effective on January 30, 1998 when
Whitman distributed (the "Distribution") to its stockholders all of the
outstanding shares of Common Stock of Hussmann. The Board approved certain
amendments to the Plan on April 9, 1998. As explained in the next paragraph, we
are submitting the Plan to stockholders for approval at the Annual Meeting only
for the purpose of complying with the stockholder approval requirement of
Section 162(m) of the Internal Revenue Code of 1986 (the "Code.") If
stockholders do not approve the Plan at the Annual Meeting, Hussmann may not be
able to deduct compensation payable under the Plan because of the deduction
limit of Section 162(m). Accordingly, the Board of Directors recommends a vote
FOR approval of the Plan. Unless otherwise instructed, the proxy holders will
vote any proxies received by them FOR approval of the Plan. Exhibit A to this
Proxy Statement contains the complete text of the Plan which is summarized
below.
Section 162(m) of the Code generally limits to $1 million the amount that
Hussmann is allowed each year to deduct for the compensation paid to Hussmann's
chief executive officer and four most highly compensated executive officers
other than the chief executive officer. However, "qualified performance-based
compensation" is not subject to the $1 million deduction limit. To qualify as
performance-based compensation, the following requirements must be satisfied:
(i) the performance goals are determined by a committee consisting solely of
two or more "outside directors", (ii) the material terms under which the
compensation is to be paid, including the performance goals, are approved by
Hussmann's stockholders, and (iii) if applicable, the committee certifies that
the applicable performance goals were satisfied before payment of any
performance-based compensation is made. The Management Resources and
Compensation Committee, which administers the Plan, currently consists solely
of "outside directors" for purposes of Section 162(m) of the Code. Although
Whitman approved the Plan as Hussmann's then sole stockholder, regulations
under Section 162(m) require that Hussmann's public stockholders approve the
Plan at the Annual Meeting in order for compensation arising from Options,
SARs, Performance Awards and certain Restricted Stock Awards (each as defined
below) granted on or after the date of the Annual Meeting to constitute
"qualified performance-based compensation." If stockholders approve the Plan at
the Annual Meeting, certain compensation under the Plan, such as that payable
with respect to Options, SARS and Performance Awards, is not expected to be
subject to the $1 million deduction limit, but other compensation payable under
the Plan, such as any Restricted Stock Award which is not subject to a
performance condition to vesting, would be subject to such limit.
The Plan provides for the grant of stock options (with or without stock
appreciation rights ("SARs"), restricted stock awards ("Restricted Stock
Awards") and performance awards ("Performance Awards"). Stock options may be
either options that qualify under Section 422 of the Code ("Incentive Options")
or nonqualified stock options ("Nonqualified Options," and together with
Incentive Options, "Options"). Incentive Options may not be granted to non-
employee directors.
Eligibility. Options (with or without SARs), Restricted Stock Awards and
Performance Awards may be granted only to persons who are officers, other key
employees or directors of Hussmann or any of its subsidiaries within the
meaning of Section 424(f) of the Code ("subsidiaries"). As of December 31,
1998, approximately 280 officers, other key employees and directors were
eligible to participate in the Plan.
Administration. Hussmann's Management Resources and Compensation Committee
(the "Committee") administers the Plan. Members of the Committee are appointed
by the Board. The Committee presently consists of Lawrence A. Del Santo
(Chairperson), Archie R. Dykes and R. Randolph Devening, none of whom is an
employee of Hussmann or a subsidiary. Each member of the Committee is currently
a "Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 and is an "outside director" within the meaning of Section
162(m) of the Code.
11
<PAGE>
The Committee has the authority to determine the individuals who receive
awards, the time or times when they shall receive them and the number of shares
subject to each award, and to make all other determinations necessary or
advisable for administering the Plan.
Available Shares. As of January 15, 1999, 815,566 shares of Common Stock
were available under the Plan. The number of available shares is reduced by the
number of shares which become subject to awards which may be paid solely in
shares or in either shares or cash. To the extent that an outstanding award
expires or terminates unexercised or is canceled or forfeited or shares are
withheld or delivered to pay the purchase price of shares or to satisfy
withholding taxes, then the shares subject to such expired, terminated,
unexercised, canceled or forfeited portion of such award, or the shares so
withheld or delivered, will again be available under the Plan. The maximum
number of shares with respect to which options, SARs or Restricted Stock Awards
may be granted during any calendar year to any person is 500,000, subject to
adjustment as described in the next paragraph.
In the event of a stock dividend, spin-off, split-up, recapitalization,
merger, consolidation, combination or exchange of shares or similar event, the
aggregate number and class of shares available under the Plan, and the number
and class of shares subject to awards will be appropriately adjusted by the
Committee.
Change in Control. Except as described in the next paragraph, in the event
of a "change in control" of Hussmann, as defined in the Plan, holders of awards
are entitled to certain accelerated cash payments. Holders have the right at
any time after a change in control to exercise their Options and will receive
from Hussmann an amount in cash equal to the difference between the fair market
value of the shares covered by such Options on the date of the change in
control and the exercise price. Holders of Restricted Stock Awards will receive
from Hussmann an amount in cash equal to the fair market value on the date of
the change in control of the Common Stock covered by such Awards. Holders of
Performance Awards for which the applicable Performance Period (as defined
below) has not expired will receive from Hussmann a pro rated amount in cash.
Holders of Performance Awards which have been earned but not yet paid are
entitled to receive an amount in cash equal to the value of the Performance
Awards.
Notwithstanding the prior paragraph, in the event of a change in control
involving a reorganization, merger or consolidation of Hussmann or other
disposition of all or substantially all of the assets of Hussmann or a
liquidation or dissolution of Hussmann, and in connection with which the
holders of Common Stock receive publicly traded shares of common stock: (i)
each Option and SAR will be exercisable in full; (ii) the Restriction Period
(as defined below) applicable to any Restricted Stock Award will lapse and any
other restrictions, terms or conditions will lapse and/or be deemed to be
satisfied at the maximum value or level; (iii) the performance measures
applicable to any Performance Award will be deemed to be satisfied at the
maximum value and (iv) there will be substituted for each share of Common Stock
remaining available under the Plan, whether or not then subject to an
outstanding award, the number and class of shares into which each outstanding
share of Common Stock is converted pursuant to such change in control. In the
event of any such substitution, the purchase price per share in the case of any
award will be appropriately adjusted by the Committee.
Amendments; Duration. The Board has the power to amend the Plan at any time,
except that stockholder approval is required to increase the maximum number of
shares available under the Plan or effect any change inconsistent with Section
422 of the Code. The Plan may be terminated at any time by the Board, except
with respect to any awards then outstanding.
Stock Options. The Committee may grant Incentive Options and Nonqualified
Options (with or without SARs) to eligible officers, key employees or
directors. An Incentive Option may not be granted to any person who is not an
employee of Hussmann or any parent or subsidiary.
The purchase price per share under each Option is determined by the
Committee, except that the purchase price per share upon exercise of an
Incentive Option may not be less than 100% of the fair market value of the
12
<PAGE>
Common Stock. The period during which an Option may be exercised is determined
by the Committee, except that no Incentive Option may be exercised later than
ten years after its date of grant. An Option may be exercised by giving written
notice to Hussmann specifying the number of shares to be purchased. The
purchase price may be paid (i) in cash or (ii) by delivery of previously-owned
whole shares of Common Stock valued at their fair market value on the date of
exercise.
In general, in the event of the termination of employment or service of a
holder of an Option, each Option will be exercisable only to the extent
exercisable at the date of such termination and may thereafter be exercised at
any time within a period ranging from three months to one year after such
termination, and in no event after the date on which such Option would
otherwise terminate, except that (i) in the event of termination by reason of
retirement or death, each Nonqualified Option will be fully exercisable at any
time up to and including the date on which the Nonqualified Option would
otherwise terminate and (ii) in the event of termination for cause or which is
voluntary on the part of the holder without Hussmann's written consent, each
Option will terminate.
Stock Appreciation Rights. The Committee may grant an SAR (concurrently with
the grant of the Option or, in the case of a Nonqualified Option which is not
intended to be qualified performance-based compensation under Section 162(m) of
the Code, subsequent to such grant) to any person who is granted an Option.
SARs enable the holder to receive, in exchange for the surrender of the portion
of any Option that is exercisable on the date of such request, shares of Common
Stock, cash or a combination thereof, in the discretion of the Committee,
having an aggregate fair market value equal to the excess of the fair market
value of one share of Common Stock over the purchase price specified in the
Option, multiplied by the number of shares covered by the portion of the Option
which is surrendered. An SAR may be exercised (i) by giving written notice to
Hussmann specifying the number of SARs which are being exercised and (ii) by
surrendering to Hussmann any Options which are canceled by reason of the
exercise of the SAR.
Restricted Stock Awards. Restricted Stock Awards are grants of Common Stock,
the vesting of which is subject to a restriction period (the "Restriction
Period") established by the Committee. During the Restriction Period, Hussmann
retains custody of the shares subject to each grant, but the holder of the
Restricted Stock Award has the right (unless otherwise provided in the
Restricted Stock Award agreement) to vote such shares and to receive dividends
thereon. During the Restriction Period, the holder may not sell, pledge or
dispose of the shares.
A holder of a Restricted Stock Award will forfeit all of the shares subject
to the award if (i) the holder breaches a restriction or the terms and
conditions established by the Committee or (ii) except as may otherwise be
determined by the Committee, the holder fails to remain continuously in the
employ or service of Hussmann or a subsidiary at all times during the
Restriction Period.
Performance Awards. The Plan authorizes the grant of Performance Awards
under which a performance period (the "Performance Period") is established by
the Committee at the time of grant. Each Performance Award is assigned a
maximum value which is contingent upon future performance of Hussmann or a
subsidiary, division or department over the Performance Period. Performance
measures are determined by the Committee prior to the beginning of each
Performance Period but may be subject to later revisions to reflect
significant, unforeseen events or changes as the Committee deems appropriate.
After a Performance Period, the holder of a Performance Award is entitled to
receive payment of an amount, not exceeding the maximum assigned value, based
on the achievement of the performance measures, as determined by the Committee.
Payment of Performance Awards may be made wholly in cash, wholly in shares or a
combination thereof, in lump sum or in installments, and subject to such
vesting and other terms and conditions as determined by the Committee. In the
case of a Performance Award intended to be qualified performance-based
compensation under Section 162(m) of the Code, no payment may be made until the
Committee certifies in writing that the performance measures have been
achieved.
