SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 26, 1999 Commission file number 1-6682
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Hasbro, Inc.
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(Name of Registrant)
Rhode Island 05-0155090
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(State of Incorporation) (I.R.S. Employer
Identification No.)
1027 Newport Avenue, Pawtucket, Rhode Island 02861
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(Address of Principal Executive Offices)
(401) 431-8697
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock New York Stock Exchange
Preference Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes[X] or No[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part II of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
registrant computed by reference to the price at which the stock was sold on
March 17, 2000 was $2,682,790,863.
The number of shares of Common Stock outstanding as of March 17, 2000 was
190,384,899.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement for its 2000 Annual
Meeting of Shareholders are incorporated by reference into Part III of this
Report.
Selected information contained in registrant's Annual Report to
Shareholders for the fiscal year ended December 26, 1999, is included as
Exhibit 13, and incorporated by reference into Parts I and II of this Report.
PART I
ITEM 1. BUSINESS
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(a) General Development of Business
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Except as expressly indicated or unless the context otherwise requires, as
used herein, the "Company" means Hasbro, Inc., a Rhode Island corporation
organized on January 8, 1926, and its subsidiaries.
The Company is a worldwide leader in children's and family leisure time and
entertainment products and services, including the design, manufacture and
marketing of games and toys ranging from traditional to high-tech. Both
internationally and in the U.S., its PLAYSKOOL, KENNER, TONKA, ODDZON, SUPER
SOAKER, MILTON BRADLEY, PARKER BROTHERS, TIGER, HASBRO INTERACTIVE,
MICROPROSE, GALOOB and WIZARDS OF THE COAST brands and products provide what
the Company believes to be the highest quality and most recognizable play
experiences in the world. Included in its offerings are games, including
traditional board and card, hand-held electronic, electronic interactive
plush, electronic learning aid, children's consumer electronic, trading card,
roleplaying and interactive software games and puzzles. Toy offerings include
boys' action, preschool, creative play and girls' toys, dolls and plush
products. The Company also licenses various trademarks, characters and other
property rights for use in connection with the sale by others of noncompeting
toys and non-toy products.
(b) Description of Business Segments and Products
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During the second quarter of 1999, the Company redefined its focus and
method of managing its business into two major areas, Toys and Games.
Following this organizational adjustment the Company's reportable segments
are U.S. Toys, Games, International and Global Operations. Financial
information with respect to the Company's segments is included in the Annual
Report to Shareholders for the fiscal year ended December 26, 1999. Prior
period amounts have been reclassified to reflect the Company's current
segments.
<PAGE>
In the United States, the U.S. Toy segment includes the design, development,
marketing and selling of boys action figures, vehicles and playsets, girls
toys, preschool toys and infant products and creative play products. The
Games segment includes the design, development, marketing and selling of
traditional board and card games and puzzles, handheld electronic games,
electronic interactive plush, children's consumer electronics, electronic
learning aids, trading card and roleplaying games and interactive software
games based on the Company's owned and licensed brands. Within the
International segment, the Company designs, develops, markets and sells both
toy and game products in non-U.S. markets. Global Operations manufactures and
sources product for the majority of the Company's segments. The Company also
has other segments which license certain toy properties and which develop and
market non-traditional toy and game based product realizing more than half of
their revenues and the majority of their operating profit in the first half
of the year, which is contra-seasonal to the rest of the Company's business.
These other segments do not meet the quantitative thresholds for reportable
segments.
(i) U.S. Toy
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In the U.S. Toy segment, the Company's products are marketed as boys' toys,
girls' toys, preschool and creative play.
Boys' toys are offered in a wide range of products, many of which are tied
to entertainment properties, including STAR WARS, POKEMON and BATMAN toys and
accessories. The Company also offers such popular properties as G.I. JOE,
BEAST WARS and BEAST MACHINES TRANSFORMERS action figures, WINNER'S CIRCLE
line of die cast vehicle assortments, MICRO MACHINES and the TONKA line of
trucks. In 2000, the Company will be launching Europe's number one boys
action figure, ACTION MAN, in the U.S., as well as an expanded line of
POKEMON toys and collectibles.
Hasbro's girls' toys include STUART LITTLE plush and figures based on the
hit motion picture and the classic RAGGEDY ANN and RAGGEDY ANDY rag dolls. In
2000, the Company will be introducing MY REAL BABY, a doll that interacts
with a child through realistic sounds, actions and facial expressions, MAKEUP
MINDY, a special feature doll, as well as a line of dolls based on the
popular S CLUB 7 musical group.
The preschool products include a portfolio of key brands, such as
PLAYSKOOL, BARNEY and TELETUBBIES. The PLAYSKOOL line includes such well-
known products as MR. POTATO HEAD, SIT 'N SPIN, GLOWORM, as well as a
successful line of infant toys such as KICK START GYM, and preschool role-
play products. The BARNEY brand includes a complete line of preschool toys
such as the BARNEY SONG MAGIC BANJO. The TELETUBBIES line of products is
inspired by the public television program featuring TINKY WINKY, DIPSY, LAA-
LAA and PO. In 2000, the U.S. Toy segment introduces a product line based on
the newest television program from the Children's Television Workshop and
Columbia TriStar Television Group, DRAGON TALES, which airs on PBS.
Additionally, new products being introduced during 2000 are the PLAYSKOOL
FIRST STARTS infant line, the interactive, customizable ESPECIALLY MY BARNEY
and MUNCH 'N SLURP TELETUBBIES plush toys.
Creative Play items for both girls and boys include such classic lines as
PLAY-DOH, EASY-BAKE OVEN and LITE-BRITE and SPIROGRAPH design toys. During
2000, the Company will be offering new PLAY-DOH playsets featuring POKEMON,
<PAGE>
DRAGON TALES and BARNEY, licensed refill bake sets for the EASY-BAKE OVEN,
including MCDONALD'S pies and EGGO waffles, as well as POKEMON ENERGY BEAD
bracelets and LITE BRITE POKEMON PICTURE AND PEG set.
(ii) Games
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The Company markets its games and puzzles under several well known brands,
including MILTON BRADLEY, PARKER BROTHERS, TIGER, WIZARDS OF THE COAST,
HASBRO INTERACTIVE AND MICROPROSE.
The MILTON BRADLEY and PARKER BROTHERS brand portfolios consist of a full
line of games for children, families and adults. The Company's staple items
include MONOPOLY, BATTLESHIP, THE GAME OF LIFE, SCRABBLE, CHUTES AND LADDERS,
CANDY LAND, TROUBLE, MOUSETRAP, OPERATION, HUNGRY HUNGRY HIPPOS, CONNECT
FOUR, TWISTER, YAHTZEE, JENGA, CLUE, SORRY!, RISK, BOGGLE, OUIJA and TRIVIAL
PURSUIT as well as a line of traditional and three dimensional puzzles.
Traditional card game offerings include MILLE BORNES, ROOK and RACK-O. The
Company has put in place a series of marketing initiatives designed to
encourage game play among a wide variety of audiences, including MY FIRST
GAMES, FAMILY GAME NIGHT and GET TOGETHER GAMES. New in 2000 will be TOP IT,
an electronic game incorporating the basic elements of hacky sack, paddleball
and the highly successful BOP IT, TRUE YOU PERSONALITY PROFILER, a talking
personality profile game, and SILLY SIX PINS, an interactive preschool
bowling game with talking pins.
TIGER brand products lead the industry in technology-driven entertainment
and lifestyle products for the whole family. Popular handheld electronic
games include WHEEL OF FORTUNE, JEOPARDY, CONCENTRATION and THE PRICE IS
RIGHT, as well as a line of NASCAR-themed racing electronic games, and for
2000, WHO WANTS TO BE A MILLIONAIRE, also available in a tabletop version.
Electronic interactive plush includes the popular FURBY line. Electronic
learning aids include licensed product featuring WINNIE THE POOH, RUGRATS and
BARNEY. Innovative items in the 2000 line include the interactive animatronic
SHELBY, a special friend of FURBY, and INTERACTIVE YODA, who has a vocabulary
of more than 800 words and phrases. Consumer electronic offerings for 2000
include LIGHTNING MAIL, a message device the size of a small cell phone which
allows users to send and receive free email messages from anywhere in the
world and YAHOO!CAM!, a palm-sized, digital camera capable of taking color
pictures and posting them to the user's web site. In 2000, a new line of
WINNIE THE POOH electronic learning aids will be introduced along with a line
of games based on the FRANKLIN property from NICK JR. Also new for 2000 is a
line of interactive pets featuring POO-CHI, which uses advanced bio-rhythmic
technology to create realistic emotional responses that adapt and change as
it is played with, and the futuristic I-CYBIE, which goes through several
stages of development from puppy to adult dog.
WIZARDS OF THE COAST trading card and roleplaying games include the popular
POKEMON, MAGIC: THE GATHERING and DUNGEONS AND DRAGONS. MAGIC: THE GATHERING,
created in 1993, has worldwide popularity, with more than six million players
in 52 countries. WIZARDS OF THE COAST has a unique organized play program for
its trading card games, sponsoring thousands of game tournaments around the
world. The Company operates approximately 70 retail stores under the WIZARDS
OF THE COAST and GAME KEEPER names which not only sell games of all types,
but provide customers with a place to play games. New for 2000 is MAJOR
LEAGUE BASEBALL SHOWDOWN 2000, a card game which allows players to assemble
their own lineups, collect their favorite baseball players and compete
<PAGE>
against other players' teams, BASE SET 2 and the TEAM ROCKET expansion for
the POKEMON trading card game, and the HARRY POTTER trading card game, based
on the NEW YORK TIMES best-selling novels.
The HASBRO INTERACTIVE brands include PC CD-ROM and video games based on
original and licensed content and the Company's games and brands. For 1999,
this includes ROLLERCOASTER TYCOON, the number one PC game in the U.S. for
1999 based on number of units sold, FROGGER for the PC and PLAYSTATION game
console and TONKA CONSTRUCTION and CD-ROM playsets which hook onto computer
keyboards and combine traditional play with computer games. A line of
strategy and action games is published under the MICROPROSE brand, a full
line of classic arcade games under the ATARI brand and family games based on
hit game show titles such as WHEEL OF FORTUNE and JEOPARDY and the premier
family games MONOPOLY and SCRABBLE. A streamlined product offering in 2000
includes FROGGER 2, PAC-MAN for the PC, MONOPOLY TYCOON, and new PC CD-ROM
playsets, TONKA DIG 'N RIG and BARNEY, as well as a sports game, NASCAR HEAT.
Additionally, video games for the entire family available on the PLAYSTATION
platform for 2000 will include TONKA SPACE STATION, NASCAR RACERS, NICKTOONS
RACING and WHEEL OF FORTUNE 2.
On December 15, 1999, the Company announced plans to launch its online
games portal, Games.com. Games.com will initially offer an extensive line-up
of at least 50 branded games. Games.com will also incorporate strong
community features, including online chat capabilities, tournaments, plus an
online store where consumers can purchase games and related products. Over
time, Games.com will highlight Hasbro's powerful games content in six
different channels: Family, Kids, Arcade, Game Shows, Sports, and Avid Gamer.
The Company has entered into a non-binding memorandum of understanding with
Go2Net, Inc. (Go2Net) for a three-year licensing and distribution agreement.
Go2Net will provide technology and engineering support to build out the site,
plus software for community monitoring and management, chat features, and
message boards. Games.com will include three primary revenue sources,
generating income via advertising, a Games.com store and premium subscription
services on the site.
(iii) International
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In addition to the United States, the Company operates in more than 25
countries which sell a representative range of the toy and game brands and
products marketed in the United States, together with some items which are
sold only internationally. International revenues in 1999 were led by sales
of ACTION MAN, STAR WARS, FURBY and TELETUBBIES. New products for 2000
include those noted in the U.S. Toy and Game segments above, as well as
TWEENIES, a toy line based upon a successful new preschool television program
from the producers of TELETUBBIES.
(iv) Global Operations
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The Company manufactures products in the United States, Mexico, the United
Kingdom, Ireland and Spain and sources products, largely through a Hong Kong
subsidiary working primarily through unrelated manufacturers in various Far
East countries, primarily China. In December, 1999, the Company announced it
would close its manufacturing operations in Tijuana, Mexico, and Ashford,
United Kingdom. The closures will be complete in 2000. See "Manufacturing and
Importing" below.
<PAGE>
(v) Other Information
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The Company has other segments which promote and out-license intellectual
property on a more focused basis, and design, develop and market certain
traditional and non-traditional toy and game based product including the
SUPER SOAKER line of water products, KOOSH brand products and for 2000, the
NERF line of soft action play equipment and a TINKERTOY classic line, made
entirely of wood and containing the same accessories that were part of the
original playset.
To further extend its range of products in its various segments, the
Company has Hong Kong units which market directly to retailers a line of high
quality, low priced toys, games and related products, primarily on a direct
import basis.
In addition, certain products are licensed to other companies for certain
countries where the Company does not otherwise have a presence.
During the 1999 fiscal year, combined revenues across all segments from the
FURBY line of products and the STAR WARS boys toys line of products
contributed 13% and 12%, respectively, of consolidated net revenues of the
Company.
Working Capital Requirements
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Production has been financed historically by means of short-term borrowings
which reach peak levels during September through November of each year when
receivables also generally reach peak levels. The revenue pattern of the
Company continues to shift with the second half of the year growing in
significance to its overall business and, within that half, the fourth
quarter being the more prominent. The trend of retailers over the past few
years has been to make a higher percentage of their purchases within or close
to the fourth quarter holiday consumer selling season, which includes
Christmas. The Company expects that this trend will continue. The toy
business is also characterized by customer order patterns which vary from
year to year largely because of differences each year in the degree of
consumer acceptance of a product line, product availability, marketing
strategies and inventory policies of retailers, the dates of theatrical
releases of major motion pictures for which the Company has licenses for
promotional product and differences in overall economic conditions. As a
result, comparisons of unshipped orders on any date with those at the same
date in a prior year are not necessarily indicative of sales for that entire
given year. Also, quick response inventory management practices now being
used results in fewer orders being placed in advance of shipment and more
orders being placed for immediate delivery. The Company's unshipped orders at
March 5, 2000 and February 28, 1999 were approximately $375,000,000 and
$570,000,000, respectively. Also, it is a general industry practice that
orders are subject to amendment or cancellation by customers prior to
shipment. The backlog at any date in a given year can be affected by programs
the Company may employ to induce its customers to place orders and accept
shipments early in the year. This method is a general industry practice. The
programs the Company is employing to promote sales in 2000 are not
substantially different from those employed in 1999.
As part of the traditional marketing strategies of the toy industry, many
sales made early in the year are not due for payment until the fourth quarter
<PAGE>
or early in the first quarter of the subsequent year, thus making it
necessary for the Company to borrow significant amounts pending these
collections. During the year, the Company relies on internally generated
funds and short-term borrowing arrangements, including commercial paper, to
finance its working capital needs. As of March 5, 2000, the Company has
available to it unsecured lines of credit, which it believes are adequate, of
approximately $1,300,000,000 including a $350,000,000 long-term and a
$350,000,000 short-term revolving credit agreement with a group of banks,
which is used as a back-up to commercial paper issued by the Company.
Royalties, Research and Development
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The Company's business is based to a substantial extent on the continuing
development of new products and the redesigning of existing items for
continuing market acceptance. In 1999, 1998 and 1997, approximately
$254,599,000, $184,962,000 and $154,710,000, respectively, were incurred on
activities relating to the development, design and engineering of new
products and their packaging (including items brought to the Company by
independent designers) and to the improvement or modification of ongoing
products. Much of this work is performed by the Company's staff of designers,
artists, model makers and engineers.
In addition to its own staff, the Company deals with a number of
independent toy designers for whose designs and ideas the Company competes
with other toy manufacturers. Rights to such designs and ideas, when acquired
by the Company, are usually exclusive under agreements requiring the Company
to pay the designer a royalty on the Company's net sales of the item. These
designer royalty agreements in some cases provide for advance royalties and
minimum guarantees.
The Company also produces a number of toys under trademarks and copyrights
utilizing the names or likenesses of familiar movie, television and comic
strip characters, for whose rights the Company competes with other toy
manufacturers. Licensing fees are generally paid as a royalty on the
Company's net sales of the item. Licenses for the use of characters are
generally exclusive for specific products or product lines in specified
territories. In many instances, advance royalties and minimum guarantees are
required by character license agreements. Under terms of agreements existing
at December 26, 1999, in certain circumstances the Company may be required to
pay an aggregate of up to $665,000,000 in guaranteed or minimum royalties
between 2000 and 2007. Of this amount, approximately $233,000,000 has been
paid. Approximately $83,000,000 is included in the $111,523,000 of prepaid
royalties which are a component of prepaid expenses and other current assets
on the balance sheet. Included in other assets is $150,000,000 representing
the long-term portion of the amount paid in 1999. Of the remaining unpaid
minimum guaranty, Hasbro may be required to pay approximately $88,000,000,
$84,000,000, $130,000,000, $6,000,000, $2,000,000 and $122,000,000 in 2000,
2001, 2002, 2003, 2004 and 2005, respectively. Such payments are related to
royalties which are expected to be incurred on anticipated revenues in the
years 2000 through 2007.