13
<PAGE>
A Performance Award will terminate if the holder does not remain
continuously in the employ or service of Hussmann or a subsidiary at all times
during the Performance Period, except as may otherwise be determined by the
Committee. In the event that a holder ceases to be an employee or director
after the Performance Period but prior to full payment of the Performance
Award, payment will be made in accordance with terms established by the
Committee. A holder of a Performance Award which is payable in installments of
Common Stock may not sell, pledge or dispose of such Common Stock until the
installments become due.
Performance Goals. The vesting or payment of Performance Awards and certain
Restricted Stock Awards will be subject to the satisfaction of certain
performance goals. The performance goals applicable to a particular award will
be determined by the Committee at the time of grant. At present, no such awards
are outstanding and, accordingly, no performance goals have been designated by
the Committee. Performance goals may be one or more of the following: return on
equity, revenues, stock price, capitalization, earnings per share, net income,
operating income, gross margins, return on equity measures, cost containment,
market share and cash flow measures. If the performance goal or goals
applicable to a particular award are satisfied, the amount of compensation
would be determined as follows: (i) in the case of a Performance Award, the
amount of compensation would equal the fair market value of any shares
delivered and the amount of cash paid and (ii) in the case of a Restricted
Stock Award that is subject to one or more performance goals, the amount of
compensation would equal the number of shares subject to such award multiplied
by the value of a share of Common Stock on the date the award vests.
Federal Tax Consequences. The following is a brief summary of certain U.S.
federal income tax consequences generally arising with respect to awards under
the Plan.
An Option holder will not recognize taxable income at the time an Option is
granted and Hussmann will not be entitled to a tax deduction at such time. An
Option holder will recognize compensation taxable as ordinary income (and
subject to income tax withholding for an employee) upon exercise of a
Nonqualified Option equal to the excess of the fair market value of the shares
purchased over their exercise price, and Hussmann will be entitled to a
corresponding deduction. An Option holder will not recognize income (except for
purposes of the alternative minimum tax) upon exercise of an Incentive Option.
If the shares acquired by exercise of an Incentive Option are held for the
longer of two years from the date the Incentive Option was granted and one year
from the date it was exercised, any gain or loss arising from a subsequent
disposition of such shares will be taxed as long-term capital gain or loss, and
Hussmann will not be entitled to any deduction. If, however, such shares are
disposed of within the above-described period, then in the year of such
disposition the Option holder will recognize compensation taxable as ordinary
income equal to the excess of the lesser of (i) the amount realized upon such
disposition and (ii) the fair market value of such shares on the date of
exercise over the exercise price, and Hussmann will be entitled to a
corresponding deduction.
A holder of SARs will not recognize taxable income at the time SARs are
granted and Hussmann will not be entitled to a tax deduction at such time. Upon
exercise, the holder will recognize compensation taxable as ordinary income
(and subject to income tax withholding for an employee) in an amount equal to
the fair market value of any shares delivered and the amount of cash paid by
Hussmann. This amount is deductible by Hussmann.
A holder of a Restricted Stock Award will not recognize taxable income at
the time the award is granted and Hussmann will not be entitled to a tax
deduction at such time, unless the holder makes an election to be taxed at such
time. If such election is not made, the holder will recognize compensation
taxable as ordinary income (and subject to income tax withholding for an
employee) at the time the restrictions lapse in an amount equal to the excess
of the fair market value of the shares at such time over the amount, if any,
paid for such shares. The amount of ordinary income recognized by making the
above-described election or upon the lapse of restrictions is deductible by
Hussmann, except to the extent the deduction limit of Section 162(m) of the
Code applies. In addition, a holder receiving dividends with respect to a
Restricted Stock Award for which the above-described election has not been made
and prior to the time the restrictions lapse will recognize compensation
14
<PAGE>
taxable as ordinary income (and subject to income tax withholding for an
employee), rather then dividend income, in an amount equal to the dividends
paid and Hussmann will be entitled to a corresponding deduction, except to the
extent the deduction limit of Section 162(m) applies.
A holder of a Performance Award will not recognize taxable income at the
time a Performance Award is granted and Hussmann will not be entitled to a tax
deduction at such time. Upon the settlement of a Performance Award, the holder
will recognize compensation taxable as ordinary income (and subject to income
tax withholding for an employee) in an amount equal to the fair market value of
any shares delivered and the amount of cash paid by Hussmann. This amount is
deductible by Hussmann, except to the extent the deduction limit of Section
162(m) applies.
----------------
The following table sets forth information regarding Options granted prior
to the date of this Proxy Statement. As a result of the Distribution, all
Whitman restricted stock awards and Whitman stock options that were outstanding
on January 30, 1998 were canceled and awards of restricted Common Stock and
options to purchase Common Stock were granted in substitution of the Whitman
awards. Such substitute awards are not reflected in the following table,
although Whitman restricted stock awards and Whitman stock options granted
during 1996 and 1997 are reflected in the Summary Compensation Table. No
determination has been made regarding any specific grants that may be made
after the date of this Proxy Statement. On March 19, 1999 the closing sale
price of Common Stock for New York Stock Exchange Composite Transactions was
$14.00 per share.
Stock Incentive Plan
<TABLE>
<CAPTION>
Dollar Number of
Name and Position Value($) Units
----------------- ------- ---------
<S> <C> <C>
J. Larry Vowell,
President and CEO......................................... --(a) 396,500
John S. Gleason,
Executive Vice President--North American Operations....... --(a) 212,500
Michael D. Newman,
Senior Vice President--Chief Financial Officer............ --(a) 205,000
John Schlee,
Senior Vice President--Europe and Middle East............. --(a) 159,500
Lawrence A. Rauzon,
Vice President--Asia Pacific.............................. --(a) 159,500
All Executive Officers as a Group (10 persons)............. --(a) 1,738,300
All Non-Employee Directors as a Group (6 persons).......... --(b) 200,000
All Employees as a Group (excluding Executive Officers)(270
persons).................................................. --(a) 1,196,806
</TABLE>
- --------
(a) The exercise price per share equals the fair market value of a share of
Common Stock on the date of grant. The general terms of each option are
described above under "Executive Compensation and Other Information --
Option Grants in 1998."
(b) The exercise price per share equals the fair market value of a share of
Common Stock on the date of grant. The option was granted to Mr. Cline as
part of his compensation for service as Chairman of the Board. The general
terms of the option are described above under "Election of Directors--
Compensation of Directors."
The Board of Directors recommends a vote FOR approval of the Plan.
15
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership of the Common Stock
on March 6, 1999 by each director of Hussmann, by each executive officer who is
named in the Summary Compensation Table, by all directors and executive
officers of Hussmann as a group and by each person known by Hussmann to be the
beneficial owner of more than 5% of the Common Stock. Each of the following
persons has sole voting and investment power with respect to the shares of
Common Stock shown unless otherwise indicated.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership(a) of Class
---- ----------------------- --------
<S> <C> <C>
J. Joe Adorjan.............................. 2,250(b) *
Richard G. Cline............................ 102,687 *
Lawrence A. Del Santo....................... 1,250(b) *
R. Randolph Devening........................ 1,250(b) *
Archie R. Dykes............................. 6,073(b) *
Victoria B. Jackson......................... 4,862(b) *
J. Larry Vowell............................. 361,232 *
John S. Gleason............................. 250,845 *
Michael D. Newman........................... 112,697 *
John Schlee................................. 258,206 *
Lawrence R. Rauzon.......................... 223,814 *
All Directors and Executive
Officers as a Group (16 persons)........... 1,785,901(d) 3.5
Gabelli Funds, Inc., et al.
One Corporate Center....................... 2,951,259(e) 5.8
Rye, NY 10580-1434
David J. Green and Company, LLC
599 Lexington Avenue....................... 2,820,425(f) 5.6
New York, New York 10022
</TABLE>
- --------
* Less than 1%.
(a) Includes shares which the named director or executive officer has the right
to acquire within 60 days after March 6, 1999 through the exercise of stock
options as follows: Mr. Cline, 100,000 shares; Mr. Vowell, 309,505 shares;
Mr. Gleason, 177,868 shares; Mr. Newman, 103,004 shares; Mr. Schlee,
214,934 shares; and Mr. Rauzon, 183,692 shares. Also includes shares
subject to possible forfeiture under outstanding restricted stock awards as
to which the named director or executive officer does not have investment
power as follows: Mr. Vowell, 14,624 shares; Mr. Gleason, 8,698 shares; Mr.
Newman, 6,735 shares; Mr. Schlee, 6,735 shares; and Mr. Rauzon, 6,735
shares.
(b) Includes 1,250 Common Stock units. Common Stock units are paid in Common
Stock, on dates selected by the director. The directors have no voting or
investment power over Common Stock units. See "Election of Directors--
Compensation of Directors."
(c) The number of shares shown for Mr. Schlee includes 27 shares owned by his
wife. Mr. Schlee expressly disclaims beneficial ownership of these shares.
(d) The number of shares shown as beneficially owned includes 1,511,015 shares
which the directors and executive officers have the right to acquire within
60 days after March 6, 1999 through the exercise of stock options, 54,957
shares subject to possible forfeiture under outstanding restricted stock
awards and as to which such persons do not have investment power, and
59,606 shares representing the vested beneficial interest of such persons
under Hussmann's Retirement Savings Plan.
(e) The information as to Gabelli Funds, Inc. ("GFI") and other entities
controlled directly or indirectly by Mario J. Gabelli is derived from a
statement (the "Statement") with respect to Hussmann Common Stock filed
with the Securities and Exchange Commission ("SEC") pursuant to Section
13(d) of the Securities
16
<PAGE>
Exchange Act of 1934 (the "Exchange Act"). GFI is an investment adviser
which presently provides discretionary managed account services for certain
registered investment companies (the "Fund(s)"). The Statement discloses
that (i) Mr. Gabelli is deemed to have beneficial ownership of the shares
beneficially owned by all such entities, (ii) Mr. Gabelli and such entities
do not admit that they constitute a group within the meaning of Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder and (iii) with respect to the Common Stock, Mr. Gabelli and such
entities have the sole power to vote and dispose of all the shares of which
they are beneficial owners, except that GFI has sole dispositive and voting
power with respect to the shares held by the Funds unless the aggregate
voting interest of all the entities exceeds 25% of the total voting interest
in Hussmann, in which case the proxy voting committee of each Fund will
exercise voting power with respect to the shares held by such Fund.
(f) The information as to David J. Greene and Company, LLC ("Greene") is
derived from a statement (the "Statement") with respect to Hussmann Common
Stock filed with the SEC pursuant to Section 13(d) of the Exchange Act.
Greene has sole voting and dispositive power as to 152,125 shares, shared
voting power as to 1,469,936 shares, and shared dispositive power as to
2,668,300 shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers of Hussmann and persons who own more than ten percent of the
Common Stock to file reports of ownership and changes in ownership of Common
Stock with the Securities and Exchange Commission and New York Stock Exchange.
Such persons are also required to furnish to Hussmann copies of all such
reports.
To Hussmann's knowledge, based solely on its review of the copies of such
reports received by Hussmann, and written representations from certain
reporting persons, directors and executive officers of Hussmann and all other
reporting persons complied with all applicable filing requirements, except that
Thomas G. Korte, Vice President and Corporate Controller, failed to file on a
timely basis a Form 3 and a Form 4 relating to one transaction.
17
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation for the last three years of
the Chief Executive Officer of Hussmann and the four other most highly
compensated executive officers of Hussmann serving at the end of 1998. On
January 30, 1998, Hussmann was spun-off from Whitman and became an independent,
publicly held company. References to restricted stock and stock options for
1996 and 1997 relate to awards under Whitman's Stock Incentive Plan.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards(a)
--------------------------------- -------------------------
Other Annual Restricted All Other
Name and Principal Salary Bonus Compensation Stock Awards Options/SARs Compensation
Position Year ($) ($) ($) ($)(b) (#) ($)(c)
- ------------------ ---- ------- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Larry Vowell........ 1998 418,754 692,789 18,875 -- 396,500 58,269
President and CEO 1997 345,003 210,000 15,792 277,500 52,200 61,188
1996 307,500 265,000 13,550 353,500 59,200 57,504
John S. Gleason........ 1998 263,757 321,209 10,830 -- 212,500 33,627
Executive Vice President 1997 248,746 151,000 9,385 166,500 31,500 35,083
--North American Operations 1996 233,746 160,000 8,751 207,050 34,800 32,156
Michael D. Newman...... 1998 229,841 305,539 10,710 -- 205,000 17,619
Senior Vice President 1997 172,463 100,000 8,751 129,500 24,300 21,641
--Chief Financial Officer 1996 151,598 115,000 8,022 159,075 26,900 13,742
John Schlee............ 1998 204,174 248,295 9,960 -- 159,500 18,734
Senior Vice President 1997 194,083 80,000 8,751 129,500 24,300 26,379
--Europe and Middle East 1996 183,246 115,000 8,751 159,075 26,900 22,926
Lawrence A. Rauzon..... 1998 180,000 248,295 9,960 -- 159,500 22,516
Vice President 1997 169,576 113,000 8,751 129,500 24,300 20,485
--Asia Pacific 1996 159,406 75,000 8,587 159,075 26,900 20,244
</TABLE>
- --------
(a) As a result of the Distribution, all Whitman restricted stock awards and
Whitman stock options, including all restricted stock awards and stock
options for 1996 and 1997, that were outstanding on January 30, 1998 were
canceled and awards of restricted Common Stock and options to purchase
Common Stock were granted in substitution of the Whitman awards. Substitute
awards are not reflected as compensation during 1998 in either the Summary
Compensation Table or under "Option Grants in 1998."
(b) The number of shares of restricted Common Stock and their market value held
by Messrs. Vowell, Gleason, Newman, Schlee and Rauzon at December 31, 1998,
was as follows: Mr. Vowell, 14,624 shares ($283,413); Mr. Gleason, 8,698
shares ($168,567); Mr. Newman, 6,735 shares ($130,524); Mr. Schlee, 6,735
shares ($130,524); and Mr. Rauzon, 6,735 shares ($130,524). Restricted
shares vest ratably over a period of three years. Dividend equivalents are
paid on restricted stock at the times and in the same amount as dividends
paid to all stockholders.
(c) The amounts shown for All Other Compensation in 1998 are amounts accrued
under a nonqualified retirement plan (Mr. Vowell, $37,736; Mr. Gleason,
$24,896; Mr. Newman, $13,802; Mr. Schlee, $12,262; and Mr. Rauzon,
$17,580), together with the 1998 values of premiums paid by Hussmann for an
executive split dollar life insurance program (Mr. Vowell, $20,533; Mr.
Gleason, $8,731; Mr. Newman, $3,817; Mr. Schlee, $6,472; and Mr. Rauzon,
$4,936.
18
<PAGE>
Option Grants in 1998
The following table sets forth, for each of the executive officers named in
the Summary Compensation Table, options to purchase Common Stock granted during
1998 under Hussmann's Stock Incentive Plan. No stock appreciation rights were
granted during 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
% of Total Rates of Stock
Options Price Appreciation
Number of Securities Granted to for Option Term (c)
Underlying Options Employees Exercise Expiration -------------------
Name Granted(#) in 1998 Price($/Sh) Date 5% ($) 10% ($)
- ---- -------------------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Vowell......... 110,000 (a) 3.8 13.66 1/30/08 944,977 2,394,757
286,500 (b) 9.9 15.06 2/25/08 2,713,485 6,876,505
John S. Gleason......... 70,000 (a) 2.4 13.66 1/30/08 601,349 1,523,937
142,500 (b) 4.9 15.06 2/25/08 1,349,639 3,420,251
Michael D. Newman....... 70,000 (a) 2.4 13.66 1/30/08 601,349 1,523,937
135,000 (b) 4.6 15.06 2/25/08 1,278,606 3,240,238
John Schlee............. 50,000 (a) 1.7 13.66 1/30/08 429,535 1,088,526
109,500 (b) 3.8 15.06 2/25/08 1,037,091 2,628,193
Lawrence A. Rauzon...... 50,000 (a) 1.7 13.66 1/30/08 429,535 1,088,526
109,500 (b) 3.8 15.06 2/25/08 1,037,091 2,628,193
</TABLE>
- --------
(a) Options granted on January 30, 1998 in connection with the Distribution
with an exercise price equal to the fair market value of the Common Stock
on the date of grant. Options become exercisable in equal annual
installments on each of the first three anniversaries of the date of grant.
In the event of a change in control as defined in Hussmann's Stock
Incentive Plan, options become fully exercisable or in certain cases will
be cashed out by Hussmann.
(b) Performance-based options granted on February 26, 1998 with an exercise
price equal to the fair market value of the Common Stock on the date of
grant. Options become exercisable in whole or in part if certain total
stockholder return targets are met during two-year or three-year
performance periods beginning February 26, 1998. The options become fully
exercisable in any event on February 26, 2005. In the event of a change in
control as defined in Hussmann's Stock Incentive Plan, options become fully
exercisable or in certain cases will be cashed out by Hussmann.
(c) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Securities and
Exchange Commission and, therefore, are not intended to forecast possible
future appreciation, if any, in the price of Common Stock. The calculations
were based on the exercise price per share and the term of the options.
19
<PAGE>
Option Exercises in 1998 and Year-End Option Values
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table regarding the exercise of
options to purchase Common Stock during 1998 and unexercised options held as of
December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-
Acquired on Value Options Held at December the-Money Options at
Exercise Realized 31, 1998 December 31, 1998 ($)(b)
Name (#) ($)(a) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J. Larry Vowell......... 0 0 204,197/497,306 1,702,551/2,518,350
John S. Gleason......... 0 0 113,683/272,762 923,209/1,405,892
Michael D. Newman....... 0 0 48,122/251,522 291,844/1,284,568
John Schlee............. 0 0 176,361/206,022 1,840,800/1,060,008
Lawrence A. Rauzon...... 0 0 145,119/206,022 1,448,079/1,060,008
</TABLE>
- --------
(a) The value realized equals the aggregate amount of the excess of the fair
market value on the date of exercise (the average of the high and low
prices of Common Stock as reported for New York Stock Exchange Composite
Transactions) over the exercise price, without any adjustment for taxes
payable by the executive officer.
(b) Based on the closing price of the Common Stock ($19.38) on December 31,
1998, as reported for New York Stock Exchange Composite Transactions.
Pension Plans
Hussmann maintains qualified, defined benefit pension plans and nonqualified
retirement plans paying benefits in optional forms elected by the employee
based upon percentage multipliers which are applied to Covered Compensation and
Credited Service. Except for Mr. Vowell, the benefit formula provides a
retirement benefit of 1% of Covered Compensation for each year of Credited
Service (excluding 1989-1991), up to a maximum of 20 years. The benefit for Mr.
Vowell, who had 29 years of Credited Service at December 31, 1988 (when the
benefit structure was amended), will be determined under a minimum benefit
formula (33.3% of Covered Compensation). Such benefits are not subject to
deduction for social security or other offset amounts. As of December 31, 1998,
Mr. Vowell had an accrued annual benefit payable at normal retirement age of
approximately $180,000.
For executive officers other than Mr. Vowell, the following table reflects
future benefits, payable as life annuities upon retirement, in terms of a range
of amounts determined under the benefit formula for representative periods of
Credited Service.
Projected Annual Pension
<TABLE>
<CAPTION>
Years of Credited Service (b)
---------------------------------------------------------
20
Covered Compensation (a) 5 10 15 or more
- ------------------------ ------- ------- -------- --------
<S> <C> <C> <C> <C>
$ 400,000 $20,000 $40,000 $ 60,000 $ 80,000
500,000 25,000 50,000 75,000 100,000
600,000 30,000 60,000 90,000 120,000
700,000 35,000 70,000 105,000 140,000
</TABLE>
- --------
(a) Covered Compensation includes salary and bonus, as shown in the Summary
Compensation Table, averaged over the five consecutive years in which such
compensation is the highest.
(b) As of December 31, 1998, Messrs. Gleason, Newman, Schlee and Rauzon had 7,
2, 7 and 16 years of Credited Service, respectively.
20
<PAGE>
Termination Benefits
Hussmann has entered into Change in Control Agreements (the "Change in
Control Agreements"), with Messrs. Vowell, Gleason, Newman, Schlee, Rauzon and
certain other officers. The Change in Control Agreements were a result of a
determination by the Board that it was important and in the best interests of
Hussmann and its stockholders to ensure that, in the event of a possible change
in control of Hussmann, the stability and continuity of management would
continue unimpaired, free of the distractions incident to any such possible
change in control.