Marketing and Sales
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The Company's products are sold nationally and internationally to a broad
spectrum of customers including wholesalers, distributors, chain stores,
discount stores, mail order houses, catalog stores, department stores and
<PAGE>
other retailers, large and small. The Company and its subsidiaries employ
their own sales forces which account for the majority of sales of their
products. Remaining sales are generated by independent distributors who sell
the Company's products principally in areas of the world where the Company
does not otherwise maintain a presence. With the acquisition of Wizards of
the Coast, Inc. in the fourth quarter of 1999, the Company acquired a
specialized line of retail stores featuring game, hobby and related products
and an area for in-store game play, as well as an online retail site. The
Company maintains showrooms in New York and selected other major cities
world-wide as well as at most of its subsidiary locations. Although the
Company has more than 2,000 customers in the United States and Canada, most
of which are wholesalers, distributors or large chain stores, there has been
significant consolidation at the retail level over the last several years. In
other countries, the Company has in excess of 20,000 customers, many of which
are individual retail stores. During 1999, sales to the Company's two largest
customers, Wal-Mart Stores, Inc. and Toys `R Us, Inc., represented 16% each
of consolidated net revenues, and sales to its top ten customers accounted
for approximately 56% of consolidated net revenues.
The Company advertises many of its toy and game products extensively on
television. The Company generally advertises selected items in its product
groups in a manner designed to promote the sale of other specific items in
those product groups. Each year, the Company introduces its new products in
New York City at the time of the American International Toy Fair in February.
It also introduces some of its products to major customers during the prior
year.
In 1999, the Company spent approximately $456,978,000 in advertising,
promotion and marketing programs compared to $440,692,000 in 1998 and
$411,574,000 in 1997.
Manufacturing and Importing
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During 1999, the Company manufactured its products in four principal
facilities, East Longmeadow, Massachusetts, Waterford, Ireland, Tijuana,
Mexico and Valencia, Spain. As part of the consolidation program announced in
December 1999, the Company announced it is closing the facility in Tijuana,
Mexico, as well as a smaller facility in Ashford, United Kingdom. Most of its
products are manufactured from basic raw materials such as plastic and
cardboard, although certain products also make use of electronic components.
All of these materials are readily available but may be subject to
significant fluctuations in price. The Company's manufacturing process
includes injection molding, blow molding, metal stamping, spray painting,
printing, box making and assembly. The Company purchases certain components
and accessories used in its toys and games and some finished items from
United States manufacturers as well as from manufacturers in the Far East,
which is the largest manufacturing center of toys in the world, and other
countries. The 1996 implementation of the General Agreement on Tariffs and
Trade reduced or eliminated customs duties on many products imported by the
Company. The Company believes that the manufacturing capacity of its
facilities and the supply of components, accessories and completed products
which it purchases from unaffiliated manufacturers is adequate to meet the
foreseeable demand for the products which it markets. The Company's reliance
on external sources of manufacturing can be shifted, over a period of time,
to alternative sources of supply for products it sells, should such changes
be necessary.
<PAGE>
However, if the Company is prevented from obtaining products from a
substantial number of its current Far East suppliers due to political, labor
or other factors beyond its control, the Company's operations would be
disrupted while alternative sources of product were secured. The imposition
of trade sanctions by the United States or the European Union against a class
of products imported by the Company from, or the loss of "normal trade
relations" status by, the People's Republic of China could significantly
increase the cost of the Company's products imported into the United States
or Europe.
Prices for resin increased in the latter part of 1999 due to rising oil
prices. If this trend of rising oil prices continues, the Company expects its
manufacturing and transportation costs to increase, which could have a
negative impact on its gross margin.
The Company makes its own tools and fixtures but purchases dies and molds
principally from independent United States and international sources. The
Company's North American production departments operate on a two-shift basis
and its molding departments operate on a continuous basis through most of the
year.
Competition
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The Company's business is highly competitive and it competes with several
large and many small United States and international manufacturers. The
Company is a worldwide leader in the design, manufacture and marketing of
games and toys.
Employees
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The Company employs approximately 9,500 persons worldwide, approximately
4,600 of whom are located in the United States.
Trademarks, Copyrights and Patents
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The Company's products are protected, for the most part and in as many
countries as practical, by registered trademarks, copyrights and patents to
the extent that such protection is available and meaningful. The loss of such
rights concerning any particular product would not have a material adverse
effect on the Company's business, although the loss of such protection for a
number of significant items might have such an effect.
Government Regulation
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The Company's toy products sold in the United States are subject to the
provisions of the Consumer Product Safety Act (the "CPSA"), The Federal
Hazardous Substances Act (the "FHSA") and the regulations promulgated
thereunder. The CPSA empowers the Consumer Product Safety Commission (the
"CPSC") to take action against hazards presented by consumer products,
including the formulation and implementation of regulations and uniform
safety standards. The CPSC has the authority to seek to declare a product "a
banned hazardous substance" under the CPSA and to ban it from commerce. The
CPSC can file an action to seize and condemn an "imminently hazardous
consumer product" under the CPSA and may also order equitable remedies such
as recall, replacement, repair or refund for the product. The FHSA provides
<PAGE>
for the repurchase by the manufacturer of articles which are banned. Similar
laws exist in some states and cities within the United States and in Canada,
Australia and Europe. The Company maintains laboratories which have testing
and other procedures intended to maintain compliance with the CPSA and FHSA.
Notwithstanding the foregoing, there can be no assurance that all of the
Company's products are or will be hazard free. Any material product recall
could have an effect on the Company, depending on the product, and could
affect sales of other products.
During 1998, the CPSC released the results of a study of a chemical,
diisononyl phthalate ("DINP") used to soften some plastic toys and children's
products. The study concluded that few if any children are at risk from DINP
because the amount that they ingest does not even come close to a harmful
level. Therefore, the CPSC staff did not recommend a ban on these products.
However, the CPSC indicated that the study identified several areas of
uncertainty where additional scientific research is needed. The CPSC has
formed a Chronic Hazard Advisory Panel which will review the scientific
evidence and is expected to make a report within a year. The CPSC staff
requested the industry to remove DINP from soft rattles and teethers. This
request was honored by the industry, including the Company. Canada and the
European Union have requested or required similar removal of DINP from
products meant to be mouthed by children. Removal of such products from the
marketplace has not materially affected the Company.
The Children's Television Act of 1990 and the rules promulgated thereunder
by the United States Federal Communications Commission as well as the laws of
certain countries place certain limitations on television commercials during
children's programming.
The Company maintains programs to comply with various United States
federal, state, local and international requirements relating to the
environment, plant safety and other matters.
Toys "R" Us Litigation
----------------------
On September 25, 1997, an administrative law judge ("ALJ") of the Federal
Trade Commission (the "Commission") issued an Initial Decision against Toys
"R" Us, finding that Toys "R" Us had engaged in unfair business practices in
violation of Section 5 of the Federal Trade Commission Act. In particular,
the ALJ found that Toys "R" Us entered into vertical agreements with, and
facilitated horizontal agreements among, various toy manufacturers, including
the Company, to restrict the supply of certain toys to warehouse club
retailers. Although the Company voluntarily produced documents and witnesses
in the action, the Company was not named a defendant by the Commission in the
action. The ALJ's decision was affirmed by the Commission on October 14,
1998.
In the wake of the ALJ's decision, numerous antitrust actions were filed
naming Toys "R" Us, the Company, and certain other toy manufacturers as
defendants. All of these actions generally alleged that Toys "R" Us
orchestrated an illegal conspiracy with various toy manufacturers to
improperly cut-off supplies of popular toys to the warehouse clubs and other
low margin retailers that compete with Toys "R" Us. The Company was named as
a defendant in twenty-seven private antitrust class actions in federal courts
in California, Illinois, Maryland, New Jersey, New York, Pennsylvania and
<PAGE>
Vermont, all of which purport to represent nationwide classes of customers.
These actions allege, among other things, violations of the Sherman and
Clayton Acts. In addition, on October 2, 1997, the Attorney General of the
State of New York ("NYAG") filed an action against Toys "R" Us, the Company,
and several other toy manufacturers alleging violations of federal and state
antitrust law, on behalf of all persons in the State of New York who
purchased toy products from retailers from 1989 to the present. The NYAG
complaint was amended to add as plaintiffs attorneys general from an
additional forty-three states, the District of Columbia and the Commonwealth
of Puerto Rico.
On February 11, 1998, the Judicial Panel on Multi-District Litigation
consolidated and transferred, for all pretrial proceedings, the NYAG action
and all of the pending private actions in the federal courts. The
consolidated cases were titled In Re Toys "R" Us Antitrust Litigation, MDL-
1211 and were pending in the Federal District Court in the Eastern District
of New York.
In addition, the Company was named as a defendant, along with Toys "R" Us
and certain other toy manufacturers, in an action titled Struthers v. Toys
"R" Us et al., No. H198813-6, filed in the Superior Court for the State of
California, Alameda County, alleging violations of state antitrust laws. On
February 9, 1998, the Superior Court ordered the Struthers case to be
coordinated with three pending state court actions previously filed against
Toys "R" Us in California. All of the California litigations were stayed to
encourage the parties to pursue settlement discussions and negotiations in
good faith. These discussions were coordinated with a mediation ordered in a
case titled Wilson v. Toys "R" Us, Case No. CV96-574, pending in Tuscaloosa
County Circuit Court in Alabama. The Company is not a party to the Alabama
case.
On December 9, 1998, Hasbro entered into a Settlement Agreement and Release
with the State Attorneys General and the Private Plaintiffs with respect to
all of the pending state and federal actions. This settlement was not
material to the Company.
On February 17, 2000, the Court approved the Settlement Agreement and
Release, and entered a Final Judgment and Order of Dismissal. This has the
effect of finally dismissing all claims pending against Hasbro in the state
and federal actions, including all claims brought by the State Attorneys
General and the private plaintiffs.
Forward-Looking Information
---------------------------
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. Forward-looking statements are inherently
subject to risks and uncertainties, many of which are known by, or self-
evident to, the investing public. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. These
statements may be identified by the use of forward-looking words or phrases
such as "anticipate," "believe," "expect," "intend," "may," "planned,"
"potential," "should," "will" and "would." In order to comply with the terms
of the safe harbor, the Company notes that a variety of factors could cause
<PAGE>
its actual results and experience to differ materially from the anticipated
results or other expectations expressed in its forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of Hasbro's business include the following and are
also delineated in the Risk Factors section below:
1) The Company's ability to manufacture, source and ship new and
continuing products in a timely manner and customers' and consumers'
acceptance of those products in a competitive product environment;
2) The impact of competition on revenue, margins and other aspects of the
Company's business, including the ability to secure, maintain and renew
popular licenses and the ability to attract and retain talented employees in
a competitive environment;
3) Economic conditions, currency fluctuations and government regulations
and other actions in the various markets in which the Company operates
throughout the world;
4) The inventory policies of retailers, including the continuing trend of
concentration of Hasbro's revenues in the second half and fourth quarter of
the year, together with the increased reliance by retailers on quick response
inventory management practices, which increases the risk of the Company's
underproduction of popular items, overproduction of less popular items and
failure to achieve tight and compressed shipping schedules;
5) The impact of market conditions, third party actions or approvals and
the impact of competition that could delay or increase the cost of
implementation of our Consolidation Program or alter our actions and reduce
actual results;
6) The risk that anticipated benefits of acquisitions may not occur or be
delayed or reduced in their realization;
7) With respect to our online game site initiative, technical difficulties
in adapting games to online format and establishing the online game site that
could delay or increase the cost of the site becoming operational; the
acceptance by customers of the games and other products and services to be
offered at our online game site; competition from other online game sites and
other game playing formats; and the fact online game revenues may not be
sufficient to cover the significant advertising expenditures required or the
support, service and product enhancement demands of online users; and
8) Other risks and uncertainties as are or may be detailed from time to
time in Hasbro's public announcements and filings with the Securities and
Exchange Commission including without limitation the Risk Factors described
below.
Risk Factors
------------
Consumer preferences are difficult to predict and the introduction of new
products is critical to the family entertainment industry.
Our business and operating results depend largely upon the appeal of our
family entertainment products, principally games and toys. A decline in the
<PAGE>
popularity of our existing products and product lines or the failure of new
products and product lines to achieve and sustain market acceptance could
result in reduced overall revenues and margins, which could have a material
adverse effect on our business financial condition and results of operations.
Our continued success will depend on our ability to redesign, restyle and
extend our existing family entertainment product lines and to develop,
introduce and gain customer acceptance of new family entertainment product
lines. However consumer preferences with respect to family entertainment are
continuously changing and are difficult to predict. Individual family
entertainment products typically have short life cycles. There can be no
assurances that:
1) Any of our current products or product lines will continue to be popular
for any significant period of time;
2) Any new products and product lines introduced by us will achieve an
adequate degree of market acceptance; or
3) Any new product's life cycle will be sufficient to permit us to recover
development, manufacturing, marketing and other costs of the product.
Our business is seasonal and therefore our annual operating results will
depend, in large part, on our sales during the relatively brief holiday
season. Further, this seasonality is increasing, as large retailers
become more efficient in their control of inventory levels through quick
response management techniques.
Sales of our family entertainment products at retail are seasonal, with a
majority of retail sales occurring during the period from September through
December in anticipation of the holiday season. This seasonality is
increasing, as large retailers become more efficient in their control of
inventory levels through quick response management techniques. These
customers are timing reorders so that they are being filled by suppliers
closer to the time of purchase by consumers, which to a large extent occur
during September through December, rather than maintaining large on-hand
inventories throughout the year to meet consumer demand. While these
techniques reduce a retailer's investment in inventory, they increase
pressure on suppliers like us to fill orders promptly and shift a significant
portion of inventory risk and carrying costs to the supplier. The limited
inventory carried by retailers may also reduce or delay retail sales.
Additionally, the logistics of supplying more and more product within shorter
time periods will increase the risk that we fail to achieve tight and
compressed shipping schedules. This seasonal pattern requires significant use
of working capital mainly to manufacture inventory during the year, prior to
the holiday season, and requires accurate forecasting of demand for products
during the holiday season. Our failure to accurately predict and respond to
consumer demand could result in our underproducing popular items and
overproducing less popular items.
The continuing consolidation of our retail customer base means that
changes in the purchasing policies of our major customers could have a
significant impact on us.
If some of our major customers were to cease doing business with us, or to
significantly reduce the amount of their purchases from us, it could have a
material adverse effect on our business, financial condition and results of
<PAGE>
operations. For the fiscal year ended December 26, 1999, Wal-Mart Stores,
Inc. and Toys R Us, Inc. each accounted for approximately 16% of our
consolidated net revenues and our ten largest customers, including Wal-Mart
and Toys R Us, in the aggregate accounted for approximately 56% of our
consolidated net revenues.
We may not realize anticipated benefits of acquisitions or these benefits
may be delayed or reduced in their realization.
Acquisitions have been a significant part of our growth over the years and
have enabled us to further broaden and diversify our product offerings. While
we target companies having what we believe to be attractive family
entertainment product offerings, there can be no assurance that the products
of companies we acquire will continue to be popular. In addition, in some
cases, we expect that the integration of the product lines of the companies
that we acquire into our operations will create production, marketing and
other operating synergies. We believe that creating these synergies can
create greater revenue growth and profitability and, where applicable, cost
savings, operating efficiencies and other synergies. However, we can provide
no assurances that these synergies, efficiencies and cost savings will be
realized. Even if achieved, these benefits may be delayed or reduced in their
realization. In other cases, we acquire companies with what we believe to
have strong and creative management, in which case we plan to create
synergies by operating them autonomously rather than integrating them into
our operations. There can be no assurance, however, that the key talented
individuals at these companies will continue to work for us after the
acquisition or that they will continue to develop popular and profitable
products or services.
Our sales and manufacturing operations outside the United States subject
us to risks normally associated with international operations.
Various international risks could negatively impact our international sales
and manufacturing operations, which could have a material adverse effect on
our business, financial condition and results of operations. For the year
ended December 26, 1999, our international net revenues comprised
approximately 33% of our total consolidated net revenues. We expect our
international sales to continue to account for a significant and growing
portion of our revenues. Additionally, we have manufacturing facilities in
Ireland and Spain and utilize third-party manufacturers principally in the
Far East. These sales and manufacturing operations are subject to the risks
normally associated with international operations, including:
1) Currency conversion risks and currency fluctuations;
2) Limitations, including taxes, on the repatriation of earnings;
3) Political instability, civil unrest and economic instability;
4) Greater difficulty enforcing intellectual property rights and weaker
laws protecting such rights;
5) Complications in complying with laws in varying jurisdictions and
changes in governmental policies;
<PAGE>
6) Natural disasters and the greater difficulty and expense in recovering
therefrom;
7) Transportation delays and interruptions; and
8) The imposition of tariffs.
Our reliance on external sources of manufacturing can be shifted, over a
period of time, to alternative sources of supply, should such changes be
necessary. However, if we were prevented from obtaining products or
components for a material portion of our product line due to political, labor
or other factors beyond our control, Hasbro's operations would be disrupted
while alternative sources of products were secured. The imposition of trade
sanctions by the United States or the European Union against a class of
products imported by us from, or the loss of "normal trade relations" status
by, the Peoples Republic of China could significantly increase our cost of
products imported into the United States or Europe.
(c) Financial Information About International and United States
-----------------------------------------------------------
Operations and Export Sales
---------------------------
The information required by this item is included in note 16 of Notes to
Consolidated Financial Statements in Exhibit 13 to this Report and is
incorporated herein by reference.
ITEM 2. PROPERTIES
----------
Lease
Square Type of Expiration
Location Use Feet Possession Dates
- - - - - - - - - - - - - - - - - -------- --- ------ ---------- ----------
Rhode Island
- - - - - - - - - - - - - - - - - ------------
Pawtucket (1)(2)(3) Administrative, Sales
& Marketing Offices &
Product Development 343,000 Owned --
Pawtucket (2) Executive Office 23,000 Owned --
East Providence (2) Administrative Office 120,000 Leased 2004
California
- - - - - - - - - - - - - - - - - ----------
Ontario (1) Warehouse 432,000 Leased 2002
Napa (3) Office & Warehouse 400,000 Leased 2013
Alameda (1) Product Development 38,400 Leased 2002
Illinois
- - - - - - - - - - - - - - - - - --------
Vernon Hills (1) Office & Warehouse 21,000 Leased 2002
<PAGE>
Massachusetts
- - - - - - - - - - - - - - - - - -------------
East Longmeadow Office, Manufacturing
(1)(4) & Warehouse 1,147,500 Owned --
East Longmeadow (4) Warehouse 500,000 Leased 2000
Beverly (1) Office 100,000 Owned --
Maryland
- - - - - - - - - - - - - - - - - --------
Hunt Valley (1) Product Development 29,900 Leased 2003
New Jersey
- - - - - - - - - - - - - - - - - ----------
Mt. Laurel (3) Office 11,000 Leased 2001
New York
- - - - - - - - - - - - - - - - - --------
New York(1)(2)(3)(5) Office & Showroom 106,800 Leased 2011
New York(1)(2)(3)(5) Office & Showroom 17,200 Leased 2006
Ohio
- - - - - - - - - - - - - - - - - ----
Cincinnati (1) Office 174,000 Leased 2007
Cincinnati (1) Warehouse 31,800 Leased 2008
Texas
- - - - - - - - - - - - - - - - - -----
El Paso (4) Warehouse 696,000 Leased 2008
Dallas (1) Warehouse 127,000 Leased 2003
Washington
- - - - - - - - - - - - - - - - - ----------
Renton (1) Offices 158,000 Leased 2003
Australia
- - - - - - - - - - - - - - - - - ---------
Lidcombe (5) Office & Warehouse 161,400 Leased 2002
Eastwood (5) Office 16,900 Leased 2001
Argentina
- - - - - - - - - - - - - - - - - ---------
Buenos Aires (5) Office and Warehouse 54,000 Leased 2000
Austria
- - - - - - - - - - - - - - - - - -------
Vienna (5) Office 4,000 Leased 2000
Belgium
- - - - - - - - - - - - - - - - - -------
Brussels (5) Office & Showroom 20,700 Leased 2000
<PAGE>
Canada
- - - - - - - - - - - - - - - - - ------
Montreal (5) Office, Warehouse
& Showroom 133,900 Leased 2001
Mississauga (5) Sales Office & Showroom 16,300 Leased 2004
Montreal (5) Warehouse 88,100 Leased 2001
Chile
- - - - - - - - - - - - - - - - - -----
Santiago (5) Warehouse 23,800 Leased 2000
Santiago (5) Office 3,500 Leased 2000
Denmark
- - - - - - - - - - - - - - - - - -------
Glostrup (5) Office 9,200 Leased 2004
England
- - - - - - - - - - - - - - - - - -------
Uxbridge (5) Office & Showroom 94,500 Leased 2013
France
- - - - - - - - - - - - - - - - - ------
Le Bourget du Lac(5) Office & Warehouse 108,300 Owned --
Savoie Technolac (5) Office 33,500 Owned --
Creutzwald (5) Warehouse 217,200 Owned --
Gresy (5) Warehouse 24,500 Leased 2000
Germany
- - - - - - - - - - - - - - - - - -------
Dietzenbach (5) Office 43,000 Leased 2006
Soest (5) Office & Warehouse 164,200 Owned --
Boner (5) Office & Warehouse 111,300 Owned --
Greece
- - - - - - - - - - - - - - - - - ------
Athens (5) Office & Warehouse 25,100 Leased 2007
Hong Kong
- - - - - - - - - - - - - - - - - ---------
Kowloon (1)(3)(4)(5) Offices 35,000 Leased 2000
Kowloon (1)(3)(4)(5) Offices 62,200 Leased 2002
New Territories (4) Office & Warehouse 17,800 Leased 2001
New Territories (4) Warehouse 11,500 Leased 2002
Hungary
- - - - - - - - - - - - - - - - - -------
Budapest (5) Office 6,300 Leased 2000
Ireland
- - - - - - - - - - - - - - - - - -------
Waterford (4) Office, Manufacturing
& Warehouse 244,400 Owned --
<PAGE>
Italy
- - - - - - - - - - - - - - - - - -----
Milan (5) Office & Showroom 12,100 Leased 2002
Mexico
- - - - - - - - - - - - - - - - - ------
Tijuana (4) Office, Manufacturing
& Warehouse 143,800 Leased 2000
Tijuana (4) Manufacturing &
Warehouse 205,000 Leased 2000
Periferico (5) Office 16,100 Leased 2003
Carretera (5) Warehouse 215,500 Leased 2005
The Netherlands
- - - - - - - - - - - - - - - - - ---------------
Ter Apel (5) Warehouse 79,400 Leased 2000
Utrecht (5) Office 17,000 Leased 2003
New Zealand
- - - - - - - - - - - - - - - - - -----------
Auckland (5) Office & Warehouse 110,900 Leased 2005
Peru
- - - - - - - - - - - - - - - - - ----
Lima (5) Warehouse 32,400 Leased 2000
Lima (5) Office 11,000 Leased 2000
Poland
- - - - - - - - - - - - - - - - - ------
Warsaw (5) Office & Warehouse 11,100 Leased 2001
Portugal
- - - - - - - - - - - - - - - - - --------
Estoril-Lisboa (5) Office 2,900 Leased 2003
Singapore
- - - - - - - - - - - - - - - - - ---------
Singapore (5) Office & Warehouse 9,300 Leased 2000
Spain
- - - - - - - - - - - - - - - - - -----
Valencia (4)(5) Office, Manufacturing
& Warehouse 322,700 Owned --
Valencia (4)(5) Office, Manufacturing
& Warehouse 144,800 Leased 2011
Sweden
- - - - - - - - - - - - - - - - - ------
Vosby (5) Office 7,400 Leased 2003
Switzerland
- - - - - - - - - - - - - - - - - -----------
Berikon (5) Office & Warehouse 25,000 Leased 2000
Delemont (5) Office 9,200 Leased 2004
<PAGE>
Taiwan
- - - - - - - - - - - - - - - - - ------
TPE County (5) Warehouse 14,400 Leased 2000
Wales
- - - - - - - - - - - - - - - - - -----
Newport (5) Warehouse 75,000 Leased 2003
Newport (5) Warehouse 170,000 Owned --
(1) Property used in the U.S. Toy or Games segment.
(2) Property used in the Corporate area.
(3) Property used in Other segments.
(4) Property used in the Global Operations segment.
(5) Property used in the International segment.
In addition to the above listed facilities, the Company either owns or
leases various other properties approximating 442,000 square feet which are
utilized by its various segments and include retail and game play locations
operated under the WIZARDS OF THE COAST and GAME KEEPER names. The Company
also either owns or leases an aggregate of approximately 1,173,000 square
feet, predominately relating to the Global Operations segment, not currently
being utilized in its operations. Most of these properties are being leased,
subleased or offered for sublease or sale.
The foregoing properties consist, in general, of brick, cinder block or
concrete block buildings which the Company believes are in good condition and
well maintained.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is party to certain legal proceedings, substantially involving
routine litigation incidental to the Company's business, none of which,
individually or in the aggregate, is deemed to be material to the financial
condition of the Company.
In January 2000, the Company entered into a settlement agreement and order
with the U.S. Consumer Products Safety Commission (CPSC) relating to the
PLAYSKOOL FOLD 'N TRAVEL INFANT CARRIER, which was the subject of a voluntary
recall by the Company in 1996. The CPSC alleged that the Company failed to
report the data that gave rise to the voluntary recall in a timely fashion to
the CPSC. Without admitting any liability or wrongdoing or that the recalled
product was defective or dangerous, the Company, to avoid incurring
additional legal costs and expenses, agreed to pay a $400,000 civil penalty
in connection with the matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
- - - - - - - - - - - - - - - - - ------------------------------------
The following persons are the executive officers of the Company and its
subsidiaries and divisions. Such executive officers are elected annually. The
position and office listed below are the principal position(s) and office(s)
held by such person with the Company, subsidiary or divisions employing such
person. The persons listed below generally also serve as officers and
directors of the Company's various subsidiaries at the request and
convenience of the Company.
Period
Serving in
Current
Name Age Position and Office Held Position
- - - - - - - - - - - - - - - - - ---- --- ------------------------ ----------
Alan G. Hassenfeld (1) 51 Chairman of the Board and
Chief Executive Officer Since 1999
Herbert M. Baum (2) 63 President and Chief
Operating Officer Since 1999
Harold P. Gordon 62 Vice Chairman Since 1995
Alfred J. Verrecchia (3) 57 Executive Vice President,
Global Operations and
Chief Financial Officer Since 1999
David D. R. Hargreaves (4) 47 Senior Vice President and
Deputy Chief Financial Officer Since 1999
Thomas J. McGrath (5) 42 General Manager and
Sector Head, Toys Since 1999
E. David Wilson (6) 62 General Manager and
Sector Head, U.S. Games Since 1999
George B. Volanakis (7) 52 General Manager and
Sector Head, International
Businesses Since 1999
Richard B. Holt 58 Senior Vice President and
Controller Since 1992
Barry Nagler (8) 43 Senior Vice President and
General Counsel Since 2000
Douglas J. Schwinn (9) 49 Senior Vice President and
Chief Information Officer Since 1999
Martin R. Trueb (10) 48 Senior Vice President and
Treasurer Since 1997
Phillip H. Waldoks 47 Senior Vice President -
Corporate Legal Affairs
and Secretary Since 1995
<PAGE>
(1) Prior thereto, Chairman of the Board, President and Chief Executive
Officer.
(2) Prior thereto, Chairman and Chief Executive Officer, Quaker State
Corporation.
(3) Prior thereto, Executive Vice President, Global Operations and
Development during 1999; prior thereto, Executive Vice President and
President, Global Operations from 1996 to 1999; prior thereto, Chief
Operating Officer, Domestic Toy Operations.
(4) Prior thereto, Senior Vice President-Finance during 1999; prior
thereto, Senior Vice President, Finance and Planning, Global Marketing,
from 1997 to 1999; prior thereto, Senior Vice President, Finance and
Planning, Global Operations from 1996 to 1997; prior thereto, Senior
Vice President, Finance and Administration, Domestic Toy Operations.
(5) Prior thereto, Group Executive, Boys Toys.
(6) Prior thereto, President, Hasbro Americas from 1996 to 1999; prior
thereto, President, Hasbro Games Group.
(7) Prior thereto, President, European Sales and Marketing from 1998 to
1999; prior thereto, President and Chief Executive Officer, The Ertl
Company, Inc.
(8) Prior thereto, Senior Vice President and General Counsel, Reebok
International, Ltd. (Reebok) from 1997 to 2000; prior thereto, Vice
President and General Counsel, Reebok.
(9) Prior thereto, Senior Vice President and Chief Information Officer,
OfficeMax, Inc., from 1997 to 1999; prior thereto, Senior Vice
President, Information Services and Chief Information Officer,
FoxMeyer Drug Company.
(10) Prior thereto, Assistant Treasurer, Amway Corporation.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
-----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
On February 10, 2000, the Company issued warrants to purchase 500,000
shares of common stock, par value $.50 per share, of the Company, at an
exercise price of $15.00 per share subject to anti-dilution adjustment in
certain events, to Warner Bros., a division of Time Warner Entertainment
Company, L.P., in connection with, and as partial consideration for, the
acquisition of certain rights for the development of trading card games, role
playing games, trading cards, candy and youth electronics relating to
characters from the first two Harry Potter books published by J.K. Rowling,
as well as two films to be developed by Warner Bros. Pictures based on these
two books. The warrants were issued without registration under the Securities
Act of 1933 (the "Act") on the basis of Section 4(2) of the Act in reliance
upon the representations of the warrant holder that it is an accredited
<PAGE>
investor, as defined in Rule 501 of Regulation D under the Act, and that it
is acquiring the warrants for investment purposes only and not with a view
to, or for resale in connection with, any "distribution" thereof for purposes
of the Act. The warrants are exercisable upon the U.S. theatrical release
date of the first film and expire on December 31, 2003, subject to limited
extension under certain limited circumstances.
The remainder of the information required by this item is included in
Market for the Registrant's Common Equity and Related Stockholder Matters in
Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The information required by this item is included in Selected Financial
Data in Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The information required by this item is included in Management's Review in
Exhibit 13 to this Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information required by this item is included in Financial Statements
and Supplementary Data in Exhibit 13 to this Report and is incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
PART III
ITEMS 10, 11, 12 and 13.
The information required by these items is included in registrant's
definitive proxy statement for the 2000 Annual Meeting of Shareholders and is
incorporated herein by reference, except that the sections under the headings
(a) "Comparison of Five Year Cumulative Total Shareholder Return Among
Hasbro, S&P 500 and Russell 1000 Consumer Discretionary Economic Sector" and
accompanying material and (b) "Report of the Compensation and Stock Option
Committee of the Board of Directors" in the definitive proxy statement shall
not be deemed "filed" with the Securities and Exchange Commission or subject
to Section 18 of the Securities Exchange Act of 1934.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) Financial Statements, Financial Statement Schedules and Exhibits
----------------------------------------------------------------
(1) Financial Statements
--------------------
Included in PART II of this report:
Independent Auditors' Report
Consolidated Balance Sheets at December 26, 1999 and
December 27, 1998
Consolidated Statements of Earnings for the Three Fiscal
Years Ended in December 1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity for the
Three Fiscal Years Ended in December 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Three
Fiscal Years Ended in December 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
-----------------------------
Included in PART IV of this Report:
Report of Independent Certified Public Accountants
on Financial Statement Schedule
For the Three Fiscal Years Ended in December 1999, 1998
and 1997:
Schedule II - Valuation and Qualifying Accounts and
Reserves
Schedules other than those listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown
in the financial statements or notes thereto. Columns omitted from schedules
filed have been omitted because the information is not applicable.
(3) Exhibits
--------
The Company will furnish to any shareholder, upon written request, any
exhibit listed below upon payment by such shareholder to the Company of the
Company's reasonable expenses in furnishing such exhibit.
Exhibit
- - - - - - - - - - - - - - - - - -------
3. Articles of Incorporation and Bylaws
(a) Restated Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit (c)(2) to the
Company's Current Report on Form 8-K, dated July 15,
1993, File No. 1-6682.)
<PAGE>
(b) Amended and Restated Bylaws of the Company. (Incorporated by
reference to Exhibit (3) to the Company's Current Report on
Form 8-K, dated February 16, 1996, File No. 1-6682.)
4. Instruments defining the rights of security holders, including
indentures.
(a) Indenture, dated as of July 17, 1998, by and between the
Company and Citibank, N.A. as Trustee. (Incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated July 14, 1998, File No. 1-6682.)
(b)(i) Indenture, dated as of March 15, 2000, by and between the
Company and the Bank of Nova Scotia Trust Company of New York.
(b)(ii)Form of 7.95% Note due 2003.
10. Material Contracts
(a) Lease between Hasbro Canada Inc. (formerly named Hasbro
Industries (Canada) Ltd.) and Central Toy Manufacturing Co.
("Central Toy"), dated December 23, 1976. (Incorporated by
reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-14, File No. 2-92550.)
(b) Lease between Hasbro Canada Inc. and Central Toy, together
with an Addendum thereto, each dated as of May 1, 1987.
(Incorporated by reference to Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
(c) Addendum to lease, dated March 5, 1998, between Hasbro Canada
and Central Toy. (Incorporated by reference to Exhibit 10(c)
to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 28, 1997, File No. 1-6682.)
(d) Toy License Agreement between Lucas Licensing Ltd. and the
Company, dated as of October 14, 1997. (Portions of this
agreement have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.)(Incorporated by reference to
Exhibit 10(d) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 27, 1998, File No. 1-6682.)
(e) First Amendment to Toy License Agreement between Lucas
Licensing Ltd. and the Company, dated as of September 25, 1998.
(Portions of this agreement have been omitted pursuant to a
request for confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.)(Incorporated by
reference to Exhibit 10(e) to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 27, 1998, File No.
1-6682.)
<PAGE>
(f) Agreement of Strategic Relationship between Lucasfilm Ltd. and
the Company dated as of October 14, 1997. (Portions of this
agreement have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.) (Incorporated by reference
to Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1998, File No. 1-6682.)
(g) First Amendment to Agreement of Strategic Relationship between
Lucasfilm Ltd. and the Company, dated as of September 25, 1998.
(Incorporated by reference to Exhibit 10(g) to the Company's
Annual Report on Form 10-K for the Fiscal Year ended December
27, 1998, File No. 1-6682.)
(h) Warrant, dated October 14, 1997 between the Company and
Lucas Licensing Ltd. (Incorporated by reference to Exhibit
10(h) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(i) Warrant, dated October 14, 1997 between the Company and
Lucasfilm Ltd. (Incorporated by reference to Exhibit
10(i) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(j) Warrant, dated October 30, 1998 between the Company and
Lucas Licensing Ltd. (Incorporated by reference to Exhibit
10(j) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(k) Warrant, dated October 30, 1998 between the Company and
Lucasfilm Ltd. (Incorporated by reference to Exhibit
10(k) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(l) Asset Purchase Agreement dated as of February 8, 1998,
together with Amendment thereto dated as of March 31, 1998,
by and among the Company, Tiger Electronics Ltd. (formerly
named HIAC X Corp. and a wholly-owned subsidiary of the
Company), Tiger Electronics, Inc. and certain affiliates
thereof and Owen Randall Rissman and the Rissman Family 1997
Trust. (Incorporated by reference to Exhibit 2(a) to the
Company's Current Report on Form 8-K, dated April 1, 1998,
File No. 1-6682.)
Executive Compensation Plans and Arrangements
(m) Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, File No. 2-78018.)
(n) Amendment No. 1 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 1986, File No. 1-6682.)
<PAGE>
(o) Amendment No. 2 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
(p) Amendment No. 3 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(o) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 25, 1988, File No. 1-6682.)