For purposes of the Change in Control Agreements, a "change in control"
includes (i) a reorganization, merger or consolidation of Hussmann or sale or
other disposition of all or substantially all of Hussmann's assets, other than
a transaction in which the beneficial owners of the Common Stock prior to the
transaction own at least two-thirds of the voting securities of the corporation
resulting from such transaction, no person owns 25% or more of the voting
securities of the corporation resulting from such transaction and the members
of Hussmann's Board of Directors constitute at least a majority of the members
of the board of directors of the corporation resulting from such transaction,
(ii) the consummation of a plan of complete liquidation or dissolution of
Hussmann, (iii) the acquisition by any person or group of 25% or more of
Hussmann's voting securities, or (iv) persons who are directors of Hussmann on
January 30, 1998 (or their successors as approved by a majority of the members
of Hussmann's Board) cease to constitute a majority of Hussmann's Board.
Benefits are payable under the Change in Control Agreements only if a change
in control has occurred and within three years thereafter the officer's
employment is terminated involuntarily without cause or voluntarily by the
officer for reasons such as demotion, relocation, loss of benefits or other
changes. The principal benefits to be provided to officers under the Change in
Control Agreements are (i) a lump sum payment equal to three years'
compensation (base salary and incentive compensation), and (ii) continued
participation in Hussmann's employee benefit programs or equivalent benefits
for three years following termination. The Change in Control Agreements provide
that, if separation payments thereunder, either alone or together with payments
under any other plan of Hussmann, would constitute a "parachute payment" as
defined in the Internal Revenue Code (the "Code") and subject the officer to
the excise tax imposed by Section 4999 of the Code, Hussmann will pay such tax
and any taxes on such payment.
The Change in Control Agreements are not employment agreements, and do not
impair the right of Hussmann to terminate the employment of the officer with or
without cause prior to a change in control, or, absent a potential or pending
change in control, the right of the officer to voluntarily terminate his
employment.
Employment Agreement
Effective April 9, 1998, Hussmann and J. Larry Vowell, the President and
Chief Executive Officer of Hussmann, entered into an employment agreement (the
"Agreement") for the purpose of securing Mr. Vowell's continued services. The
Agreement has a three-year term expiring on April 9, 2001.
The Agreement provides that Mr. Vowell's base salary shall be at least
$425,000 per year and he is entitled to participate in all executive
compensation plans and programs, as well as pension, retirement and insurance
plans. In the event Mr. Vowell's employment is terminated for good reason or by
Hussmann without cause, Mr. Vowell will receive a lump sum severance payment
equal to his base salary and a pro rated bonus, in each case for the remainder
of the term of the Agreement. In addition, Hussmann will continue Mr. Vowell's
executive perquisites and benefits, and credit Mr. Vowell with service for
purposes of any retirement benefits, for the remainder of the term of the
Agreement. In the event of a change in control of Hussmann, Mr. Vowell's
severance benefits will be governed by his Change in Control Agreement
described above.
21
<PAGE>
Report of the Management Resources and Compensation Committee on Executive
Compensation
The Management Resources and Compensation Committee of the Board of
Directors (the "Committee") consists entirely of outside, non-employee
Directors. The Committee oversees the design of and regularly reviews the
Company's executive compensation programs. The Committee believes compensation
should vary on the basis of performance, should be aligned to comparable peer
groups, and should ultimately be driven by the short-and long-term interests of
stockholders. In determining the compensation payable to the Company's
executive officers, the Committee seeks to implement the following policies
through a combination of fixed and variable compensation. These policies were
developed with the assistance of outside compensation consultants.
Compensation Policies
. Executives will be rewarded for the achievement of financial and
individual results against clearly defined goals and objectives.
. As executives assume greater responsibilities, their total compensation
packages will be subject to greater risk, based upon the financial
performance of the Company.
. Stockholder value creation must be an important link in the design of
the executive compensation package.
. The various components of the executive compensation package must
attract, retain and motivate key executives and aid in maintaining an
entrepreneurial spirit by members of the management team.
. Generally, base compensation will be aligned to median base compensation
levels for positions of similar scope at comparable organizations.
. Variable cash awards will be used to align compensation with short-term
business objectives. Exceeding these objectives will increase the amount
of the awards.
. Equity instruments (primarily stock options) will be used to align a
significant portion of total compensation with the Company's long-term
strategy of continued stockholder value creation.
1998 Compensation Overview
As outlined above, the Company's executive compensation program consists of
specific elements that, in the aggregate, are market competitive and are
aligned to short- and long-term business objectives. For 1998, each executive
officer's total compensation package consisted primarily of a base salary plus
an annual cash incentive award and a stock option award. The Company's
executive officers are also eligible to participate in compensation and benefit
programs generally available to other Company employees.
To determine the Company's comparative position on each of the specified
primary compensation elements, the Company analyzed various published
compensation surveys and proxy statements of 15 companies in similar industries
and of comparable revenues to the Company. Four of the 15 companies whose proxy
statements were analyzed are in the Russell 2000-Producer Durables Index, the
peer group index in the Performance Graph included in this Proxy Statement.
Because the Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies that would be
included in a peer group established to compare stockholder return, the
compensation peer group is not the same as the Performance Graph peer group.
Elements of 1998 Total Compensation
Base Compensation. Each executive officer's salary is reviewed each year and
adjusted as appropriate based on Company performance, individual performance,
the scope and responsibilities of the executive's position, and the base
salaries paid by peer companies to employees in comparable positions. During
1998, base salaries of the executive officers reflected the 50th percentile
compensation level for executives of the surveyed companies.
22
<PAGE>
Annual Cash Incentive. The Committee has created the Hussmann Incentive Plan
("HIP") to motivate executive officers and other Company management employees
to attain annual performance objectives. Annual cash incentives available under
the HIP are set at a level which, when combined with an executive officer's
salary, would position the officer's cash compensation at or near the 75th
percentile of peer company compensation if the annual performance objectives
are met. Cash awards for the CEO and other executive officers under HIP are
based on financial performance goals established at the beginning of the year.
The pre-set financial performance targets are based on Economic Value Added
("EVA"), which is a measurement of return on investment based on net income.
The HIP awards are paid during the year following the year of performance after
the Committee has certified that the applicable performance goals have been
satisfied. Because the Company achieved the maximum EVA target level in 1998,
awards earned by the executive officers equaled the maximum award available to
each.
Long Term Incentive. The Company provides long-term incentives through the
Company's Stock Incentive Plan ("SIP"). The Committee believes that stock
ownership by executive officers and middle management is essential for aligning
management's interest with that of stockholders. Under the SIP, the Committee
may provide long-term performance incentive awards in the form of stock options
(with or without stock appreciation rights), restricted stock awards and
performance awards. In 1998, the Committee approved stock option awards
designed to focus management's energy and effort on stockholder value by a)
accelerating vesting of the options based upon increases in the Company's stock
price and b) combining the amount of options which would have been granted
annually over a three year period into a single award. The exercise price of
the options is equal to the fair market value of Hussmann Common Stock on the
date of the grant, February 26, 1998. The options become exercisable in whole
or in part on an accelerated basis if certain total stockholder return targets
are met during two- or three-year performance periods beginning February 26,
1998. The options become fully exercisable in any event on February 26, 2005.
In determining the number of options granted, the Committee did not consider
the amount and terms of options which had been granted to the officer by
Whitman Corporation prior to January 30, 1998 (the "Distribution Date"), the
date on which Whitman distributed (the "Distribution") to its stockholders all
of the outstanding shares of Common Stock of Hussmann. (As indicated in the
Company's 1997 Annual Report on Form 10-K, as a result of the Distribution, all
Whitman stock options and restricted stock awards that were outstanding on the
Distribution Date were canceled and awards of Hussmann stock options and
restricted stock were granted under the SIP in substitution thereof.)
On January 30, 1998, the executive officers also received stock option
awards approved by the transitional Hussmann Board of Directors which had been
appointed by Whitman. The exercise price of these options is equal to the fair
market value of Hussmann Common Stock on the date of the grant. The options
become exercisable in equal annual installments on each of the first three
anniversaries of the date of grant (January 30, 1998).
CEO Compensation
Mr. Vowell's 1998 annual cash incentive and stock option grant each followed
the same policies and calculations set forth above; provided, however, Mr.
Vowell was eligible for a higher percentage payout, up to a maximum of 163% of
his annual salary, under the HIP if the Company achieves the pre-set EVA
performance levels. Because the Company achieved the maximum EVA target level
in 1998, Mr. Vowell received the maximum award available under the HIP, a
payout of $692,789. Mr. Vowell received two stock option awards during 1998: 1)
110,000 options granted on January 30, 1998 which were approved by the
transitional Hussmann Board of Directors; and 2) 286,500 options granted on
February 26, 1998 by the Committee. The number of options for the February 26,
1998 Committee grant was determined by converting his annual salary into an
equivalent dollar value of stock options using the Black-Scholes valuation
method for the options.
Effective April 9, 1998, Mr. Vowell has a 3-year employment agreement
terminating April 9, 2001 (which is described more fully under "Employment
Agreement" in this Proxy Statement) which establishes a
23
<PAGE>
minimum annual salary of $425,000. Mr. Vowell's salary for 1998, $418,754,
reflects this annual salary prorated for the year.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally imposes a $1,000,000
limit on the amount of compensation that is deductible by the Company with
respect to the Chief Executive Officer and each of the four named executive
officers. Performance-based compensation which has been approved by
stockholders is excluded from the $1,000,000 limit if, among other
requirements, the compensation is payable only upon attainment of pre-
established, objective performance goals and the board committee that
establishes such goals consists only of two or more "outside directors." The
Company has undertaken to qualify its SIP so that certain portions thereof
payable with respect to options, stock appreciation rights and performance
awards meet the deductibility requirements. If restricted stock awards made
under the SIP are not subject to a performance condition, such awards would be
subject to the limit. No such awards were made during 1998.
Awards under HIP may exceed the deduction limitation under Section 162(m) if
the pre-established, objective performance goals set forth in the plan are
attained. While the tax impact of any compensation arrangement is one factor to
be considered, such impact is evaluated by the Committee in light of its
overall compensation policies and need for flexibility to attract and retain
executive talent. In order to mitigate the negative impact of Section 162(m) on
stockholders, the terms of the HIP allow the awards to be deferred.
MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE
Lawrence A. Del Santo (Chairperson)
R. Randolph Devening
Archie R. Dykes
24
<PAGE>
Performance Graph
The following performance graph compares Hussmann's cumulative total
stockholder return on the Common Stock from January 30, 1998 (the date of the
Distribution) to December 31, 1998 with the cumulative total return of Russell
2000 Stock Index ("Russell 2000") and the Russell 2000--Producer Durables
("Peer Group", which includes Hussmann). These comparisons assume an initial
investment of $100 and reinvestment of dividends.