(q) Amendment No. 4 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(s) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(r) Form of Non Qualified Stock Option Agreement under the
Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 10(q) to the Company's Annual Report
on Form 10-K for the Fiscal Year Ended December 25, 1988,
File No. 1-6682.)
(s) Non Qualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.10 to the Company's Registration Statement on
Form S-14, File No. 2-92550.)
(t) Amendment No. 1 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(j) to the
Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 28, 1986, File No. 1-6682.)
(u) Amendment No. 2 to Non Qualified Stock Option Plan.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1987 Annual Meeting of
Shareholders, File No. 1-6682.)
(v) Amendment No. 3 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(w) Form of Stock Option Agreement (For Employees) under the Non
Qualified Stock Option Plan. (Incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1992, File No.
1-6682.)
(x) 1992 Stock Incentive Plan. (Incorporated by reference to
Appendix A to the Company's definitive proxy statement for
its 1992 Annual Meeting of Shareholders, File No. 1-6682.)
(y) Form of Stock Option Agreement under the 1992 Stock Incentive
Plan, the Stock Incentive Performance Plan and the Employee
Non-Qualified Stock Plan. (Incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
<PAGE>
(z) Hasbro, Inc. Stock Incentive Performance Plan. (Incorporated
by reference to Appendix A to the Company's definitive proxy
statement for its 1995 Annual Meeting of Shareholders, File
No. 1-6682.)
(aa) First Amendment to the 1992 Stock Incentive Plan and the Stock
Incentive Performance Plan. (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the period ended June 27, 1999, File No. 1-6682.)
(bb) Employee Non-Qualified Stock Plan. (Incorporated by reference
to Exhibit 10(dd) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 29, 1996, File No. 1-6682.)
(cc) First Amendment to the Employee Non-Qualified Stock Plan.
(Incorporated by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the period ended March 28,
1999, File No. 1-6682.)
(dd) Form of Stock Option Agreement (For Participants in the Long
Term Incentive Program) under the 1992 Stock Incentive Plan,
the Stock Incentive Performance Plan, and the Employee Non-
Qualified Stock Plan. (Incorporated by reference to Exhibit
10(w) to the Company's Annual Report on Form 10-K for the
Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(ee) Form of Employment Agreement between the Company and eleven
officers of the Company. (Incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(ff) Form of Amendment, dated as of March 10, 2000, to Form of
Employment Agreement included as Exhibit 10(ee) above.
(gg) Hasbro, Inc. Retirement Plan for Directors. (Incorporated
by reference to Exhibit 10(x) to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended December 30,
1990, File No. 1-6682.)
(hh) Form of Director's Indemnification Agreement. (Incorporated
by reference to Appendix B to the Company's definitive proxy
statement for its 1988 Annual Meeting of Shareholders, File
No. 1-6682.)
(ii) Hasbro, Inc. Deferred Compensation Plan for Non-Employee
Directors.(Incorporated by reference to Exhibit 10(cc) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 26, 1993, File No. 1-6682.)
(jj) Hasbro, Inc. Stock Option Plan for Non-Employee Directors.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1994 Annual Meeting of
Shareholders, File No. 1-6682.)
<PAGE>
(kk) First Amendment to the Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 27, 1999, File No. 1-6682.)
(ll) Form of Stock Option Agreement for Non-Employee Directors
under the Hasbro, Inc. Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10(w) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 25, 1994, File No. 1-6682.)
(mm) Hasbro, Inc. 1999 Senior Management Annual Performance Plan.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1999 Annual Meeting of
Shareholders, File No. 1-6682.)
(nn) Hasbro, Inc. Amended and Restated Nonqualified Deferred
Compensation Plan. (Incorporated by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the Period
Ended March 29, 1998, File No. 1-6682.)
(oo) Employment Agreement, dated as of January 1, 1996, between
the Company and Harold P. Gordon. (Incorporated by reference
to Exhibit 10(aa) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1995, File No. 1-6682.)
(pp) Letter dated January 26, 1998 from the Company to George B.
Volanakis. (Incorporated by reference to Exhibit 10(ii) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 28, 1997, File No. 1-6682.)
(qq) Employment Agreement dated as of January 5, 1999, between the
Company and Herbert M. Baum. (Incorporated by reference to
Exhibit 10(rr) to the Company's Annual Report on Form 10-K for
the Fiscal Year ended December 27, 1998, File No. 1-6682.)
(rr) Letter agreement, dated March 23, 1999, between the Company
and Adam Klein. (Incorporated by reference to Exhibit 10(ss) to
the Company's Annual Report on Form 10-K for the Fiscal Year
ended December 27, 1998, File No. 1-6682.)
(ss) Letter agreement, dated December 30, 1999, between the Company
and John T. O'Neill.
11. Statement re computation of per share earnings
12. Statement re computation of ratios
13. Selected information contained in Annual Report to Shareholders
21. Subsidiaries of the registrant
23. Consents of KPMG LLP
27. Financial data schedule
<PAGE>
The Company agrees to furnish the Securities and Exchange Commission, upon
request, a copy of each agreement with respect to long-term debt of the
Company, the authorized principal amount of which does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
-------------------
A Current Report on Form 8-K dated February 8, 2000 was filed to
announce the Company's results for the quarter and year ended
December 26, 1999. Consolidated statements of earnings (without
notes) for the quarter and year ended December 26, 1999 and
December 27, 1998 and consolidated condensed balance sheets
(without notes) as of said dates were also filed.
A Current Report on Form 8-K dated March 13, 2000 was filed by the
Company in connection with the issuance of an aggregate amount of
$750 million of long-term debt. The filing included the following
exhibits: Terms Agreement among the Registrant, Salomon Smith Barney
Inc. and Bear, Stearns & Co. Inc., dated March 10, 2000; Opinion of
Phillip H. Waldoks, Senior Vice President-Corporate Legal Affairs and
Secretary of the Company, re legality of the Notes; and Statement of
Eligibility under the Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee on Form T-1.
(c) Exhibits
--------
See (a)(3) above
(d) Financial Statement Schedules
-----------------------------
See (a)(2) above
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
Under date of February 7, 2000, we reported on the consolidated balance
sheets of Hasbro, Inc. and subsidiaries as of December 26, 1999 and December
27, 1998 and the related consolidated statements of earnings, shareholders'
equity, and cash flows for each of the fiscal years in the three-year period
ended December 26, 1999, as contained in the 1999 annual report to
shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1999. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement
schedule listed in Item 14 (a) (2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ KPMG LLP
Providence, Rhode Island
February 7, 2000
<PAGE>
HASBRO, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Fiscal Years Ended in December
(Thousands of Dollars)
Provision
Balance at Charged to Write-Offs Balance
Beginning of Costs and Other And at End of
Year Expenses Additions Other (a) Year
------------ ---------- ------------ ----------- ---------
Valuation
accounts
deducted
from assets
to which
they apply -
for doubtful
accounts
receivable:
1999 $64,400 9,053 2,329 (10,782) $65,000
====== ====== ====== ====== ======
1998 $51,700 13,057 2,832 (3,189) $64,400
====== ====== ====== ====== ======
1997 $46,600 9,229 - (4,129) $51,700
====== ====== ====== ====== ======
(a) Includes write-offs, recoveries of previous write-offs and
translation adjustments.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HASBRO, INC. (Registrant)
By: /s/ Alan G. Hassenfeld Date: March 24, 2000
------------------------- ---------------
Alan G. Hassenfeld
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- - - - - - - - - - - - - - - - - --------- ----- ----
/s/ Alan G. Hassenfeld
- - - - - - - - - - - - - - - - - ---------------------------- Chairman of the Board, March 24, 2000
Alan G. Hassenfeld Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ Alfred J. Verrecchia
- - - - - - - - - - - - - - - - - ---------------------------- Executive Vice President, March 24, 2000
Alfred J. Verrecchia Global Operations and Chief
Financial Officer and Director
(Principal Financial and
Accounting Officer)
/s/ Alan R. Batkin
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Alan R. Batkin
/s/ Herbert M. Baum
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Herbert M. Baum
<PAGE>
/s/ E. Gordon Gee
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
E. Gordon Gee
/s/ Harold P. Gordon
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Harold P. Gordon
- - - - - - - - - - - - - - - - - ---------------------------- Director March , 2000
Alex Grass
/s/ Sylvia K. Hassenfeld
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Sylvia K. Hassenfeld
/s/ Marie-Josee Kravis
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Marie-Josee Kravis
/s/ Norma T. Pace
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Norma T. Pace
/s/ E. John Rosenwald, Jr.
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
E. John Rosenwald, Jr.
/s/ Carl Spielvogel
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Carl Spielvogel
/s/ Preston Robert Tisch
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Preston Robert Tisch
/s/ Paul Wolfowitz
- - - - - - - - - - - - - - - - - ---------------------------- Director March 24, 2000
Paul Wolfowitz
<PAGE>
HASBRO, INC.
Annual Report on Form 10-K
for the Year Ended December 26, 1999
Exhibit Index
Exhibit
- - - - - - - - - - - - - - - - - -------
3. Articles of Incorporation and Bylaws
(a) Restated Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit (c)(2) to the
Company's Current Report on Form 8-K, dated July 15,
1993, File No. 1-6682.)
(b) Amended and Restated Bylaws of the Company. (Incorporated by
reference to Exhibit (3) to the Company's Current Report on
Form 8-K, dated February 16, 1996, File No. 1-6682.)
4. Instruments defining the rights of security holders, including
indentures.
(a) Indenture, dated as of July 17, 1998, by and between the
Company and Citibank, N.A. as Trustee. (Incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated July 14, 1998, File No. 1-6682.)
(b)(i) Indenture, dated as of March 15, 2000, by and between the
Company and the Bank of Nova Scotia Trust Company of New York.
(b)(ii)Form of 7.95% Note due 2003.
10. Material Contracts
(a) Lease between Hasbro Canada Inc. (formerly named Hasbro
Industries (Canada) Ltd.) and Central Toy Manufacturing Co.
("Central Toy"), dated December 23, 1976. (Incorporated by
reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-14, File No. 2-92550.)
(b) Lease between Hasbro Canada Inc. and Central Toy, together
with an Addendum thereto, each dated as of May 1, 1987.
(Incorporated by reference to Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
(c) Addendum to lease, dated March 5, 1998, between Hasbro Canada
and Central Toy. (Incorporated by reference to Exhibit 10(c)
to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 28, 1997, File No. 1-6682.)
(d) Toy License Agreement between Lucas Licensing Ltd. and the
Company, dated as of October 14, 1997. (Portions of this
agreement have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.)(Incorporated by reference to
Exhibit 10(d) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 27, 1998, File No. 1-6682.)
<PAGE>
(e) First Amendment to Toy License Agreement between Lucas
Licensing Ltd. and the Company, dated as of September 25, 1998.
(Portions of this agreement have been omitted pursuant to a
request for confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.)(Incorporated by
reference to Exhibit 10(e) to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 27, 1998, File No.
1-6682.)
(f) Agreement of Strategic Relationship between Lucasfilm Ltd. and
the Company dated as of October 14, 1997. (Portions of this
agreement have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.) (Incorporated by reference
to Exhibit 10(f) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1998, File No. 1-6682.)
(g) First Amendment to Agreement of Strategic Relationship between
Lucasfilm Ltd. and the Company, dated as of September 25, 1998.
(Incorporated by reference to Exhibit 10(g) to the Company's
Annual Report on Form 10-K for the Fiscal Year ended December
27, 1998, File No. 1-6682.)
(h) Warrant, dated October 14, 1997 between the Company and
Lucas Licensing Ltd. (Incorporated by reference to Exhibit
10(h) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(i) Warrant, dated October 14, 1997 between the Company and
Lucasfilm Ltd. (Incorporated by reference to Exhibit
10(i) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(j) Warrant, dated October 30, 1998 between the Company and
Lucas Licensing Ltd. (Incorporated by reference to Exhibit
10(j) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(k) Warrant, dated October 30, 1998 between the Company and
Lucasfilm Ltd. (Incorporated by reference to Exhibit
10(k) to the Company's Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1998, File No. 1-6682.)
(l) Asset Purchase Agreement dated as of February 8, 1998,
together with Amendment thereto dated as of March 31, 1998,
by and among the Company, Tiger Electronics Ltd. (formerly
named HIAC X Corp. and a wholly-owned subsidiary of the
Company), Tiger Electronics, Inc. and certain affiliates
thereof and Owen Randall Rissman and the Rissman Family 1997
Trust. (Incorporated by reference to Exhibit 2(a) to the
Company's Current Report on Form 8-K, dated April 1, 1998,
File No. 1-6682.)
<PAGE>
Executive Compensation Plans and Arrangements
(m) Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, File No. 2-78018.)
(n) Amendment No. 1 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 28, 1986, File No. 1-6682.)
(o) Amendment No. 2 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 27, 1987, File No. 1-6682.)
(p) Amendment No. 3 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(o) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 25, 1988, File No. 1-6682.)
(q) Amendment No. 4 to Employee Incentive Stock Option Plan.
(Incorporated by reference to Exhibit 10(s) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(r) Form of Non Qualified Stock Option Agreement under the
Employee Incentive Stock Option Plan. (Incorporated by
reference to Exhibit 10(q) to the Company's Annual Report
on Form 10-K for the Fiscal Year Ended December 25, 1988,
File No. 1-6682.)
(s) Non Qualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.10 to the Company's Registration Statement on
Form S-14, File No. 2-92550.)
(t) Amendment No. 1 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(j) to the
Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 28, 1986, File No. 1-6682.)
(u) Amendment No. 2 to Non Qualified Stock Option Plan.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1987 Annual Meeting of
Shareholders, File No. 1-6682.)
(v) Amendment No. 3 to Non Qualified Stock Option Plan.
(Incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1989, File No. 1-6682.)
(w) Form of Stock Option Agreement (For Employees) under the Non
Qualified Stock Option Plan. (Incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 27, 1992, File No.
1-6682.)
(x) 1992 Stock Incentive Plan. (Incorporated by reference to
Appendix A to the Company's definitive proxy statement for
its 1992 Annual Meeting of Shareholders, File No. 1-6682.)
(y) Form of Stock Option Agreement under the 1992 Stock Incentive
Plan, the Stock Incentive Performance Plan and the Employee
Non-Qualified Stock Plan. (Incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(z) Hasbro, Inc. Stock Incentive Performance Plan. (Incorporated
by reference to Appendix A to the Company's definitive proxy
statement for its 1995 Annual Meeting of Shareholders, File
No. 1-6682.)
(aa) First Amendment to the 1992 Stock Incentive Plan and the Stock
Incentive Performance Plan. (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the period ended June 27, 1999, File No. 1-6682.)
(bb) Employee Non-Qualified Stock Plan. (Incorporated by reference
to Exhibit 10(dd) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 29, 1996, File No. 1-6682.)
(cc) First Amendment to the Employee Non-Qualified Stock Plan.
(Incorporated by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the period ended March 28,
1999, File No. 1-6682.)
(dd) Form of Stock Option Agreement (For Participants in the Long
Term Incentive Program) under the 1992 Stock Incentive Plan,
the Stock Incentive Performance Plan, and the Employee Non-
Qualified Stock Plan. (Incorporated by reference to Exhibit
10(w) to the Company's Annual Report on Form 10-K for the
Fiscal Year Ended December 27, 1992, File No. 1-6682.)
(ee) Form of Employment Agreement between the Company and eleven
officers of the Company. (Incorporated by reference to
Exhibit 10(v) to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1989, File No. 1-6682.)
(ff) Form of Amendment, dated as of March 10, 2000, to Form of
Employment Agreement included as Exhibit 10(ee) above.
(gg) Hasbro, Inc. Retirement Plan for Directors. (Incorporated
by reference to Exhibit 10(x) to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended December 30,
1990, File No. 1-6682.)
(hh) Form of Director's Indemnification Agreement. (Incorporated
by reference to Appendix B to the Company's definitive proxy
statement for its 1988 Annual Meeting of Shareholders, File
No. 1-6682.)
<PAGE>
(ii) Hasbro, Inc. Deferred Compensation Plan for Non-Employee
Directors.(Incorporated by reference to Exhibit 10(cc) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 26, 1993, File No. 1-6682.)
(jj) Hasbro, Inc. Stock Option Plan for Non-Employee Directors.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1994 Annual Meeting of
Shareholders, File No. 1-6682.)
(kk) First Amendment to the Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 27, 1999, File No. 1-6682.)
(ll) Form of Stock Option Agreement for Non-Employee Directors
under the Hasbro, Inc. Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10(w) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 25, 1994, File No. 1-6682.)
(mm) Hasbro, Inc. 1999 Senior Management Annual Performance Plan.
(Incorporated by reference to Appendix A to the Company's
definitive proxy statement for its 1999 Annual Meeting of
Shareholders, File No. 1-6682.)
(nn) Hasbro, Inc. Amended and Restated Nonqualified Deferred
Compensation Plan. (Incorporated by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the Period
Ended March 29, 1998, File No. 1-6682.)
(oo) Employment Agreement, dated as of January 1, 1996, between
the Company and Harold P. Gordon. (Incorporated by reference
to Exhibit 10(aa) to the Company's Annual Report on Form 10-K
for the Fiscal Year Ended December 31, 1995, File No. 1-6682.)
(pp) Letter dated January 26, 1998 from the Company to George B.
Volanakis. (Incorporated by reference to Exhibit 10(ii) to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 28, 1997, File No. 1-6682.)
(qq) Employment Agreement dated as of January 5, 1999, between the
Company and Herbert M. Baum. (Incorporated by reference to
Exhibit 10(rr) to the Company's Annual Report on Form 10-K for
the Fiscal Year ended December 27, 1998, File No. 1-6682.)
(rr) Letter agreement, dated March 23, 1999, between the Company
and Adam Klein. (Incorporated by reference to Exhibit 10(ss) to
the Company's Annual Report on Form 10-K for the Fiscal Year
ended December 27, 1998, File No. 1-6682.)
(ss) Letter agreement, dated December 30, 1999, between the Company
and John T. O'Neill.
11. Statement re computation of per share earnings
<PAGE>
12. Statement re computation of ratios
13. Selected information contained in Annual Report to Shareholders
21. Subsidiaries of the registrant
23. Consents of KPMG LLP
27. Financial data schedule
Exhibit 4(b)(i)
==============================================================================
HASBRO, INC.
AND
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK,
as Trustee
---------------
Senior Debt Securities
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Senior Debt Indenture
Dated as of March 15, 2000
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TABLE OF CONTENTS
PAGE
PARTIES......................................................................1
RECITALS OF THE COMPANY......................................................1
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01 Definitions..............................................1
SECTION 1.02 Compliance Certificates and Opinions....................13
SECTION 1.03 Form of Documents Delivered to Trustee..................14
SECTION 1.04 Acts of Holders.........................................14
SECTION 1.05 Notices, Etc., to Trustee and Company...................17
SECTION 1.06 Notice to Holders; Waiver...............................17
SECTION 1.07 Conflict with Trust Indenture Act.......................18
SECTION 1.08 Effect of Headings and Table of Contents................18
SECTION 1.09 Successors and Assigns..................................18
SECTION 1.10 Separability Clause.....................................19
SECTION 1.11 Benefits of Indenture...................................19
SECTION 1.12 Governing Law...........................................19
SECTION 1.13 Moneys of Different Currencies to Be Segregated.........19
SECTION 1.14 Payment to Be in Proper Currency........................19
SECTION 1.15 Counterparts............................................20
SECTION 1.16 Legal Holidays..........................................20
ARTICLE II
SECURITY FORMS
SECTION 2.01 Forms Generally.........................................21
SECTION 2.02 Form of Trustee's Certificate of Authentication.........22
SECTION 2.03 Securities in Global Form...............................22
ARTICLE III
THE SECURITIES
SECTION 3.01 Amount Unlimited; Issuable in Series....................23
SECTION 3.02 Denominations...........................................27
SECTION 3.03 Execution, Authentication, Delivery and Dating..........28
SECTION 3.04 Temporary Securities....................................31
SECTION 3.05 Registration, Registration of Transfer and Exchange.....32
SECTION 3.06 Mutilated, Destroyed, Lost and Stolen Securities........35
SECTION 3.07 Payment of Interest; Interest Rights Preserved..........37
SECTION 3.08 Persons Deemed Owners...................................39
SECTION 3.09 Cancellation............................................39
SECTION 3.10 Computation of Interest.................................40
ARTICLE IV
CONVERSION OF SECURITIES
SECTION 4.01 Applicability of Article................................40
SECTION 4.02 Exercise of Conversion Privilege........................41
SECTION 4.03 Fractional Interests....................................43
SECTION 4.04 Adjustment of Conversion Price..........................43
SECTION 4.05 Continuation of Conversion Privilege in Case of Merger,
Consolidation or Sale of Assets........................48
SECTION 4.06 Notices of Certain Events...............................50
SECTION 4.07 Taxes on Conversion.....................................51
SECTION 4.08 Company to Provide Stock................................51
SECTION 4.09 Disclaimer of Responsibility for Certain Matters........52
SECTION 4.10 Return of Funds Deposited for Redemption of Converted
Convertible Securities.................................53
ARTICLE V
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 5.01 Satisfaction and Discharge of Indenture.................53
SECTION 5.02 Application of Trust Money..............................55
SECTION 5.03 Satisfaction, Discharge and Defeasance of Securities
of Any Series..........................................55
ARTICLE VI
REMEDIES
SECTION 6.01 Events of Default.......................................59
SECTION 6.02 Acceleration of Maturity; Rescission and Annulment......61
SECTION 6.03 Collection of Indebtedness and Suits for
Enforcement by Truste...................................62
SECTION 6.04 Trustee May Enforce Claims without Possession
of Securities...........................................63
SECTION 6.05 Trustee May File Proofs of Claim........................63
SECTION 6.06 Application of Money Collected..........................64
SECTION 6.07 Limitation on Suits.....................................64
SECTION 6.08 Restoration of Rights and Remedies......................65
SECTION 6.09 Rights and Remedies Cumulative..........................65
SECTION 6.10 Delay or Omission Not Waiver............................66
SECTION 6.11 Control by Holders......................................66
SECTION 6.12 Waiver of Past Defaults.................................66
SECTION 6.13 Waiver of Stay or Extension Laws........................67
SECTION 6.14 Undertaking for Costs...................................67
SECTION 6.15 Judgment Currency.......................................67
ARTICLE VII
THE TRUSTEE
SECTION 7.01 Certain Rights of Trustee...............................69
SECTION 7.02 Not Responsible for Recitals or Issuance of Securities..71
SECTION 7.03 May Hold Securities.....................................71
SECTION 7.04 Money Held in Trust.....................................71
SECTION 7.05 Compensation and Reimbursement..........................71
SECTION 7.06 Resignation and Removal; Appointment of Successor.......72
SECTION 7.07 Acceptance of Appointment by Successor..................74
SECTION 7.08 Merger, Conversion, Consolidation or Succession to
Business................................................75
SECTION 7.09 Reports by Trustee......................................76
SECTION 7.10 Corporate Trustee Required; Eligibility.................76
SECTION 7.11 Notice of Events of Default.............................76
SECTION 7.12 Disqualification; Conflicting Interests.................76
ARTICLE VIII
CONSOLIDATION, MERGER OR SALE
SECTION 8.01 Consolidation, Merger or Sale...........................77
SECTION 8.02 Successor Corporation to Be Substituted.................77
SECTION 8.03 Securities to Be Secured in Certain Events..............78
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01 Supplemental Indentures without Consent of Holders......79
SECTION 9.02 Supplemental Indentures with Consent of Holders.........81
SECTION 9.03 Execution of Supplemental Indentures....................83
SECTION 9.04 Effect of Supplemental Indentures.......................83
SECTION 9.05 Conformity with Trust Indenture Act.....................83
SECTION 9.06 Reference in Securities to Supplemental Indentures......83
ARTICLE X
COVENANTS
SECTION 10.01 Payment of Principal, Premium and Interest.............84
SECTION 10.02 Maintenance of Office or Agency........................84
SECTION 10.03 Money for Securities Payments to Be Held in Trust......85
SECTION 10.04 Maintenance of Properties and Corporate Existence......87
SECTION 10.05 Statements as to Compliance............................87
SECTION 10.06 Commission Reports.....................................88
SECTION 10.07 Waiver of Covenant.....................................88
SECTION 10.08 Additional Instruments and Acts........................88
SECTION 10.09 Restriction on Creation of Liens.......................89
SECTION 10.10 Restrictions on Sale and Leaseback Transactions........90
SECTION 10.11 Names and Addresses of Holders.........................91
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.01 Applicability of Article...............................92
SECTION 11.02 Election to Redeem; Notice to Trustee..................92
SECTION 11.03 Selection by Trustee of Securities to Be Redeemed......92
SECTION 11.04 Notice of Redemption...................................93
SECTION 11.05 Deposit of Redemption Price............................94
SECTION 11.06 Securities Payable on Redemption Date..................94
SECTION 11.07 Securities Redeemed in Part............................95
ARTICLE XII
SINKING FUNDS
SECTION 12.01 Applicability of Article...............................96
SECTION 12.02 Satisfaction of Sinking Fund Payments with Securities..96
SECTION 12.03 Redemption of Securities for Sinking Fund..............96
INDENTURE, dated as of March 15, 2000, between HASBRO, INC., a
corporation duly organized and existing under the laws of the State of
Rhode Island (herein called the "Company"), having its principal office at
Pawtucket, Rhode Island, and The Bank of Nova Scotia Trust Company of New
York (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its
unsecured senior debentures, notes or other evidences of indebtedness
(herein called the "Securities"), to be issued in one or more series as in
this Indenture provided.
All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the
Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01 Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles as in effect on June 1, 1998 or, as to any
computation required or permitted pursuant to, and relating to any
covenant of the Company contained in, any Board Resolution, Officers'
Certificate or executed supplemental indenture establishing any
series of Securities, such computation shall be made and such
covenant shall be construed in accordance with generally accepted
accounting principles as are generally accepted at the date of such
Board Resolution, Officers' Certificate or executed supplemental
indenture (unless otherwise provided therein or except as otherwise
provided herein or in any further Board Resolution, Officers'
Certificate or executed supplemental indenture); and
(4) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Article Four, are defined in
that Article.
"Act," when used with respect to any Holder, has the meaning
specified in Section 1.04.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, as of any particular time, the present value (discounted
at the rate of interest implicit in the terms of the lease involved in such
Sale and Leaseback Transaction, as determined in good faith by the Board of
Directors) of the obligation of the lessee thereunder for rental payments
(excluding, however, any amounts required to be paid by such lessee,
whether or not designated as rent or additional rent, on account of
maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges or any amounts required to be paid by such lessee
thereunder contingent upon the amount of sales, maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges) during the
remaining term of such lease (including any period for which such lease has
been extended or may, at the option of the lessor, be extended).
"Authorized Newspaper" means a newspaper of general circulation
in the place of publication (which, in the case of the City of New York,
will, if practicable, be The Wall Street Journal (Eastern Edition), in the
case of the United Kingdom, will, if practicable, be The Financial Times
(London Edition) and, in the case of Luxembourg, will, if practicable, be
the Luxembourg Wort), printed in the official language of the country of
publication and customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays. Whenever successive weekly
publications in an Authorized Newspaper are authorized or required
hereunder, they may be made (unless otherwise expressly provided herein) on
the same or different days of the week and in the same or different
Authorized Newspapers. If it shall be impractical, in the opinion of the
Trustee, to make any publication of any notice required hereby in an
Authorized Newspaper, any publication or other notice in lieu thereof which
is made or given with the approval of the Trustee shall constitute a
sufficient publication of such notice.
"Bearer Security" means any Security in the form of bearer
securities established pursuant to Section 2.01 which is payable to bearer
and is not a Registered Security.
"Board of Directors" means either the Board of Directors of the
Company, the executive committee of the Board of Directors or any other
duly authorized committee of the Board of Directors.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Book-Entry Security" means a security evidencing all or part
of a series of Securities, issued to the Depositary for such series of
Securities in accordance with Section 3.03, and bearing the legend
prescribed in Section 3.03.
"Business Day," when used with respect to any Place of Payment
or other location, means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in that Place of
Payment or other location are authorized or obligated by law to close.
"Capital Lease" means any lease obligation of a Person incurred
with respect to assets acquired or leased by such Person which is required
to be capitalized in accordance with generally accepted accounting
principles. A Capital Lease shall be deemed incurred at the time a binding
commitment to lease the subject asset shall become effective.
"Capital Lease Obligation" means Indebtedness represented by
obligations under a Capital Lease.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, as amended, or, if at any time after the execution of this instrument
such Commission is not existing and performing the duties now assigned to
it under the Trust Indenture Act, than the body performing such duties at
such time.
"Common Stock" means the common stock, par value $.50 per
share, of the Company, as authorized on the date of the execution of this
instrument or as such common stock may be constituted in one or more
classes from time to time thereafter.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman, its President, its Chief Financial Officer, or an Executive
Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means, as determined at any
time, the aggregate amount of assets included on a consolidated balance
sheet of the Company and its Subsidiaries, less applicable reserves and
after deducting therefrom (a) all current liabilities of the Company and
its Subsidiaries and (b) the total of the net book values of all assets of
the Company and its Subsidiaries properly classified as intangible assets
under generally accepted accounting principles, in each case as of the end
of the last fiscal quarter for which financial information is available at
the time of such calculation.
"Conversion Agent" shall have the meaning set forth in Section
10.02.
"Conversion Price" shall have the meaning set forth in Section
4.01.
"Convertible Securities" means Securities designated as
convertible into Common Stock or cash in lieu thereof (in accordance with
Article Four) pursuant to Section 3.01.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be
administered except that with respect to the presentation of Securities for
payment or for registration of transfer or exchange, such term shall mean
the office or agency of the Trustee in the Borough of Manhattan, the City
of New York at which at any particular time its corporate trust business
shall also be conducted.
"Coupon" means any interest coupon appertaining to any
Security.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Depositary" means, with respect to the Securities of any
series issuable or issued in whole or in part in global form, including
Book-Entry Securities, the Person designated as Depositary by the Company
pursuant to Section 3.01 until a successor Depositary shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and if at any time there is more than one such person
"Depositary" shall mean or include each Person who is then a Depositary
hereunder, and if at any time there is more than one such person
"Depositary" shall be a collective reference to such Persons. "Depositary"
as used with respect to the debt securities of any such series shall mean
the Depositary with respect to the debt securities of that series.
"Dollar" means the coin or currency of the United States as at
the time of payment is legal tender for the payment of public and private
debts.
"ECU" means the European Currency Unit as defined and revised
from time to time by the Council of the European Communities.
"Event of Default" has the meaning specified in Section 6.01.
"Ex-Dividend Time" means the time immediately prior to the
commencement of "ex-dividend" trading for the Common Stock on the American
Stock Exchange or such other national or regional exchange or market on
which the Common Stock is then listed or quoted.
"Extraordinary Cash Dividend" means any cash dividend with
respect to the Common Stock the amount of which, together with the
aggregate amount of cash dividends on the Common Stock to be aggregated
with such cash dividend in accordance with the provisions of this
paragraph, equals or exceeds the threshold percentages set forth below:
If, upon the date prior to the Ex-Dividend Time with respect to
a cash dividend on the Common Stock, the aggregate amount of such
cash dividend together with the amounts of all cash dividends on the
Common Stock with Ex-Dividend Time occurring in the 365 consecutive
day period ending on the date prior to the Ex-Dividend Time with
respect to the cash dividend to which this provision is being applied
equals or exceeds on a per share basis 25 percent of the average of
the Sale Prices during the period beginning on the date after the
first such Ex-Dividend Time in such period and ending on the date
prior to the Ex-Dividend Time with respect to the cash dividend to
which this provision is being applied (except that if no other cash
dividend has had an Ex-Dividend Time occurring in such period, the
period for calculating the average of the Sale Prices shall be the
period commencing 365 days prior to the date prior to the Ex-
Dividend Time with respect to the cash dividend to which this
provision is being applied), such cash dividend together with each
other cash dividend with an Ex-Dividend Time occurring in such 365-
day period shall be deemed to be an Extraordinary Cash Dividend. In
determining the amount of Extraordinary Cash Dividends for purposes
of making adjustments required by Section 4.04, no adjustment shall
be made for cash dividends for which a prior adjustment in the
Conversion Rate was previously made.
"Foreign Currency" means a currency issued by the government of
any country other than the United States.
"Funded Debt" means all indebtedness which by its terms matures
more than 12 months after the time of the computation of the amount thereof
or which is extendible or renewable at the option of the obligor on such
indebtedness to a time more than 12 months after the time of the
computation of the amount thereof or which is classified, in accordance
with generally accepted accounting principles, on a corporation's balance
sheet as long-term debt.
"Holder" means, with respect to a Registered Security, a Person
in whose name a Security is registered in the Security Register and, with
respect to a Bearer Security (or any temporary global Security), and/or
Coupons, the bearer thereof.
"Indebtedness" means (a) any liability of any Person (i) for
borrowed money, (ii) evidenced by a note, debenture or similar instrument
(including an obligation with or without recourse) issued in connection
with the acquisition (whether by way of purchase, merger, consolidation or
otherwise) of any business, real property or other assets (other than
inventory or similar property acquired in the ordinary course of business)
or (iii) for the payment of money relating to a Capital Lease Obligation;
(b) any liability of others described in the preceding clause (a) which the
Person has guaranteed or which is otherwise its legal liability and (c) any
amendment, renewal, extension or refunding of any such liability.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of particular series of
Securities established as contemplated by Section 3.01.
"interest," when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity,
means interest payable after Maturity.
"Interest Payment Date," when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"Maturity," when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for redemption,
mandatory repurchase or otherwise.
"New York Business Day" means each weekday which is not a day
on which commercial banking institutions in the City of New York are
authorized or obligated by law to close.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the Vice Chairman, the President, or an Executive
Vice President, and by the Controller, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be reasonably acceptable to
the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 6.02.
"Outstanding," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption (a) money
in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities as contemplated by Section
5.01 or (b) U.S. Government Obligations or Foreign Government Securities as
contemplated by and defined in Section 5.03 in the necessary amount have
been theretofore deposited with the Trustee in trust for the holders of
such Securities in accordance with Section 5.03; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provisions therefor satisfactory to the
Trustee has been made; and
(iii) Securities which have been paid pursuant to Section
3.06 or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of
the requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, the principal amount of any Original Issue Discount Securities
that shall be deemed to be Outstanding for such purposes shall be the
amount of the principal thereof that would be due and payable as of the
date of such determination upon a declaration of acceleration of the
maturity thereof pursuant to Section 6.02, the principal amount of a
Security denominated in a Foreign Currency or Currencies shall be deemed to
be that amount of Dollars that could be obtained for such principal amount
on the basis of the spot rate of exchange for such Foreign Currency or such
currency unit as determined by the Company or by an authorized exchange
rate agent, and Securities owned by the Company or any other obligor upon
the Securities or any Affiliate of the Company or of such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee knows to be so owned
shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any Securities on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of
any series, means the place or places where the principal of (and premium,
if any) and interest on the Securities of that series are payable as
specified as contemplated by Section 3.01.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.06 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost
or stolen Security.