Cumulative Total Returns
Hussman International, Inc., Russell 2000, Peer Group
(Performance results through 12/31/98)
<TABLE>
<CAPTION>
1/30/98 3/31/98 6/30/98 9/30/98 12/31/98
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Hussmann............................... $100 $137.80 $136.57 $104.53 $142.92
Russell 2000........................... $100 $111.82 $106.61 $ 85.13 $ 99.02
Peer Group............................. $100 $112.91 $103.26 $ 78.01 $ 93.52
</TABLE>
25
<PAGE>
CERTAIN TRANSACTIONS
Distribution and Indemnity Agreement
Hussmann entered into a Distribution and Indemnity Agreement (the
"Distribution Agreement") with Whitman providing for, among other things, the
principal corporate transactions required to effect the Distribution and
certain other agreements governing the relationship between Hussmann and
Whitman with respect to or as a result of the Distribution.
The Distribution Agreement also provides that (i) Whitman will indemnify
Hussmann against any liabilities arising out of the businesses conducted or to
be conducted by Whitman or any subsidiary of Whitman and any previously-owned
division, subsidiary or affiliate of Whitman (other than Hussmann); and (ii)
Hussmann will indemnify Whitman against any liabilities arising out of
businesses conducted or to be conducted by Hussmann or any subsidiary of
Hussmann and any previously-owned division, subsidiary or affiliate of
Hussmann; provided, however, that neither Hussmann nor Whitman will have any
liability to each other for taxes except as provided in the Tax Sharing
Agreement (as defined below). The indemnities will be limited to the extent
that the indemnitee receives insurance proceeds or a tax benefit with respect
to the claimed loss. In January 1998, as part of the Distribution, Hussmann
paid Whitman $141 million to settle intercompany loans and advances and a $81
million cash dividend. Also in 1998, Hussmann paid Whitman $1.5 million as
Hussmann's allocation from Whitman of Whitman's expenses to its operating
subsidiaries and $1.0 million as interest on loans and advances from Whitman.
The Distribution Agreement provides that, except as otherwise set forth
therein or in the Tax Sharing Agreement, all costs and expenses arising on or
prior to January 30, 1998 in connection with the Distribution will be paid by
Whitman, other than (i) costs related to Hussmann's new financing arrangements,
to the listing of Hussmann's Common Stock on the New York Stock Exchange and to
printing new stock certificates, (ii) fees of rating agencies for rating
Hussmann's securities, (iii) one-third of the legal fees for the Distribution,
(iv) the accounting and audit fees related to the Distribution, (v) fees of
outside consultants retained by Hussmann and (vi) one-third of the cost of
printing and distributing Hussmann's Registration Statement on Form 10.
Hussmann has paid $0.7 million to Whitman in reimbursement of costs and
expenses payable by Hussmann pursuant to the Distribution Agreement.
In connection with certain employee compensation and benefit matters, the
Distribution Agreement provides that, with certain exceptions, Hussmann and its
subsidiaries will be responsible for all liabilities to, or under benefit plans
or programs with respect to, any current, former and future employee (and their
dependents and beneficiaries) of Hussmann or any of its subsidiaries prior to,
on and after the Distribution.
Tax Sharing Agreement
Hussmann will be included in the consolidated U.S. Federal income tax
returns of Whitman through and including January 30, 1998. Whitman had
previously entered into a Tax Allocation Agreement (the "Tax Allocation
Agreement") with Hussmann Corporation, a subsidiary of Hussmann, with respect
to U.S. Federal income taxes. The Tax Allocation Agreement provided, among
other things, that if Hussmann Corporation left the consolidated group, such
agreement would terminate and Hussmann Corporation would not be entitled to the
value of any tax benefits that it may have made available to the Whitman
consolidated group while included in such group.
As part of the Distribution, Hussmann and Hussmann Corporation entered into
an agreement with Whitman (the "Tax Sharing Agreement") which replaced the Tax
Allocation Agreement. The Tax Sharing Agreement provides that in order to avoid
adversely affecting the intended tax consequences of the Distribution, Hussmann
will not (i) cease to engage in an active trade or business within the meaning
of the Code, (ii) issue any shares of Hussmann's stock, except for issuances of
stock or stock options which do not, in the aggregate, exceed 20% of the issued
and outstanding Common Stock immediately following the Distribution, (iii)
purchase any shares of its stock other than through stock purchases permitted
by the tax
26
<PAGE>
ruling related to the Distribution, (iv) liquidate or merge with any other
corporation or transfer substantially all of its assets to any other
corporation, or (v) recommend to its stockholders that they agree to an
acquisition of their Common Stock by another entity, unless either (a) an
opinion is obtained from counsel to Hussmann which counsel shall be
satisfactory to Whitman, or (b) a supplemental ruling is obtained from the
Internal Revenue Service to the effect that such act or omission would not
adversely affect the U.S. Federal income tax consequences, as set forth in the
tax ruling, of the Distribution to any of Whitman, its stockholders or
Hussmann. Hussmann does not expect that these limitations will significantly
inhibit its activities or its ability to respond to unanticipated developments.
In addition, the Tax Sharing Agreement provides that, if as a result of any
transaction occurring after January 30, 1998 involving either the stock, assets
or debt, or any combination thereof, of Hussmann or any of its subsidiaries,
the Distribution fails to qualify as tax-free under Section 355 of the Code,
Hussmann will indemnify Whitman for all taxes, including penalties and
interest, incurred by Whitman by reason of the Distribution. The Tax Sharing
Agreement further provides that if the Distribution fails to qualify as tax-
free under Section 355 of the Code as a result of any transaction occurring on
or before January 30, 1998 and involving the stock, assets or debt, or any
combination thereof, of Hussmann or any of its subsidiaries, then Whitman, and
not Hussmann, will be liable for such taxes described above.
The Tax Sharing Agreement generally provides that Hussmann will be liable
for all Federal, state, local and foreign tax liabilities, including any such
liabilities resulting from the audit or other adjustment to previously filed
tax returns, which are attributable to Hussmann's businesses, and that Whitman
will be responsible for all such taxes attributable to the businesses retained
by Whitman.
INDEPENDENT AUDITORS
KPMG LLP, independent public accountants, were the independent auditors of
Hussmann for the fiscal year ending December 31, 1998. We expect that a
representative of KPMG LLP will attend the Annual Meeting and will have an
opportunity to make a statement and respond to appropriate questions. The Board
of Directors has not yet selected independent auditors for the fiscal year
ending December 31, 1999.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in Hussmann's proxy materials for
the 2000 Annual Meeting of Stockholders, a stockholder proposal must be
received by the Corporate Secretary no later than December 3, 1999. In
addition, regardless of whether a stockholder proposal is set forth in this
Proxy Statement as a matter to be considered by stockholders, Hussmann's Bylaws
establish an advance notice procedure for stockholder proposals to be brought
before any annual meeting of stockholders, including proposed nominations of
persons for election to the Board of Directors. Stockholders at the 1999 Annual
Meeting may consider a proposal or nomination brought by a stockholder of
record on March 26, 1999, who is entitled to vote at the 1999 Annual Meeting
and who has given the Corporate Secretary timely written notice, in proper
form, of the stockholder's proposal or nomination. A stockholder proposal or
nomination intended to be brought before the 1999 Annual Meeting must have been
received by the Corporate Secretary after the close of business on February 6,
1999 and prior to the close of business on February 26, 1999. The Corporate
Secretary did not receive notice of any stockholder proposal or nomination
relating to the 1999 Annual Meeting. The 2000 Annual Meeting is expected to be
held on May 4, 2000. A stockholder proposal or nomination intended to be
brought before the 2000 Annual Meeting must be received by the Corporate
Secretary after the close of business on February 12, 2000 and prior to the
close of business on March 4, 2000. All proposals and nominations should be
addressed to Hussmann International, Inc., 12999 St. Charles Rock Road,
Bridgeton, Missouri 63044-2483, Attention: Corporate Secretary.
27
<PAGE>
GENERAL
Hussmann will bear the entire cost of soliciting proxies for the Annual
Meeting. Proxies will be solicited by mail, and may be solicited personally by
directors, officers or employees of Hussmann who will not receive special
compensation for such services. Hussmann will reimburse brokers, dealers, banks
and trustees, or their nominees, for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of shares of Common Stock.
Hussmann has also engaged Kissel-Blake Inc. to solicit proxies at a cost of
approximately $11,000.
We mailed a copy of Hussmann's 1998 Annual Report to Stockholders with this
Proxy Statement.
A copy of Hussmann's 1998 Annual Report on Form 10-K may be obtained without
charge upon written request to Hussmann International, Inc., 12999 St. Charles
Rock Road, Bridgeton, Missouri 63044-2483, Attention: Corporate Secretary. A
reasonable charge will be made for requested exhibits.
By Order of the Board of Directors
/s/ Burton Halpern
Burton Halpern
Corporate Secretary
St. Louis, Missouri
April 2, 1999
28
<PAGE>
EXHIBIT A
HUSSMANN INTERNATIONAL, INC.
STOCK INCENTIVE PLAN
(amended as of April 9, 1998)
1. Definitions
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time. Reference in the Plan to any section of the
Code shall be deemed to include any amendments or successor provision to
such section and any regulations under such section.
(b) "Committee" shall mean the Committee selected by the Board of
Directors as provided in Paragraph 4, consisting of two or more members of
the Board of Directors, each of whom shall be (i) a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Exchange Act, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code.
(c) "Common Stock" shall mean common stock of the Corporation, with par
value of $.001 per share.
(d) "Corporation" shall mean Hussmann International, Inc., a Delaware
corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the
Performance Award provisions of the Plan.
(i) "Plan" shall mean the Corporation's Stock Incentive Plan, as amended
from time to time.
(j) "Restricted Stock Award" shall mean an award of Common Stock granted
under the Restricted Stock Award provisions of the Plan.
(k) "Retirement" shall mean cessation of active employment or service
with the Corporation or a subsidiary pursuant to the Corporation's
retirement policies and programs.
(l) "SAR" shall mean a stock appreciation right which is issued in
tandem with, or by reference to, an Option, which entitles the Holder
thereof to receive, upon exercise of such SAR and surrender for
cancellation of all or a portion of such Option, shares of Common Stock,
cash or a combination thereof with an aggregate value equal to the excess
of the fair market value of one share of Common Stock on the date of
exercise over the purchase price specified in such Option, multiplied by
the number of shares of Common Stock subject to such Option, or portion
thereof, which is surrendered.
2. Purpose
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries, to serve as directors and to provide a means whereby those
persons upon whom the responsibilities of the successful administration and
management of the Corporation or its subsidiaries rest, and whose present and
potential contributions to the welfare of the Corporation or its subsidiaries
are of importance, can acquire and maintain stock ownership. Such persons
should thus have a greater than ordinary concern for the welfare of the
Corporation and/or its subsidiaries and would be expected to strengthen and
maintain a desire to remain in the employ or service of the Corporation or its
subsidiaries. It is a further purpose of the Plan to provide such persons with
additional incentive and reward opportunities
A-1
<PAGE>
designed to enhance the profitable growth of the Corporation. So that the
maximum incentive can be provided each participant in the Plan by granting such
participant an Option or award best suited to such participant's circumstances,
the Plan provides for granting "incentive stock options" (as defined in Section
422 of the Code) and nonqualified stock options (with or without SARs),
Restricted Stock Awards and Performance Awards, or any combination of the
foregoing.
3. Effective Date and Duration of the Plan
The Plan is subject to approval by Whitman Corporation ("Whitman"), the sole
shareholder of the Corporation, and shall become effective concurrently with
the distribution by Whitman to its shareholders of all of the outstanding
shares of Common Stock held by Whitman (the "Distribution"). The Plan may be
submitted at the 1999 annual meeting of the shareholders of the Corporation for
approval in accordance with Section 162(m) of the Code. The Plan shall remain
in effect until all Options granted under the Plan have been exercised, all
restrictions imposed upon Restricted Stock Awards have been eliminated and all
Performance Awards have been satisfied.
4. Administration
The members of the Committee shall be selected by the Board of Directors to
administer the Plan. A majority of the Committee shall constitute a quorum.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to receive Options
(with or without SARs), Restricted Stock Awards and Performance Awards, the
time or times when they shall receive them, whether an "incentive stock option"
under Section 422 of the Code or nonqualified option shall be granted, the
number of shares to be subject to each Option and Restricted Stock Award and
the value of each Performance Award. In making such determinations the
Committee shall take into account the nature of the services rendered by each
individual, such individual's present and potential contribution to the
Corporation's success, and such other factors as the Committee shall deem
relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and Performance
Award agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to determine the terms, restrictions and
provisions of the Option, Restricted Stock Award and Performance Award
agreements (which need not be identical) including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
certain Options to qualify as "incentive stock options" under Section 422 of
the Code, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may, in its sole discretion and for any
reason at any time, subject to the requirements imposed under Section 162(m) of
the Code and regulations promulgated thereunder in the case of an award
intended to be qualified performance-based compensation, take action such that
(i) any or all outstanding Options shall become exercisable in part or in full,
(ii) all or some of the restrictions applicable to any outstanding Restricted
Stock Award shall lapse and (iii) all or a portion of any outstanding
Performance Award shall be satisfied. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
Option, Restricted Stock Award or Performance Award agreement in the manner and
to the extent it shall deem expedient to carry it into effect, and it shall be
the sole and final judge of such expediency. The determinations of the
Committee on matters referred to in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting, except that action
permitted to be taken at a meeting may be taken without a meeting if written
consent thereto is given by all members of the Committee.
5. Grants of Options, Restricted Stock Awards and Performance Awards; Shares
Subject to the Plan
The Committee may from time to time grant both "incentive stock options"
under Section 422 of the Code and nonqualified options to purchase shares of
Common Stock (with or without SARs), Restricted Stock Awards and Performance
Awards to one or more officers, key employees or directors determined by it to
be eligible for participation in accordance with the provisions of Paragraph 6
and providing for the issuance of
A-2
<PAGE>
such number of shares and, in the case of Performance Awards, having such value
as in the discretion of the Committee may be fitting and proper. Subject to
Paragraph 10, not more than 4,000,000 shares of Common Stock may be issued upon
exercise of Options or SARs or pursuant to Restricted Stock Awards or
Performance Awards granted under the Plan, plus the number of shares of Common
Stock issued under Options or Restricted Stock Awards substituted for options
to purchase Common Stock or restricted stock awards of Whitman in connection
with the Distribution. Performance Awards which may be exercised or paid only
in cash shall not affect the number of shares of Common Stock available for
issuance under the Plan.
The Common Stock to be offered under the Plan pursuant to Options, SARs,
Restricted Stock Awards and Performance Awards may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and reacquired
by the Corporation.
The number of shares of Common Stock available for issuance under the Plan
shall be reduced by the sum of the aggregate number of shares of Common Stock
then subject to outstanding Options, Restricted Stock Awards and outstanding
Performance Awards which may be paid solely in shares of Common Stock or in
either shares of Common Stock or cash. To the extent (i) that an outstanding
Option expires or terminates unexercised or is canceled or forfeited (other
than in connection with the exercise of an SAR for Common Stock as set forth in
the immediately following sentence) or (ii) that an outstanding Restricted
Stock Award or outstanding Performance Award which may be paid solely in shares
of Common Stock or in either shares of Common Stock or cash expires or
terminates without vesting or is canceled or forfeited or (iii) shares of
Common Stock are withheld or delivered pursuant to the provisions on Share
Withholding set forth in Paragraph 11(A), then the shares of Common Stock
subject to such expired, terminated, unexercised, canceled or forfeited portion
of such Option, Restricted Stock Award or Performance Award, or the shares of
Common Stock so withheld or delivered, shall again be available for issuance
under the Plan. In the event all or a portion of an SAR is exercised, the
number of shares of Common Stock subject to the related Option (or portion
thereof) shall again be available for issuance under the Plan, except to the
extent that shares of Common Stock were actually issued upon exercise of the
SAR.
To the extent necessary for an award hereunder to be qualified performance-
based compensation under Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which Options, SARs or Restricted Stock Awards or a combination
thereof may be granted during any calendar year to any person shall be 500,000,
subject to adjustment as provided in Paragraph 10. Grants of Options,
Restricted Stock Awards or Performance Awards that are canceled shall count
toward the maximum stated in the preceding sentence.
6. Eligibility
Options, Restricted Stock Awards and Performance Awards may be granted only
to persons who, at the time of the grant or award, are officers, other key
employees or directors of the Corporation or any of its present and future
subsidiaries within the meaning of Section 424(f) of the Code (herein called
subsidiaries). Options, Restricted Stock Awards or Performance Awards, or any
combination thereof, may be granted on more than one occasion to the same
person. A person who has received or is eligible to receive options to purchase
stock of any subsidiary of the Corporation or incentive awards from any
subsidiary of the Corporation will not, by reason thereof, be ineligible to
receive Options, Restricted Stock Awards or Performance Awards under the Plan
unless prohibited by the plan of such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an agreement
or understanding, expressed or implied, on the part of the Corporation or its
subsidiaries to employ any person for any specific period of time.
7. Options and SARs
(A) Number of Shares. The Committee may, in its discretion, grant Options to
such eligible persons as may be selected by the Committee. With respect to each
Option, the Committee shall determine the number of shares subject to the
Option and the manner and the time of exercise of such Option. The Committee
shall make such other determinations which in its discretion appear to be
fitting and proper.
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(B) Stock Option Agreement. Each Option shall be evidenced by a stock option
agreement in such form containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify certain Options as
"incentive stock options" under Section 422 of the Code. An incentive stock
option may not be granted to any person who is not an employee of the
Corporation or any parent or subsidiary (as defined in Section 424 of the
Code). Each incentive stock option shall be granted within ten years of the
earlier of the date the Plan is adopted by the Corporation's Board of Directors
and the date the Plan is approved by Whitman as the sole shareholder of the
Corporation. To the extent that the aggregate fair market value (determined as
of the date of grant) of shares of Common Stock with respect to which Options
designated as incentive stock options are exercisable for the first time by a
person during any calendar year exceeds the amount (currently $100,000)
established by the Code, such Options shall be deemed to be non-qualified stock
options.
(C) Option Price and Term of Option. The purchase price per share of the
Common Stock under each Option shall be determined by the Committee; provided,
however, that the purchase price per share of Common Stock purchasable upon
exercise of an incentive stock option shall not be less than 100% of the fair
market value of the Common Stock at the date such Option is granted; provided,
further, that if an incentive stock option shall be granted to any person who,
at the time such Option is granted, owns capital stock of the Corporation
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Corporation (or of any parent or subsidiary of
the Corporation) (a "Ten Percent Holder"), such purchase price shall be the
price (currently 110% of fair market value) required by the Code in order to
constitute an incentive stock option.
The period during which an Option may be exercised shall be determined by
the Committee; provided, however, that no incentive stock option shall be
exercised later than ten years after its date of grant; provided further, that
if an incentive stock option shall be granted to a Ten Percent Holder, such
option shall not be exercised later than five years after its date of grant.
The Committee shall determine whether an Option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time.
An exercisable Option, or portion thereof, may be exercised only with respect
to whole shares of Common Stock.
(D) Payment. An Option may be exercised by giving written notice to the
Corporation specifying the number of shares of Common Stock to be purchased and
accompanied by payment of the purchase price in full (or arrangement made for
such payment to the Corporation's satisfaction). As determined by the Committee
at the time of grant of an Option and set forth in the agreement evidencing the
Option, the purchase price may be paid (a) in cash or (b) by delivery (either
actual delivery or by attestation procedures established by the Corporation) of
previously-owned whole shares of Common Stock (for which the holder has good
title, free and clear of all liens and encumbrances and which such holder
either (i) has held for at least six months or (ii) has purchased on the open
market) valued at their fair market value on the date of exercise. If
applicable, a person exercising an Option shall surrender to the Corporation
any SARs which are canceled by reason of the exercise of such Option.
(E) Termination of Employment or Service or Death of Holder. In the event of
any termination of the employment or service of a Holder with the Corporation
or one of its subsidiaries, other than by reason of death or, in the case of a
Holder of a nonqualified option, Retirement, the Holder may (unless otherwise
provided in the Option agreement) exercise each Option held by such Holder at
any time within three months (or one year if the Holder is permanently and
totally disabled within the meaning of Section 22(e)(3) of the Code) after such
termination of employment or service, but only if and to the extent such Option
is exercisable at the date of such termination of employment or service, and in
no event after the date on which such Option would otherwise terminate;
provided, however, that if such termination of employment or service is for
cause or voluntary on the part of the Holder without the written consent of the
Corporation, any Option held by such Holder under the Plan shall terminate
unless otherwise provided in the Option agreement.