"Principal Property" means any real property, any manufacturing
plant, warehouse, office building or other physical facility or other like
depreciable physical asset of the Company or of any Subsidiary whether
owned on the date hereof or hereafter acquired having a net book value at
the time of determination in excess of the greater of five percent of
Consolidated Net Tangible Assets or $50 million, other than, in each case,
any of the same which in the good faith opinion of the Board of Directors
is not of material importance to the total business conducted by the
Company and its Subsidiaries, as a whole.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" means any Security in the form of
Registered Securities established pursuant to Section 2.01 which is
registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified for
that purpose as contemplated by Section 3.01.
"Required Currency" has the meaning specified in Section 1.14.
"Responsible Officer," when used with respect to the Trustee,
means any officer in the corporate trust administration division of the
Trustee or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Sale and Leaseback Transaction" means any arrangement with any
Person providing for the leasing or use by the Company or any Subsidiary of
any Principal Property, whether owned at the date of this Indenture or
thereafter acquired (except for temporary leases of a term, including any
renewal period, of not more than three years), which Principal Property has
been or is to be sold or transferred by the Company or a Subsidiary to a
Person with an intention of taking back a lease of such Property.
"Sale Price" means, for any given day, the last reported per
share sale price (or, if no sale price is reported, the average of the bid
and ask prices or, if more than one in either case, the average of the
average bid and average ask prices) on such day of the Common Stock on the
American Stock Exchange or, in the event shares of common Stock are not
listed on the American Stock Exchange, such other national or regional
securities exchange upon which the Common Stock is listed, or, if the
shares of Common Stock are not listed on a national or regional securities
exchange, as quoted on the National Association of Securities Dealers
Automated Quotation System or by the National Quotation Bureau
Incorporated. In the absence of one or more such quotations specified in
the definition of Sale Price, the Company shall determine such price on the
basis of such quotations as it deems appropriate.
"Secured Debt" means indebtedness for money borrowed by the
Company or its Subsidiaries (other than indebtedness owed by a Subsidiary
to the Company, by a Subsidiary to another Subsidiary or by the Company to
a Subsidiary), which in any case is secured, whether by operation of law or
otherwise, by a mortgage, security interest, pledge, lien or other
encumbrance on Principal Property or on any shares of stock or evidences of
indebtedness of a Subsidiary. If any amount of such indebtedness described
in the parenthetical in the preceding sentence and held by the Company or a
Subsidiary is transferred in any manner to any Person other than the
Company or a Subsidiary, such amount shall be deemed to be Secured Debt
issued on the date of transfer.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 3.05.
"Significant Subsidiary" shall have the meaning ascribed to
such term in Rule 1-02 of Regulation S-X of the Commission, as in effect on
June 1, 1998.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity," when used with respect to any Security or
Coupon or any installment of principal thereof or interest thereon, means
the date specified in such Security as the fixed date on which the
principal of such Security or Coupon or such installment of principal or
interest is due and payable.
"Subsidiary" means any corporation of which the Company, or the
Company and one or more Subsidiaries, or any one or more Subsidiaries,
directly or indirectly own a majority (by number of votes) of the
outstanding voting securities having voting power under ordinary
circumstances to elect the directors of such corporation.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each person who is then a
Trustee hereunder and, if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean
the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed,
except as provided in Section 9.05.
"Vice President," when used with respect to the Company, means
any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 1.02 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or
request as to which the furnishing of such documents is specifically
required by any provision of this Indenture relating to such particular
application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect
to some matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 1.04 Acts of Holders.
(1) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one ore more
instruments of substantially similar tenor signed by such holders in person
or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to a Responsible Officer of the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 7.01) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(2) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(3) The principal amount and serial numbers of Bearer
Securities held by any Person, and the date of his holding the same, may be
proved by the production of such Bearer Securities or by a certificate
executed by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee to be
satisfactory, showing that at the date therein mentioned such Person had on
deposit with such depositary, or exhibited to it, the Bearer Securities
therein described; or such facts may be proved by the certificate or
affidavit of the Person holding such Bearer Securities, if such certificate
or affidavit is deemed by the Trustee to be satisfactory. The Trustee and
the Company may assume that such ownership of any Bearer Security continues
until (i) another certificate or affidavit bearing a later date issued in
respect of the same Bearer Security is produced, (ii) such Bearer Security
is produced to the Trustee by some other Person, (iii) such Bearer Security
is surrendered in exchange for a Registered Security or (iv) such Bearer
Security is no longer Outstanding.
(4) The fact and date of execution of any such instrument or
writing pursuant to clause (c) above, the authority of the Person executing
the same and the principal amount and serial numbers of Bearer Securities
held by the Person so executing such instrument or writing and the date of
holding the same may also be proved in any other reasonable manner which
the Trustee deems sufficient; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this
clause.
(5) The ownership of Registered Securities shall be proved by the
Security Register.
(6) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Company in reliance thereon, whether or not notation of
such action is made upon such Security.
(7) Whenever for purposes of any Act to be taken hereunder by
the Holders of a series of Securities denominated in a Foreign Currency (or
any currency unit), the principal amount of Securities is required to be
determined, the aggregate principal amount of such Securities shall be
deemed to be that amount of Dollars that could be obtained for such
principal amount on the basis of the spot rate of exchange for such Foreign
Currency or such currency unit as determined by the Company or by an
authorized exchange rate agent and evidenced to the Trustee by an Officers'
Certificate as of the date taking of such Act by the Holders of the
requisite percentage in principal amount of the Securities is evidenced to
the Trustee. An exchange rate agent may be authorized in advance or from
time to time by the Company, and may be the Trustee or its Affiliate. Any
such determination by the Company or by any such exchange rate agent shall
be conclusive and binding on all Holders, the Company and the Trustee, and
neither the Company nor any such exchange rate agent shall be liable
therefor in the absence of bad faith. The Trustee, unless it is serving as
exchange rate agent, shall have no duty to determine or confirm such
calculation, and may conclusively rely on the aforementioned Officers'
Certificate.
(8) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give
such request, waiver or other Act, but the Company shall have no obligation
to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as
of such record date; provided that no such authorization, agreement or
consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not
later than six months after the record date.
SECTION 1.05 Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the
Company addressed to it at 1027 Newport Avenue, Pawtucket, Rhode Island
02861 or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 1.06 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, (i) if any of the Securities affected by such event are Registered
Securities, such notice to the Holders thereof shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, at such Holder's address as it appears in the
Security Register, within the time prescribed for the giving of such notice
and (ii) if any of the Securities affected by such event are Bearer
Securities, notice to the Holders thereof shall be sufficiently given
(unless otherwise herein or in the terms of such Bearer Securities
expressly provided) if published once in an Authorized Newspaper in the
Borough of Manhattan, the City of New York, New York, and in such other
city or cities, if any, as may be specified in such Securities and, if the
Securities of such series are listed on any stock exchange outside the
United States, in any place at which such Securities are listed on a
securities exchange to the extent that such securities exchange so
requires, and mailed to such Persons whose names and addresses were
previously filed with the Trustee, within the time prescribed for giving
such notice. In any case where notice to Holders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to
any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. If it is impossible, or in the opinion of the
Trustee, impracticable to give any notice by publication in the manner
herein required, then such publication in lieu thereof as shall be made
with the approval of the Trustee shall constitute a sufficient publication
of such notice.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice
as provided above, then such notification as shall be made with the
approval of the Trustee shall constitute a sufficient notification for
every purpose hereunder.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
SECTION 1.07 Conflict with Trust Indenture Act.
This Indenture is subject to the Trust Indenture Act and if any
provision hereof limits, qualifies or conflicts with another provision
which is required or deemed to be included in this Indenture by any of the
provisions of the Trust Indenture Act, such required or deemed provision
shall control.
SECTION 1.08 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction
hereof.
SECTION 1.09 Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.10 Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, expressed or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12 Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 1.13 Moneys of Different Currencies to Be Segregated.
The Trustee shall segregate moneys, funds, and accounts held by
the Trustee hereunder in one currency (or unit thereof) from any moneys,
funds or accounts in any other currencies (or units thereof),
notwithstanding any provision herein which would otherwise permit the
Trustee to commingle such amounts.
SECTION 1.14 Payment to Be in Proper Currency.
The following provisions of this Section 1.14 shall apply to
the extent permitted by applicable law: In the case of any Security payable
in any particular currency or currency unit (the "Required Currency"),
except as otherwise provided herein, therein or in or pursuant to the
related Board Resolution or supplemental indenture or as contemplated by
Section 3.01, the obligation of the Company to make any payment of
principal, premium or interest thereon shall not be discharged or satisfied
by any tender by the Company, or recovery by the Trustee, in any currency
or currency unit other than the Required Currency, except to the extent
that such tender or recovery shall result in the Trustee timely holding the
full amount of the Required Currency then due and payable. If any such
tender or recovery is made in other than the Required Currency, the Trustee
may, but shall not be obligated to, take such actions as it considers
appropriate to exchange such other currency or currency unit for the
Required Currency. The costs and risks of any such exchange, including
without limitation the risks of delay and exchange rate fluctuation, shall
be borne by the Company, the Company shall remain fully liable for any
shortfall or delinquency in the full amount of the Required Currency then
due and payable and in no circumstances shall the Trustee be liable
therefor. The Company hereby waives any defense of payment based upon any
such tender or recovery which is not in the Required Currency, or which,
when exchanged for the Required Currency by the Trustee, is less than the
full amount of Required Currency then due and payable.
SECTION 1.15 Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 1.16 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
repurchase date or Maturity of any Security or any date on which any
Defaulted Interest is proposed to be paid shall not be a Business Day at
any Place of Payment, then (notwithstanding any other provision of this
Indenture or the Securities) payment of interest or principal (and premium,
if any) need not be made at such Place of Payment on such date, but may be
made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the nominal date of such Interest
Payment Date or Redemption Date, Maturity, or on the date on which
Defaulted Interest is proposed to be paid, and no interest shall accrue for
the period from and after such Interest Payment Date, Redemption Date,
repurchase date, Maturity or date on which Defaulted Interest is proposed
to be paid, as the case may be.
ARTICLE II
SECURITY FORMS
SECTION 2.01 Forms Generally.
The Securities of each series and the Coupons, if any, to be
attached thereto shall be in substantially such form as shall be
established pursuant to Section 3.01 by or pursuant to one or more Board
Resolutions or Officers' Certificates or in one or more indentures
supplemental hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted
by this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such
Securities and Coupons, if any, as evidenced by their execution of the
Securities and Coupons, if any. If temporary Securities of any series are
issued in global form as permitted by Section 3.04, the form thereof also
shall be established as provided in the preceding sentence. If the form of
Securities and Coupons, if any, of any series are established by, or by
action taken pursuant to, a Board Resolution, a copy of the Board
Resolution together with an appropriate record of any such action taken
pursuant thereto, including a copy of the approved form of Securities or
Coupons, if any, shall be certified by the Secretary or any Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 3.03 for the
authentication and delivery of such Securities.
The definitive Securities and Coupons, if any, shall be
printed, lithographed or engraved on steel engraved borders or may be
produced in any other manner, all as determined by the officers executing
such Securities and Coupons, if any, as evidenced by their execution of
such Securities and Coupons, if any.
SECTION 2.02 Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in
substantially the following form:
"This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NOVA SCOTIA
TRUST COMPANY OF NEWYORK,
as Trustee
By______________________________________
as Authorized Signatory"
SECTION 2.03 Securities in Global Form.
If Securities of a series are issuable in whole or in part in
global form, any such Security may provide that it shall represent the
aggregate or specified amount of Outstanding Securities from time to time
endorsed thereon and may also provide that the aggregate amount of
Outstanding Securities represented thereby may from time to time be reduced
to reflect exchanges. Any endorsement of a Security in global form to
reflect the amount, or any increase or decrease in the amount, of
Outstanding Securities represented thereby, shall be made in such manner
and by such Person or Persons as shall be specified therein or in the
Company Request to be delivered to the Trustee pursuant to Section 3.03 or
Section 3.04.
Notwithstanding the provisions of Sections 2.01 and 3.07,
unless otherwise specified as contemplated by Section 3.01, payment of
principal of and any premium and interest on any Security in permanent
global form shall be made to the Person or Persons specified therein.
Notwithstanding the provisions of Section 3.08 and except as
provided in the preceding paragraph, the Company, the Trustee and any agent
of the Company and the Trustee shall treat a Person as the Holder of such
principal amount of Outstanding Securities represented by a permanent
global Security as shall be specified in a written statement of the Holder
of such permanent global Security.
Any instructions by the Company with respect to a Security in
global form shall be in writing but need not comply with Section 3.14(c) of
the Trust Indenture Act.
ARTICLE III
THE SECURITIES
SECTION 3.01 Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall
be established in or pursuant to a Board Resolution, and set forth, or
determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the
issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered
under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in
lieu of, other Securities of the series pursuant to Sections 3.04,
3.05, 3.06, 9.06 or 11.07);
(3) whether the Securities of the series are convertible
into Common Stock, or cash in lieu thereof, and, if so, the terms and
conditions upon which such conversion will be effected, including the
initial conversion price or conversion rate and other conversion
provisions;
(4) the date or dates on which the principal (and
premium, if any) of the Securities of the series is payable and/or
the method by which such date or dates shall be determined;
(5) the rate or rates at which the Securities of the
series shall bear interest, if any, the date or dates from which such
interest shall accrue, the Interest Payment Dates on which such
interest shall be payable and, in the case of Registered Securities,
the Regular Record Date for the interest payable on any Interest
Payment Date, and/or the method by which rate or rates or date or
dates shall be determined;
(6) the Person to whom any interest on any Registered
Securities of the series shall be payable if other than the Person in
whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for
such interest and the manner in which, or the Person to whom, any
interest on any Bearer Securities of the series shall be payable if
otherwise than upon presentation and surrender of the Coupons
appertaining thereto as they severally mature;
(7) the place or places where the principal of (and
premium, if any) and interest on the Securities of the series shall
be payable and the place or places where the Securities of the series
may be presented for transfer and, if applicable, conversion;
(8) the period or periods within which or the date or
dates on which, the price or prices at which and the terms and
conditions upon which Securities of the series may be redeemed, in
whole or in part, at the option of the Company, pursuant to any
sinking fund or otherwise;
(9) the obligation, if any, of the Company to redeem or
purchase Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation and/or the method by which such period or periods, price
or prices and terms and conditions shall be determined;
(10) if other than denominations of $1,000 and any
integral multiple thereof in the case of Registered Securities or
$5,000 in the case of Bearer Securities, the denominations in which
Securities of the series shall be issuable;
(11) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 6.02 or the method by which such portion shall be determined;
(12) whether Securities of the series will be issuable as
Registered Securities, Bearer Securities or both, and the terms upon
which Bearer Securities of the series may be exchanged for Registered
Securities of the series;
(13) the date as of which any Bearer Securities of the
series and any temporary global Security representing Outstanding
Securities of the series shall be dated if other than the original
issuance of the first Security of the series to be issued;
(14) if Bearer Securities of the series are to be
issuable, whether interest in respect of any portion of a temporary
Bearer Security in global form (representing all of the Outstanding
Bearer Securities of the series) payable in respect of any Interest
Payment Date prior to the exchange of such temporary Bearer Security
for definitive Securities of the series shall be paid to any clearing
organization with respect to the portion of such temporary Bearer
Security held for its account and, in such event, the terms and
conditions (including any certification requirements) upon which any
such interest payment received by a clearing organization will be
credited to the Persons entitled to interest payable on such Interest
Payment Date;
(15) the currency of denomination of the Securities of
the series, the currency or currencies in which payment of the
principal of (and premium, if any) and interest on the Securities of
the series will be made, and the currency or currencies (in addition
to Dollars), if any, in which payment of the principal of (and
premium, if any) or the interest on Registered Securities, at the
election of each of the Holders thereof, may also be payable which
currencies may be in Dollars, any Foreign Currency or any composite
currency, including but not limited to the ECU, and, if any such
currency of denomination is a composite currency other than the ECU,
the agency or organization, if any, responsible for overseeing such
composite currency;
(16) if the amount of payments of principal of (and
premium, if any) or interest on the Securities of the series may be
determined with reference to an index based on a currency or
currencies other than that in which the Securities of the series are
denominated or designated to be payable, the manner in which such
amounts shall be determined;
(17) if the payments of principal of (and premium, if
any) or the interest on the Securities of the series are to be made
in a Foreign Currency other than the Foreign Currency in which such
Securities are denominated, the manner in which the exchange rate
with respect to such payments shall be determined;
(18) any deletions from, modifications of or additions to
the Events of Default set forth in Section 6.01 or covenants of the
Company set forth in Articles Eight or Ten pertaining to the
Securities of the series;
(19) the form of the Securities and Coupons, if any, of the
series;
(20) whether the Securities of such series shall be
issued in whole or in part in global form, including Book-Entry
Securities, and the Depositary for such global Securities;
(21) any Depositaries or paying agents, transfer agents,
registrars or other agents with respect to the Securities of the series;
(22) the application, if any, of Section 5.03;
(23) any other terms of the series (which shall not be
inconsistent with the provisions of this Indenture); and
(24) the applicability of the seventh paragraph of Section
3.05.
All Securities (including Coupons, if any) of any one series
shall be substantially identical except as to denomination and except as
may otherwise be provided in or pursuant to such Board Resolution, such
Officers' Certificate or any such indenture supplemental hereto.
If any of the terms of the series are established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary
of the Company and delivered to the Trustee at or prior to the delivery of
the Officers' Certificate setting forth the terms of the series.
SECTION 3.02 Denominations.
The Securities of each series shall be issuable in such
denominations as shall be specified as contemplated by Section 3.01. In the
absence of any such provisions with respect to the Securities of any
series, the Securities of such series shall be issuable in denominations of
$1,000 and any multiple thereof in the case of Registered Securities or in
denominations of $5,000 in the case of Bearer Securities.
SECTION 3.03 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman, its President, its Chief
Financial Officer or one of its Executive Vice Presidents, under its
corporate seal reproduced thereon attested by the signature of its
Secretary or one of its Assistant Secretaries or its Treasurer or one of
its Assistant Treasurers. The Coupons, if any, shall be executed on behalf
of the Company by its Chairman of the Board, its Vice Chairman, its
President, its Chief Financial Officer or one of its Executive Vice
Presidents attested by its Secretary or any Assistant Secretary or its
Treasurer or one of its Assistant Treasurers. The signature of any of these
officers on the Securities (and Coupons, if any) may be manual or
facsimile.
Securities (and Coupons, if any) bearing the manual or
facsimile signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities (and Coupons, if any) or did
not hold such offices at the date of such Securities (and Coupons, if any).
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities (with or
without Coupons) of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or terms
of the Securities of the series have been established in or pursuant to one
or more Board Resolutions as permitted by Sections 2.01 and 3.01, in
authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and shall be fully protected in
relying upon any of the following:
(1) a Company Request;
(2) any Board Resolution, Officers' Certificate and/or
executed supplemental indenture referred to in Sections 2.01 or 3.01 by or
pursuant to which the form or forms and the terms of the Securities of such
series and the Coupons, if any, appertaining thereto were established;
(3) an Officers' Certificate either setting forth the form or
forms and the terms of the Securities of such series and the Coupons, if
any, appertaining thereto or stating that such form or forms and terms have
been established pursuant to Sections 2.01 or 3.01 and comply with this
Indenture, and covering such other matters as the Trustee may reasonably
request; and
(4) at the option of the Company, either an Opinion of
Counsel, or a letter addressed to the Trustee permitting it to rely on an
Opinion of Counsel, substantially to the effect that:
(a) if established pursuant to a Board Resolution
as permitted by Section 2.01, the form of such Securities and Coupons, if
any, have been established in conformity with the provisions of this
Indenture;
(b) if established pursuant to a Board Resolution as
permitted by Section 3.01, the terms of such Securities and Coupons, if
any, have been established in conformity with the provisions of this
Indenture; and
(c) such Securities and Coupons, if any, when
authenticated and delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting the enforcement of creditors' rights and to general equity
principles.
The Trustee shall have the right to decline to authenticate and
deliver such Securities if the Trustee determines or is advised by counsel
that such action may not lawfully be taken or if the Trustee in good faith
by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees and/or Responsible Officers shall
determine that such action would expose the Trustee to personal liability
to existing Holders or would affect the Trustee's own rights, duties or
immunities under this Indenture or otherwise in a manner not reasonably
acceptable to the Trustee.
The Trustee shall not be required to authenticate Securities
denominated in a coin or currency (or unit including a coin or currency)
other than that of the United States if the Trustee reasonably determines
that such Securities impose duties or obligations on the Trustee which the
Trustee is not able or reasonably willing to accept; provided that the
Trustee, upon a Company Request, will resign as Trustee with respect to
Securities of any series as to which such a determination is made, prior to
the issuance of such Securities, and will comply with the request of the
Company to execute and deliver a supplemental indenture appointing a
successor Trustee pursuant to Section 9.01.
If all of the Securities of a series are not to be originally
issued at the same time, then the documents required to be delivered
pursuant to this Section 3.03 must be delivered only once, prior to the
authentication and delivery of the first Security of such series (provided
the Company Order for the authentication and delivery of such series of
Securities authorizes the amount of such Securities to be subsequently
issued).
If the Company shall establish pursuant to Section 3.01 that
the Securities of a series are to be issued in whole or in part in global
form, then the Company shall execute and the Trustee shall, in accordance
with this Section and the Company Order with respect to such series,
authenticate and deliver one or more securities in global form that (i)
shall represent and shall be denominated in an amount equal to the
aggregate principal amount of the Outstanding Securities of such series to
be represented by such global Security or Securities, (ii) shall be
registered, if in registered form, in the name of the Depositary for such
Book-Entry Security or Securities or the nominee of such Depositary, (iii)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instruction and (iv) shall bear a legend substantially to the
following effect: "Unless and until it is exchanged in whole or in part for
Securities in certificated form, this Security may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary" or to such other
effect as the Depositary and the Trustee may agree.
Each Depositary designated pursuant to Section 3.01 for a
Book-Entry Security in registered form must, at the time of its designation
and at all times while it serves as Depositary, be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, and any
other applicable statute or regulation. The Trustee shall have no
responsibility to determine if the Depositary is so registered. Each
Depositary shall enter into an agreement with the Trustee governing their
respective duties and rights with regard to Book-Entry Securities.
Each Security shall be dated the date of its authentication,
except that each Bearer Security, including any Bearer Security in global
form, shall be dated as of the date specified as contemplated by Section
3.01.
No Security or Coupon appertaining thereto shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee
by manual signature of one of its authorized officers, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that
such Security has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Indenture. Except as permitted by Sections
3.06 or 3.07, the Trustee shall not authenticate and deliver any Bearer
Security unless all appurtenant coupons for interest then matured have been
detached and cancelled.
SECTION 3.04 Temporary Securities.
Pending the preparation of definitive Securities of any series,
the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor and form, with or
without Coupons of the definitive Securities in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine,
as conclusively evidenced by their execution of such Securities and
Coupons, if any. Every temporary Security of any series shall be executed
by the Company and authenticated by the Trustee upon the same conditions
and in substantially the same manner, and with like effect, as the
definitive Securities of such series.
Except in the case of temporary Securities in global form, each
of which shall be exchanged in accordance with the provisions thereof, if
temporary Securities of any series are issued, the Company will cause
definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of
such series at the office or agency of the Company pursuant to Section
10.02 in a Place of Payment for such series, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Securities of
any series (accompanied by any unmatured Coupons appertaining thereto), the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of the
same series of authorized denominations and of like tenor; provided,
however, that no definitive Bearer Security shall be delivered in exchange
for a temporary Registered Security; and provided, further, that no
definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security unless the Trustee shall have received from the person
entitled to receive the definitive Bearer Security a certificate
substantially in the form approved in the Board Resolutions relating
thereto and such delivery shall occur only outside the United States. Until
so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive
Securities of such series except as otherwise specified as contemplated by
Section 3.01 with respect to the payment of interest on Bearer Securities
in temporary form.
SECTION 3.05 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee, for each series of Securities issuable as Registered
Securities, a register (the register maintained in such office and in any
other office or agency of the Company maintained pursuant to Section 10.02
in a Place of Payment being herein sometimes collectively referred to as
the "Security Register") in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of
Registered Securities of such series and of transfers of Registered
Securities of such series. Said office or agency is hereby appointed
"Security Registrar" for the purpose of registering Registered Securities
and transfers of Registered Securities as herein provided.
Upon surrender for registration of transfer of any Registered
Security of any series at the office or agency maintained pursuant to
Section 10.02 in a Place of Payment for that series, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Registered Securities
of the same series, of any authorized denominations and of a like aggregate
principal amount.
Notwithstanding any other provision of this Section, unless and
until it is exchanged in whole or in part for Securities in certificated
form, a Security in global form representing all or a portion of the
Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee
of such Depositary to such Depositary or another nominee of such Depositary
or by such Depositary or any such nominee to a successor Depositary for
such series or a nominee of such successor Depositary.
If at any time the Depositary for the Securities of a series
notifies the Company that it is unwilling or unable to continue as
Depositary for the Securities of such series or if at any time the
Depositary for the Securities of such series shall no longer be eligible
under Section 3.03, the Company shall appoint a successor Depositary with
respect to the Securities of such series. If a successor Depositary for the
Securities of such series is not appointed by the Company within 90 days
after the issuer receives such notice or becomes aware of such
ineligibility, the Company's election pursuant to Section 3.01(21) shall no
longer be effective with respect to the Securities of such series and the
Company shall execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of certificated Securities of such series
of like tenor, shall authenticate and deliver Securities of such series in
certificated form in an aggregate principal amount equal to the principal
amount of the Security or Securities in global form representing such
series in exchange for such Security or Securities in global form.
Within 14 days after the occurrence of an Event of Default
specified in clause (1), (2) or (3) of Section 6.01 with respect to any
series of the Securities if so specified pursuant to Section 3.01, the
Company shall execute, and the Trustee upon receipt of a Company Order
shall authenticate and deliver, in exchange for any Security of such series
in global form, Securities of such series in certificated form in
authorized denominations for an aggregate principal amount equal to the
principal amount of such Security in global form.
The Company may at any time and in its sole discretion
determine that the Securities of any series issued in the form of one or
more global Securities shall no longer be represented by such global
Security or Securities. In such event the Company shall execute, and the
Trustee, upon receipt of a Company Order for the authentication and
delivery of certificated Securities of such series of like tenor, shall
authenticate and deliver, Securities of such series in certificated form
and in an aggregate principal amount equal to the principal amount of the
Security or Securities in global form representing such series in exchange
for such Security or Securities in global form.
If specified by the Company pursuant to Section 3.01 with
respect to a series of Securities, the Depositary for such series of
Securities may surrender a global Security of such series in exchange in
whole or in part for Securities of such series in certificated form on such
terms as are acceptable to the Company and such Depositary. Thereupon, the
Company shall execute, and the Trustee shall authenticate and deliver,
without service charge to the Depositary,
(1) to each Person specified by such Depositary a new
certificated Security or Securities of the same series of like tenor,
of any authorized denomination as requested by such Person in
aggregate principal amount equal to and in exchange for such Person's
beneficial interest in the global Security; and
(2) to such Depositary a new global Security of like
tenor in a denomination equal to the difference, if any, between the
principal amount of the surrendered global Security and the aggregate
principal amount of certificated Securities delivered to Holders
thereof.
In any exchange provided for in any of the preceding three
paragraphs, the Company shall execute and the Trustee shall authenticate
and deliver Securities in certificated form in authorized denominations.
Upon the exchange of a global Security for Securities in
certificated form, such global Security shall be cancelled by the Trustee.
Unless expressly provided with respect to the Securities of any series that
such Security may be exchanged for Bearer Securities, Securities issued in
exchange for a Book-Entry Security pursuant to this Section shall be
registered in such names and in such authorized denominations as the
Depositary for such Book-Entry Security, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Securities to the Persons in whose names
such Securities are so registered.
Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer
or exchange.
Every Registered Security presented or surrendered for
registration of transfer or for exchange shall (if so required by the
Company or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to the Holder for any
registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer
or exchange of Securities, other than exchanges pursuant to Sections 3.04,
9.06 or 11.06 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange of Securities of any series for a period of 15 days
before the selection of any Securities of that series selected for
redemption, or (ii) to register the transfer of or exchange of any Security
so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part, (iii) to register the
transfer of or exchange of any Security if the Holder thereof has exercised
any right to require the Company to purchase such Security, in whole or in
part, except any portion thereof not required to be so purchased, or (iv)
to exchange any Bearer Security so selected for redemption except that such
a Bearer Security any be exchanged for a Registered Security of that series
and like tenor, provided that such Registered Security shall be
simultaneously surrendered for redemption.
SECTION 3.06 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or Security with a mutilated Coupon
appertaining to it is surrendered to the Trustee, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Security with Coupons corresponding to the Coupons, if any, appertaining to
the surrendered Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding with Coupons
corresponding to the Coupons, if any, appertaining to the surrendered
Security.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security or Security with a destroyed, lost or stolen Coupon and (ii) such
security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security or Coupon has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost
or stolen Security a new Security of the same series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding
with Coupons corresponding to the Coupons, if any, appertaining to the
destroyed, lost or stolen Security.
In case any such mutilated, destroyed, lost or stolen Security
or Coupon has become or is about to become due and payable, the Company in
its discretion may, instead of issuing a new Security or Coupon, pay such
Security or Coupon; provided, however, that payment of principal of and any
premium or interest on Bearer Securities shall, except as otherwise
provided in Section 10.02, be payable only at an office or agency located
outside the United States and, unless otherwise specified as contemplated
by Section 3.01, any interest on Bearer Securities shall be payable only
upon presentation and surrender of the coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security of any series with its Coupons, if any,
issued pursuant to this Section in lieu of any destroyed, lost or stolen
Security, or in exchange for a Security to which a destroyed, lost or
stolen Coupon appertains, shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost
or stolen Security and its Coupons, if any, or the destroyed, lost or
stolen Coupon, shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities of that series and their Coupons, if any,
duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities
or Coupons.
SECTION 3.07 Payment of Interest; Interest Rights Preserved.
Unless otherwise provided as contemplated by Section 3.01,
interest on any Registered Security which is payable, and is paid or duly
provided for on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Registered Security of any series which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to
be payable to the Holder on the relevant Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of such
series (or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Registered Security of such series and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than ten days prior to the date of the proposed payment and
not less than ten days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Registered Securities of such Series at his address as it
appears in the Security Register, not less than ten days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest on the Securities of any series in any other lawful manner
not inconsistent with the requirements of any securities exchange on
which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this Clause, such
manner of payment shall be deemed practicable by the Trustee.
At the option of the Company, interest on Registered Securities
of any series that bear interest may be paid (i) by mailing a check to the
address of the person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer to an account maintained by the
person entitled thereto as specified in the applicable Security Register.
Notwithstanding the above, except as otherwise specified with
respect to a series of Securities in accordance with the provisions of
Section 3.01, a Holder of $10,000,000 or more in aggregate principal amount
of Securities of the same series having the same Interest Payment Date
shall be entitled to receive payments of interest by wire transfer of
immediately available funds if appropriate wire transfer instructions have
been received by the Trustee on or before the Regular Record Date
immediately preceding the applicable Interest Payment Date.
Subject to the foregoing provisions of this Section, each
Security or Coupon, if any, delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any other
Security or Coupon, if any, shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security or Coupon.
SECTION 3.08 Persons Deemed Owners.
Prior to due presentment of a Registered Security for
registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such Registered
Security is registered as the owner of such Registered Security for the
purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 3.07) interest on such Registered Security and for all
other purposes whatsoever, whether or not such Registered Security be
overdue, and neither the Company, the Trustee nor any agent of the Company
or the Trustee shall be affected by notice to the contrary.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the bearer of any Bearer Security and the bearer of any
Coupon as the absolute owner of such Bearer Security or Coupon for the
purpose of receiving payment thereof or on account thereof and for all
other purposes whatsoever, whether or not such Bearer Security or Coupon be
overdue, and neither the Company, the Trustee nor any agent of the Company
or the Trustee shall be affected by notice to the contrary.
SECTION 3.09 Cancellation.
All Securities and Coupons surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee for cancellation or, if surrendered to the
Trustee, promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities and Coupons so delivered shall be promptly
cancelled by the Trustee. No Securities or Coupons shall be authenticated
in lieu of or in exchange for any Securities or Coupons cancelled as
provided in this Section, except as expressly permitted by this Indenture.
All cancelled Securities and Coupons shall be destroyed by the Trustee and,
if requested by the Company, a certificate evidencing such destruction
shall be delivered to the Company.
SECTION 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.01
for Securities of any series, interest on the Securities of each series
shall be computed, based on actual days elapsed, on the basis of a 360-day
year of twelve 30-day months.
ARTICLE IV
CONVERSION OF SECURITIES
SECTION 4.01 Applicability of Article.
If the Securities of any series are Convertible Securities the
provisions of this Article Four shall be applicable to the Securities of
such series (except as otherwise specified in a Board Resolution, Officers'
Certificate or executed supplemental indenture referred to in Section 3.01
by or pursuant to which the form and terms of the Convertible Securities of
such series were established).
Subject to the provisions of this Article Four, the Holder of
any Convertible Security shall have the right, at the option of such
Holder, to convert the principal amount of such Convertible Security or any
portion of the principal amount thereof which is $1,000 or an integral
multiple of $1,000 (or such principal amount as is specified in a Board
Resolution, Officers' Certificate or executed supplemental indenture
referred to in Section 3.01 by or pursuant to which the form and terms of
the Convertible Securities of such series were established) into the number
of shares of Common Stock obtained by dividing the principal amount so to
be converted by the Conversion Price, defined and determined as hereinafter
provided, in effect at the Conversion Date (as defined in Section 4.02) in
the manner provided in Section 4.02 and subject to settlement of fractional
interests in accordance with Section 4.03 and subject to the other
provisions of this Article Four with respect to the delivery of property
other than Common Stock. Such conversion privilege shall, except as
specified in a Board Resolution, Officers' Certificate or executed
supplemental indenture referred to in Section 3.01 by or pursuant to which
the form and terms of the Convertible Securities of such series were
established, commence on the date of the issuance of such Convertible
Security or any Predecessor Security and shall expire at the close of
business on the Stated Maturity of such Convertible Security. If a
Convertible Security or portion thereof is called for redemption or is
delivered for repurchase, such conversion privilege in respect of the
Convertible Security or portion so called shall expire at the close of
business on the fifth Business Day prior to the Redemption Date or
repurchase date, unless the Company shall default in making the payment due
upon redemption or repurchase.
The conversion price (the "Conversion Price") for a series of
Convertible Securities shall be set forth in a Board Resolution, Officers'
Certificate or executed supplemental indenture referred to in Section 3.01
by or pursuant to which the form and terms of the Convertible Securities of
such series were established and shall be subject to adjustment as provided
in Section 4.04.