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In the event of the termination of employment or service of a Holder of a
nonqualified option by reason of Retirement, then each nonqualified option held
by the Holder shall be fully exercisable, and, subject to the following
paragraph, such nonqualified option shall be exercisable by the Holder at any
time up to and including (but not after) the date on which the nonqualified
option would otherwise terminate (unless otherwise provided in the Option
Agreement).
Unless otherwise provided in the Option Agreement, in the event of the death
of a Holder (i) while employed by or providing service to the Corporation or
one of its subsidiaries or after Retirement, (ii) within three months after
termination of the Holder's employment or service, other than a termination by
reason of permanent and total disability within the meaning of Section 22(e)(3)
of the Code, or (iii) within one year after termination of the Holder's
employment or service by reason of such disability, then each Option held by
such Holder may be exercised by the legatees of the Holder under his last will,
or by his personal representatives or distributees, at any time within a period
of nine months after the Holder's death, but only if and to the extent such
Option is exercisable at the date of death (unless death occurs while the
Holder is employed by or providing service to the Corporation or one of its
subsidiaries, in which case each Option held by the Holder shall be fully
exercisable), and in no event after the date on which such Option would
otherwise terminate.
(F) Privileges of the Holder as Shareholder. The Holder shall be entitled to
all the privileges and rights of a shareholder with respect only to such shares
of Common Stock as have been actually purchased under the Option and registered
in the Holder's name.
(G) SARs. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or, in the case of a nonqualified
option which is not intended to be qualified performance-based compensation
under Section 162(m) of the Code and the rules and regulations thereunder,
subsequent to such grant) to any Holder of any Option granted under the Plan
(or such Holder's legatees, personal representatives or distributees then
entitled to exercise such Option). An SAR may be exercised (i) by giving
written notice to the Corporation specifying the number of SARs which are being
exercised and (ii) by surrendering to the Corporation any Options which are
canceled by reason of the exercise of the SAR. An SAR shall be exercisable upon
such additional terms and conditions as may from time to time be prescribed by
the Committee. No fractional share shall be issued upon the exercise of any
SAR.
(H) Non-Transferability. Unless otherwise specified in the agreement
evidencing an Option or SAR, no Option or SAR hereunder shall be transferable
other than by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Corporation. Except to the
extent permitted by the foregoing sentence, each Option or SAR may be exercised
during the Holder's lifetime only by the Holder or the Holder's legal
representative or similar person. Except as permitted by the second preceding
sentence, no Option or SAR hereunder shall be sold, transferred, assigned,
pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or
similar process. Upon any attempt to so sell, transfer, assign, pledge,
hypothecate, encumber or otherwise dispose of any Option or SAR hereunder, such
Option or SAR and all rights thereunder shall immediately become null and void.
8. Restricted Stock Awards
(A) Restriction Period to Be Established by the Committee. At the time of
the making of a Restricted Stock Award, the Committee shall establish a period
of time (the "Restriction Period") applicable to such award. The Committee may
establish different Restriction Periods from time to time and each Restricted
Stock Award may have a different Restriction Period, in the discretion of the
Committee.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to a
Restricted Stock Award, shall be represented by a stock certificate or book-
entry credits registered in the name of the Holder who receives the Restricted
Stock Award or a nominee for the benefit of the Holder. The Holder shall have
the right to receive dividends (or the cash equivalent thereof) during the
Restriction Period and shall also have the right to vote such Common Stock and
all other shareholder's rights (in each case unless otherwise provided in the
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agreement evidencing the Restricted Stock Award), with the exception that (i)
the Holder shall not be entitled to delivery of the stock certificate (or the
removal of restrictions in the Corporation's books and records) until the
Restriction Period established by the Committee pursuant to Paragraph 8(A)
shall have expired, (ii) the Corporation shall retain custody of the stock
certificate during the Restriction Period, (iii) the Holder may not sell,
transfer, pledge, exchange, hypothecate or dispose of such Common Stock during
the Restriction Period, and (iv) a breach of restriction or breach of terms and
conditions established by the Committee pursuant to the Restricted Stock Award
shall cause a forfeiture of the Restricted Stock Award. If requested by the
Corporation, a Holder of a Restricted Stock Award shall deposit with the
Corporation stock powers or other instruments of assignment (including a power
of attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate by the Corporation, which would permit transfer to the
Corporation of all or a portion of the shares of Common Stock subject to the
Restricted Stock Award in the event such award is forfeited in whole or in
part. A distribution with respect to shares of Common Stock, other than a
distribution in cash, shall be subject to the same restrictions as the shares
of Common Stock with respect to which such distribution was made, unless
otherwise determined by the Committee. The Committee may, in addition,
prescribe additional restrictions, terms or conditions upon or to the
Restricted Stock Award in the manner prescribed by Paragraph 4. The Committee
may, in its sole discretion, also establish rules pertaining to the Restricted
Stock Award in the event of termination of employment or service (by
Retirement, disability, death or otherwise) of a Holder of such award prior to
the expiration of the Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made by the
Committee whereby the Holder receives Common Stock subject to those terms,
conditions and restrictions established by the Committee but is not required to
make any payment for said Common Stock. The Committee may also establish terms
as to each Holder whereby such Holder, as a condition to the Restricted Stock
Award, is required to pay, in cash or other consideration, all (or any lesser
amount than all) of the fair market value of the Common Stock, determined as of
the date the Restricted Stock Award is made.
(E) Termination of Employment or Service or Death of Holder. A Restricted
Stock Award shall terminate for all purposes if the Holder does not remain
continuously in the employ or service of the Corporation or a subsidiary at all
times during the applicable Restriction Period, except as may otherwise be
determined by the Committee.
9. Performance Awards
(A) Performance Period. The Committee shall establish with respect to each
Performance Award a performance period over which performance shall be
measured. The performance period shall be established at the time of such
award.
(B) Performance Awards. Each Performance Award shall have a maximum value
established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an eligible
person contingent upon future performance of the Corporation and/or a
designated subsidiary, division or department of the Corporation over the
performance period. The Committee shall establish the performance measures
applicable to such performance. The performance measures determined by the
Committee shall be established prior to the beginning of each performance
period but, except as necessary to qualify a Performance Award as "performance-
based compensation" under Section 162(m) of the Code and the rules and
regulations thereunder, may be subject to such later revisions to reflect
significant, unforeseen events or changes, as the Committee shall deem
appropriate.
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(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an eligible person's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems appropriate.
Notwithstanding the preceding sentence, to the extent necessary for a
Performance Award to be qualified performance-based compensation under Section
162(m) of the Code and the rules and regulations thereunder, the performance
period shall be not less than three years and, if a Performance Award is
payable in shares of Common Stock, the maximum number of shares that may be
paid under the Performance Award during such performance period shall be
500,000 and, if a Performance Award is payable in cash, the maximum amount that
may be paid under the Performance Award during such performance period shall be
$10,000,000.
(E) Payment. Following the end of each performance period, the Holder of
each Performance Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. Payment of Performance Awards may be made wholly in cash, wholly in
shares of Common Stock or a combination thereof, all at the discretion of the
Committee. Payment shall be made in a lump sum or in installments, and shall be
subject to such vesting and other terms and conditions as may be prescribed by
the Committee for such purpose. Notwithstanding anything contained herein to
the contrary, in the case of a Performance Award intended to be qualified
performance-based compensation under Section 162(m) and the rules and
regulations thereunder, no payment shall be made under any such Performance
Award until the Committee certifies in writing that the performance measures
for the performance period have in fact been achieved.
(F) Termination of Employment or Service or Death of Holder. A Performance
Award shall terminate for all purposes if the Holder does not remain
continuously in the employ or service of the Corporation or a subsidiary at all
times during the applicable performance period, except as may otherwise be
determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an employee
or director of the Corporation or a subsidiary following the end of the
applicable performance period but prior to full payment according to the terms
of the Performance Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, one or more stock
certificates or book-entry credits registered in the name of the Holder
representing shares of Common Stock which would have been issuable to the
Holder of the Performance Award if such payment had been made in full on the
day following the end of the applicable performance period may be registered in
the name of such Holder, and during the period until such installment becomes
due such Holder shall have the right to receive dividends (or the cash
equivalent thereof) and shall also have the right to vote such Common Stock and
all other shareholder's rights (in each case unless otherwise provided in the
agreement evidencing the Performance Award), with the exception that (i) the
Holder shall not be entitled to delivery of any stock certificate until the
installment payable in shares becomes due, (ii) the Corporation shall retain
custody of any stock certificates until such time and (iii) the Holder may not
sell, transfer, pledge, exchange, hypothecate or dispose of such Common Stock
until such time. A distribution with respect to shares of Common Stock payable
in installments which has not become due, other than a distribution in cash,
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made, unless otherwise determined by the
Committee.
(H) Performance Award Agreements. Each Performance Award shall be evidenced
by an agreement in such form and containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve.
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10. Adjustments Upon Changes in Capitalization; Change in Control
(A) Notwithstanding any other provision of the Plan, each Option, Restricted
Stock Award or Performance Award agreement may contain such provisions as the
Committee shall determine to be appropriate for the adjustment of (i) the
number and class of shares or other consideration subject to any Option or to
be delivered pursuant to any Restricted Stock Award or Performance Award and
(ii) the Option or Restricted Stock Award price, in the event of a stock
dividend, spin-off, split-up, recapitalization, merger, consolidation,
combination or exchange of shares, or the like. In such event, the maximum
number and class of shares available under the Plan, and the number and class
of shares subject to Options, SARs, Restricted Stock Awards or Performance
Awards, shall be appropriately adjusted by the Committee, whose determination
shall be conclusive.
(B)(i) In the event of a "change in control" (as hereinafter defined)
pursuant to subparagraph (C)(i) or (ii) below, or in the event of a change in
control pursuant to subparagraph (C)(iii) or (iv) below in connection with
which the holders of Common Stock receive consideration other than shares of
common stock that are registered under Section 12 of the Exchange Act:
(1)(x) each Option granted under the Plan shall be exercisable in full,
(y) each Holder of an Option shall receive from the Corporation within 60
days after the change in control, in exchange for the surrender of the
Option or any portion thereof to the extent the Option is then exercisable
in accordance with clause (x), an amount in cash equal to the difference
between the fair market value (as determined by the Committee) on the date
of the change in control of the Common Stock covered by the Option or
portion thereof which is so surrendered and the purchase price of such
Common Stock under the Option and (z) each SAR shall be surrendered by the
Holder thereof and shall be canceled simultaneously with the cancellation
of the related Option;
(2) each Holder of a Restricted Stock Award shall receive from the
Corporation within 60 days after the change in control, in exchange for the
surrender of the Restricted Stock Award, an amount in cash equal to the
fair market value (as determined by the Committee) on the date of the
change in control of the Common Stock subject to the Restricted Stock
Award;
(3) each Holder of a Performance Award for which the performance period
has not expired shall receive from the Corporation within 60 days after the
change in control, in exchange for the surrender of the Performance Award,
an amount in cash equal to the product of the value of the Performance
Award and a fraction the numerator of which is the number of whole months
which have elapsed from the beginning of the performance period to the date
of the change in control and the denominator of which is the number of
whole months in the performance period; and
(4) each Holder of a Performance Award that has been earned but not yet
paid shall receive an amount in cash equal to the value of the Performance
Award.
(ii) Notwithstanding any other provision of the Plan or any agreement
relating to an Option, Restricted Stock Award or Performance Award, in the
event of a change in control pursuant to subparagraph (C)(iii) or (iv) below in
connection with which the holders of Common Stock receive shares of common
stock that are registered under Section 12 of the Exchange Act:
(1) each Option and SAR granted under the Plan shall be exercisable in
full;
(2) the Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse and, if applicable, any other restrictions, terms
or conditions shall lapse and/or be deemed to be satisfied at the maximum
value or level;
(3) the performance measures applicable to any outstanding Performance
Award shall be deemed to be satisfied at the maximum value; and
(4) there shall be substituted for each share of Common Stock remaining
available for issuance under the Plan, whether or not then subject to an
outstanding Option (and SAR), Restricted Stock Award or Performance Award,
the number and class of shares into which each outstanding share of Common
Stock
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shall be converted pursuant to such Change in Control. In the event of any
such substitution, the purchase price per share in the case of any award
shall be appropriately adjusted by the Committee (whose determination shall
be conclusive), such adjustments to be made without any increase in the
aggregate purchase price.
(C) For purposes of this paragraph, the term "change in control" shall mean:
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, of beneficial ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act, of 25% or more of either (x) the
then outstanding shares of common stock of the Corporation (the
"Outstanding Common Stock") or (y) the combined voting power of the then
outstanding securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Voting Securities"); excluding,
however, the following: (1) any acquisition directly from the Corporation
(excluding any acquisition resulting from the exercise of an exercise,
conversion or exchange privilege unless the security being so exercised,
converted or exchanged was acquired directly from the Corporation), (2) any
acquisition by the Corporation, (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (1), (2)
and (3) of clause (iii) in this definition of change in control;
(ii) individuals who, as of the effective date of the Plan, constitute
the Board of Directors of the Corporation (the "Incumbent Board") cease for
any reason to constitute at least a majority of such Board; provided,
however, that any individual who becomes a director of the Corporation
subsequent to such effective date whose election, or nomination for
election by the Corporation's shareholders, was approved by the vote of at
least a majority of the directors then comprising the Incumbent Board shall
be deemed a member of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the Corporation as a
result of an actual or threatened election contest, as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board of Directors shall not be deemed
a member of the Incumbent Board;
(iii) the consummation of a reorganization, merger or consolidation of
the Corporation or sale or other disposition of all or substantially all of
the assets of the Corporation (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (1) all or substantially
all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 66 2/3% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities of such corporation entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or indirectly) in substantially the same proportions relative to
each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be, (2) no Person (other than: the Corporation;
any employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation; the
corporation resulting from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate Transaction,
directly or indirectly, 25% or more of the Outstanding Common Stock or the
Outstanding Voting Securities, as the case may be) will beneficially own,
directly or indirectly, 25% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of directors
and (3) individuals who were members of the Incumbent Board will constitute
at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) the consummation of a plan of complete liquidation or dissolution
of the Corporation.
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(D) With respect to any Holder of an Option or SAR who is subject to Section
16 of the Exchange Act, (i) notwithstanding the exercise periods set forth in
Paragraph 7(E) or as set forth pursuant to Paragraph 7(E) in any agreement
evidencing such Option or SAR and (ii) notwithstanding the expiration date of
the term of such Option or SAR, in the event the Corporation is involved in a
business combination which is intended to be treated as a pooling of interests
for financial accounting purposes (a "Pooling Transaction") or pursuant to
which such Holder receives a substitute option to purchase securities of any
entity, including an entity directly or indirectly acquiring the Corporation,
then each Option or SAR (or option or stock appreciation right in substitution
thereof) held by such Holder shall be exercisable to the extent set forth in
the Plan or the agreement evidencing such Option or SAR until and including the
latest of (x) the expiration date of the term of the Option or SAR or, in the
event of such Holder's termination of employment or service, the date
determined pursuant to Paragraph 7(E), (y) the date which is six months and ten
business days after the consummation of such business combination and (z) the
date which is ten business days after the date of expiration of any period
during which such Holder may not dispose of a security issued in the Pooling
Transaction in order for the Pooling Transaction to be accounted for as a
pooling of interests.
11. Withholding Taxes
(A) If provided in the agreement evidencing an Option, SAR, Restricted Stock
Award or Performance Award, the Holder thereof may elect, by written notice to
the Corporation at the office of the Corporation designated for that purpose,
to pay through withholding by the Corporation all or a portion of the estimated
federal, state, local and other taxes arising from (1) the exercise of an
Option or SAR and (2) the vesting or distribution of shares of Common Stock
pursuant to a Restricted Stock Award or Performance Award (a) by having the
Corporation withhold shares of Common Stock or (b) by delivering previously-
owned shares (collectively, "Share Withholding"), in each case being such
number of shares of Common Stock as shall have a fair market value equal to the
amount of taxes to be withheld, rounded up to the nearest whole share.
(B) A Share Withholding election shall be subject to disapproval by the
Corporation.
(C) If the date as of which the amount of tax to be withheld is determined
(the "Tax Date") is deferred until after the exercise of an Option or SAR, the
expiration of the Restriction Period applicable to a Restricted Stock Award or
the payment of a Performance Award, and if the Holder elects Share Withholding,
the Corporation shall issue to the Holder the full number of shares of Common
Stock, if any, resulting from such exercise, expiration or payment and the
Holder shall be unconditionally obligated to deliver to the Corporation on the
Tax Date such number of shares of Common Stock as shall have an aggregate fair
market value equal to the amount to be withheld on the Tax Date, rounded up to
the nearest whole share.
(D) The fair market value of shares of Common Stock used for payment of
taxes, as provided in this Paragraph 11, shall be the mean sale price per
share, as reported for New York Stock Exchange Composite Transactions, on the
Tax Date.
12. Termination of Plan
The Plan may be terminated at any time by the Board of Directors, except
with respect to any Options, SARs, Restricted Stock Awards or Performance
Awards then outstanding. The Corporation reserves the right to restrict, in
whole or in part, the exercise of any Options or SARs or the delivery of Common
Stock pursuant to any Restricted Stock Awards or Performance Awards granted
under the Plan until such time as:
(A) any legal requirements or regulations have been met relating to the
issuance of the shares covered thereby or to their registration under the
Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when issued
will be duly listed on the New York Stock Exchange, Inc.
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13. Amendment of the Plan
The Board of Directors may amend the Plan; provided, however, that without
approval of the shareholders the Board of Directors may not amend the Plan,
subject to Paragraph 10, to (a) increase the maximum number of shares which may
be issued on exercise of Options or SARs or pursuant to Restricted Stock Awards
or Performance Awards granted under the Plan or (b) effect any change
inconsistent with Section 422 of the Code.
14. Effect of the Plan
Neither the adoption of the Plan nor any action of the Board of Directors or
of the Committee shall be deemed to give any person any right to be granted an
Option, a right to a Restricted Stock Award or a right to a Performance Award
or any rights hereunder except as may be evidenced by an Option agreement,
Restricted Stock Award agreement or Performance Award agreement, duly executed
on behalf of the Corporation, and then only to the extent and on the terms and
conditions expressly set forth therein.
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P R O X Y
HUSSMANN INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1999 AT 10:30 A.M.
HYATT REGENCY, ST. LOUIS, ONE ST. LOUIS UNION STATION ST. LOUIS, MISSOURI
The undersigned, revoking any proxy previously given, hereby appoints Burton
Halpern, Michael D. Newman and J. Larry Vowell, and each of them, as proxies,
with the powers the undersigned would possess if personally present, and with
full power of substitution, 1) to vote as directed all shares of Common Stock
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of Hussmann International, Inc. to be held on May 13, 1999, and at any
adjournment thereof and 2) to vote at his discretion on any other matter that
may properly come before the Meeting, or any adjournment thereof. If no
directions are given, the proxies will vote for the election of the nominees
listed on the reverse side and to approve the Stock Incentive Plan.
SEE REVERSE SIDE
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FOLD AND DETACH HERE
[HUSSMANN LOGO]
IMPORTANT
PLEASE VOTE THE ABOVE PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.
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2433
[X] Please mark your votes as in this example.
FOR WITHHELD
1. Election of Directors [_] [_]
Nominees for the Election of Directors are:
1. J. Joe Adorjan
2. Archie R. Dykes
For, except vote withheld from the following nominee:
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FOR AGAINST ABSTAIN
2. Approval of Existing Stock Incentive Plan
to Maintain Tax Deductibility [_] [_] [_]
Annual Report
Mark here if you have more
than one Account and want
to discontinue receiving
multiple copies of future
Annual Reports. [_]
Annual Meeting
Mark here if you plan to attend
the May 13, 1999 Annual Meeting. [_]
SIGNATURE(S) DATE
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NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guaridan, please give full title as such.
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NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed, and returned your proxy card. To
vote by phone or Internet, please follow these easy steps:
TO VOTE BY PHONE Call toll free 1-800-OK2-VOTE (1-800-552-8683) on a
touch tone telephone. Stockholders residing outside the
United States, Canada and Puerto Rico should call
1-201-324-0377.
Use the Control Number located in the box above, just
below the perforation. Enter the Control Number and
pound signs (#) exactly as they appear.
Follow the recorded instructions.
TO VOTE BY INTERNET Log onto http://www.vote-by-net.com
Follow the instructions on the screen.
You can also elect to receive future stockholder
materials electronically at this web site.
IF YOU PLAN TO ATTEND If you plan to attend the Annual Meeting, please so
THE ANNUAL MEETING indicate by either marking the box provided on the above
proxy card or signifying your intention to attend when
you access the Internet or telephone voting system.
If you have voted by phone or Internet, please do not
return the proxy card.
THANK YOU FOR VOTING!