SECTION 4.02 Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of
any Convertible Security to be converted, in whole or in part, shall
surrender such Convertible Security to the Conversion Agent at any time
during usual business hours at its office or agency maintained for the
purpose as provided in this Indenture, accompanied by a fully executed
written notice (the "Conversion Notice"), in substantially the form set
forth on the reverse of the Convertible Security, that the Holder elects to
convert such Convertible Security or, if less than the entire principal
amount thereof is to be converted, a stated portion thereof constituting a
multiple of $1,000 in principal amount (or such other principal amount as
is specified in a Board Resolution, Officers' Certificate or executed
supplemental indenture referred to in Section 3.01 by or pursuant to which
the form and terms of the Convertible Securities of such series were
established). A Convertible Security surrendered for conversion during the
period between the close of business on any record date for such
Convertible Security and the opening of business on the related Interest
Payment Date (the "Interest Period") that shall not have been called for
redemption on a Redemption Date within such Interest Period (or on such
Interest Payment Date) shall be accompanied also by payment of an amount
equal to the interest payable on such Interest Payment Date on the portion
of the principal amount of the Convertible Security being surrendered for
conversion. Such interest shall be payable to the Holder on the Record Date
notwithstanding the conversion. Such Conversion Notice shall also state the
name or names (and address or addresses) in which the certificate or
certificates for shares of Common Stock shall be issued (or to whom payment
in cash in lieu of Common Stock shall be made). Convertible Securities
surrendered for conversion shall (if so required by the Company or the
Conversion Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company
and the Conversion Agent duly executed by, the Holder or his attorney duly
authorized in writing.
As promptly as practicable on or after the Conversion Date (as
defined below), the Company shall, subject to the provisions of Section
4.07, issue and deliver at such office or agency to such Holder, or on his
written order, a certificate or certificates for the number of full shares
of Common Stock issuable on conversion of such Convertible Security or
portion thereof in accordance with the provisions of this Article Four
together with payment in cash, as provided in Section 4.03, in respect of
any fraction of a share of Common Stock otherwise issuable upon such
conversion or, if so provided in a Board Resolution, Officers' Certificate
or executed supplemental indenture referred to in Section 3.01 by or
pursuant to which the form and terms of the Convertible Securities of such
series were established, a payment in cash in lieu of shares of Comon
Stock. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the date (herein called the "Conversion
Date") on which such notice in proper form shall have been received by the
Conversion Agent and such Convertible Security shall have been surrendered
as aforesaid, and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable,
if any, upon such conversion shall be deemed to have become on the
Conversion Date the holder or holders of record of the shares represented
thereby; provided, however, that upon any such surrender on any date when
the stock transfer books of the Company shall be closed, the Person or
Persons in whose name or names the certificate or certificates for such
shares are to be issued, if any, shall be deemed the record holder or
holders thereof for all purposes at the opening of business on the next
succeeding day on which such stock transfer books are open but such
conversion shall nevertheless be at the Conversion Price in effect at the
close of business on the date when such Security shall have been so
surrendered with the Conversion Notice.
In the case of conversion of a portion, but less than all, of a
Convertible Security, the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder thereof, at the expense of the
Company, a new Convertible Security or Securities of the same series in the
aggregate principal amount equal to the unconverted portion of the
principal amount of the surrendered Convertible Security. Except as
otherwise expressly provided in this Indenture, no payment or adjustment
shall be made for interest accrued on any Convertible Security (or portion
thereof) converted or for dividends or distributions on any Common Stock
issued upon conversion of any Convertible Security. The right, if any, of a
Holder of any Convertible Security to cause the Company to redeem, purchase
or repay such Convertible Security shall terminate at the close of business
on the Conversion Date.
SECTION 4.03 Fractional Interests.
No fractions of shares or scrip representing fractions of
shares shall be issued upon conversion of Convertible Securities. If more
than one Convertible Security of the same series shall be surrendered for
conversion, in whole or in part, at one time by the same Holder, the number
of full shares which shall be issuable upon conversion thereof shall be
computed on the basis of the aggregate principal amount of the Convertible
Securities (or specified portions thereof) to be converted, so surrendered.
If any fraction of a share of Common Stock would, except for the foregoing
provisions of this Section 4.03, be issuable on the conversion of any
Convertible Security or Securities (or specified portions thereof), the
Company shall make payment in lieu thereof in cash equal to the same
fraction of the market price per share of Common Stock. For such purposes
the market price per share of Common Stock shall be determined on the basis
of the last sale price of one share of Common Stock regular way on the most
recent Trading Day prior to the Conversion Date or, if no such reported
sale takes place on such day, the average of the reported closing bid and
asked prices regular way on such day, in either case (i) as reported on the
American Stock exchange, or (ii) if on such Trading Day the Common Stock is
not listed or admitted to trading on such exchange, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading, or (iii) if not listed or admitted to trading on any
national securities exchange on such Trading Day, then as reported through
the National Association of Securities Dealers, Inc. on its NASDAQ National
Market System or NASDAQ System or a similar organization if NASDAQ is no
longer reporting information, or (iv) if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on such
National Market System or NASDAQ System on such Trading Day, then the
average of the closing bid and asked prices in the over-the- counter market
as furnished by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or (v) if not quoted by
any such organization on such Trading Day, the fair value of such Common
Stock on such Trading Day, as determined by the Board of Directors. The
term "Trading Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on any of the
above mentioned exchanges or in such markets.
SECTION 4.04 Adjustment of Conversion Price.
The Conversion Price with respect to Convertible Securities of
a series shall be adjusted from time to time as follows with respect to
events that take place after the initial issuance of any Securities of such
series:
(1) if the Company shall (i) pay a dividend or make a
distribution in shares of Common Stock on the Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares or (iv) issue by reclassification of its Common Stock any shares
of capital stock of the Company, the Conversion Price shall be deemed to be
proportionately adjusted, so that any Holder of any Convertible Security
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock or other capital stock of the Company
which he would have owned or been entitled to receive immediately following
such action had such Convertible Security been converted immediately prior
thereto. If in any reclassification the holders of Common Stock are
entitled to make an election between different forms of consideration, the
Holders shall be deemed to have elected to receive the consideration
payable to a plurality of the holders of Common Stock who have not duly
filed elections as to the consideration to be received.
An adjustment made pursuant to this subsection (1) shall become
effective immediately, except as provided in subsection (6) below, after
the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(2) In case the Company shall issue generally to holders of
Common Stock rights, options or warrants entitling such holders (for a
period not exceeding 45 days from the date of such issuance) to subscribe
for or purchase shares of Common Stock at a price per share less than the
current market price per share (as determined pursuant to subsection (5)
below) of the Common Stock on the record date mentioned below, the
Conversion Price shall be adjusted to a price, computed to the nearest
cent, so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of
such rights, options or warrants by a fraction, of which
(i) the numerator shall be the sum of (A) the number of
shares of Common Stock outstanding on the date fixed for the
determination of stockholders entitled to receive such rights,
options or warrants, and (B) the number of shares which the aggregate
offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such current
market price (determined by multiplying such total number of shares
by the exercise price of such rights, options or warrants and
dividing the product so obtained by such current market price), and
of which
(ii) the denominator shall be the sum of (A) the number
of shares of Common Stock outstanding on the date fixed for the
determination of stockholders entitled to receive such rights,
options or warrants, and (B) the number of additional shares of
Common Stock which are so offered for subscription or purchase.
Such adjustment shall become effective immediately, except as
provided in subsection (6) below, after the record date for the
determination of holders entitled to receive such rights, options or
warrants.
(3) In case the Company shall, by dividend or otherwise,
distribute, to substantially all holders of Common Stock, evidences of
indebtedness, equity securities (including equity interests in the
Company's Subsidiaries) other than Common Stock, or other assets (other
than cash dividends paid out of earned surplus of the Company or current
net earnings as shown on the books of the Company and other than
Extraordinary Cash Dividends, which are governed by the provisions of
subsection (4) below), or shall distribute to substantially all holders of
Common Stock rights, options or warrants entitling such Holders to
subscribe for securities (other than those referred to in subsection (2)
above), then in each such case the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
distribution by a fraction of which
(i) the numerator shall be the current market price per
share (determined as provided in subsection (5) below) of the Common
Stock on the record date mentioned below less the then fair market
value (as determined by the Board of Directors, whose determination
shall, if made in good faith, be conclusive evidence of such fair
market value and provided to the Trustee) of the portion of the
assets, evidence of indebtedness, equity securities or other
securities so distributed or of such subscription rights, options or
warrants applicable to one share of Common Stock, and of which
(ii) the denominator shall be such current market price
per share of the Common Stock.
Such adjustment shall become effective immediately, except as
provided in subsection (6) below, after the record date for the
determination of stockholders entitled to receive such distribution.
Notwithstanding the foregoing, with respect to the rights ("Rights")
distributed under the Rights Agreement, dated as of June 4, 1989, between
the Company and BankBoston, N.A. as amended and as it may be further
amended after the date hereof and/or in the event that and each time that
the Company shall distribute any other rights or warrants (other than those
referred to in paragraph (2) of this Section) ("Additional Rights") pro
rata to holders of Common Stock, the Company shall make proper provision so
that each Holder of a Convertible Security who converts such Convertible
Security (or any portion thereof) (A) after the date hereof in the case of
Rights and (B) after the record date for any such distribution in the case
of Additional Rights, and prior to the expiration or redemption of the
Rights or Additional Rights, as the case may be, shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion (the "Conversion Shares"), a number of Rights
or Additional Rights, to be determined as follows: (i) if such conversion
occurs on or prior to the date for the distribution to the holders of
Rights or Additional Rights of separate certificates evidencing such Rights
or Additional Rights (the "Distribution Date"), the same number of Rights
or Additional Rights to which a holder of a number of shares of Common
Stock equal to the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions of and
applicable to the Rights or Additional Rights; and (ii) if such conversion
occurs after the Distribution Date, the same number of Rights or Additional
Rights to which a holder of the number of shares of Common Stock into which
the principal amount of the Security so converted was convertible
immediately prior to the Distribution Date would have been entitled on the
Distribution Date in accordance with the term and provisions of and
applicable to the Rights or Additional Rights.
If, with respect to any distribution to which this paragraph
(3) would otherwise apply, the fair market value of the portion of the
assets so distributed applicable to one share of Common Stock exceeds the
current market price per share of Common Stock or the current market price
per share of Common Stock exceeds such fair market value by less than
$1.00, then the adjustment provided by this subsection (3) shall not be
made and in lieu thereof the provision of paragraph (8) shall apply to such
distribution.
(4) If the Company shall, by dividend or otherwise, distribute
generally to holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 4.05 applies)
in an aggregate amount such that such dividend or distribution shall
constitute an Extraordinary Cash Dividend, then, and in each such case,
immediately after the close of business on such date for determination, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date fixed for determination of the
stockholders entitled to receive such distribution by a fraction, of which
(i) the numerator shall be equal to (A) the current
market price per share (determined as provided in paragraph (5) of
this Section) of the Common Stock on the date fixed for such
determination less (B) an amount equal to the excess of such
Extraordinary Cash Dividend over four times the per share amount of
the Company's most recently declared regular quarterly dividend and
of which
(ii) the denominator shall be equal to such market price
per share.
(5) For the purpose of any computation under subsections (2),
(3) or (4) above, the current market price per share of Common Stock on any
date shall be deemed to be the average of the Sale Prices for the 20
consecutive Trading Days commencing 30 Trading Days before the date in
question.
(6) In any case in which this Section 4.04 shall require that
an adjustment of the Conversion Price be made effective immediately
following a record date, the Company may elect to defer the effectiveness
of such adjustment (but in no event until a date later than the effective
time of the event giving rise to such adjustment), in which case the
Company shall, with respect to any Convertible Security converted after
such record date and before such adjustment shall have become effective,
(i) defer paying any cash payment pursuant to Section 4.03 or issuing to
the Holder of such Convertible Security the number of shares of Common
Stock and other capital stock of the Company issuable upon such conversion
in excess of the number of shares of Common Stock and other capital stock
of the Company issuable thereupon only on the basis of the Conversion Price
prior to adjustment and (ii) not later than five Business Days after such
adjustment shall have become effective, pay to such Holder the appropriate
cash payment pursuant to Section 4.03 and issue to such Holder the
additional shares of Common Stock and other capital stock of the Company
issuable on such conversion.
(7) No adjustment of the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least
one percent of the Conversion Price; provided, however, that any
adjustments which by reason of this subsection (7) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment; and, provided, further, that each adjustment shall be required
and made in accordance with the provisions of this Article Four (other than
this subsection (7)) not later than such time as may be required in order
to preserve the tax-free nature of a distribution to the holders of
Convertible Securities or Common Stock. All calculations under this Article
Four shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(8) If the Company makes a distribution to holders of its
Common Stock of any of its assets, or debt securities or any rights,
warrants or options to purchase securities of the Company that, but for the
provisions of the last sentence of subsection (3), would otherwise result
in an adjustment in the Conversion Rate, then, from and after the record
date for determining the holders of Common Stock entitled to receive the
distribution, a Holder of a Convertible Security that converts such
Convertible Security in accordance with the provisions of this Indenture
shall upon such conversion be entitled to receive, in addition to the
shares of Common Stock into which the Convertible Security is convertible,
the kind and amount of securities, cash or other assets comprising the
distribution that such Holder would have received if such Holder had
converted the Convertible Security immediately prior to the record date for
determining the holders of Common Stock entitled to receive the
distribution.
(9) Whenever the Conversion Price shall be adjusted as herein
provided, the Company shall promptly (i) file with the Trustee and each
Conversion Agent an Officers' Certificate setting forth the Conversion
Price after such adjustment and setting forth in reasonable detail the
facts requiring such adjustment and the manner of computing the same, and
(ii) mail or cause to be mailed a notice stating that the Conversion Price
has been adjusted and setting forth the adjusted Conversion Price to each
Holder of Convertible Securities at his address as the same appears on the
Security Register.
Anything in this Section 4.04 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Conversion
Price, in addition to those required by this Section 4.04, as it in its
discretion shall determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of other assets (other than
cash dividends) hereafter made by the Company to its stockholders shall not
be taxable.
SECTION 4.05 Continuation of Conversion Privilege in Case of Merger,
Consolidation or Sale of Assets.
If the Company is a party to a transaction subject to Section
8.01 (other than a sale of all or substantially all of the assets of the
Company in a transaction in which the holders of Common Stock immediately
prior to such transaction do not receive securities, cash, or other assets
of the Company or any other Person) or a merger or binding share exchange
which reclassifies or changes its outstanding Common Stock, the Person
obligated to deliver securities, cash or other assets to holders of Common
Stock pursuant to such transaction subject to Section 8.01, merger or
binding share exchange shall enter into a supplemental indenture. If the
issuer of securities deliverable upon conversion of Convertible Securities
is an Affiliate of the successor Company, that issuer shall join in the
supplemental indenture. The supplemental indenture shall provide that the
Holder of a Convertible Security shall have the right thereafter (during
the period such Convertible Security shall be convertible as specified in
Section 4.01) to convert such Convertible Security into the kind and amount
of securities, cash, property or other assets which such Holder would have
received immediately after the consolidation, merger, binding share
exchange or transfer if such Holder had converted the Convertible Security
immediately before the effective date of such transaction, assuming (to the
extent applicable) that such Holder (i) was not a Person with which the
Company consolidated or into which the Company merged or which merged into
the Company or to which such Sale or transfer was made, as the case may be
(a "Constituent Person"), or an Affiliate of a Constituent Person to such
transaction, (ii) made no election, if any, as to the kind or amount of
securities, cash or other property receivable upon such transaction with
respect thereto, and (iii) was treated alike with the plurality of
non-electing Holders. Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Article Four. The successor Company shall
mail to each Holder of a Convertible Security a notice briefly describing
the supplemental indenture.
Neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in
any such supplemental indenture relating either to the kind or amount of
shares of stock or securities or property or cash receivable by Holders
upon the conversion of their Securities after any such reclassification,
change, consolidation, merger, sale or conveyance or to any adjustment to
be made with respect thereto, but, subject to the provisions of Section
7.01, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, an Officers'
Certificate or, at the option of the Company, a certificate of a firm of
independent public accountants which shall conform to the provisions of
Section 1.02 with respect thereto.
If the Company shall enter into a sale of all or substantially
all of the assets of the Company in a transaction in which the holders of
the Common Stock immediately prior to such transaction do not receive
securities, cash, or other assets of the Company or any other Person, the
Convertible Securities shall remain convertible into the Common Stock (or
other property) which, but for such sale of assets of the Company, the
Holders of such Convertible Securities would have been entitled to upon
conversion.
If this Section 4.05 applies, neither paragraph (1) nor (3) of
Section 4.04 applies.
SECTION 4.06 Notices of Certain Events.
If:
(1) the Company shall declare a dividend (or any other
distribution) payable to the holders of Common Stock other than cash
dividends which are not Extraordinary Cash Dividends; or
(2) the Company shall authorize the granting generally to
the holders of Common Stock of rights, options or warrants to subscribe for
or purchase any shares of stock of any class or of any other rights; or
(3) the Company shall authorize any reclassification or
change of the Common Stock (other than a subdivision or combination of its
outstanding shares of Common Stock), or any consolidation or merger to
which the Company is a party and for which approval of any stockholders of
the Company is required, or the sale or conveyance of all or substantially
all the property or business of the Company; or
(4) there shall be authorized or ordered any voluntary or
involuntary dissolution, liquidation or winding-up of the Company; or
(5) the Company or any Subsidiary or Affiliate shall
commence a tender offer for all or a portion of the Company's outstanding
shares of Common Stock (or shall amend any such tender offer);
then, the Company shall cause to be filed at the office or
agency maintained for the purpose of conversion of the Convertible
Securities as provided in Section 10.02, and shall cause to be mailed to
each Holder of Convertible Securities, at his address as it shall appear on
the Security Register therefor, at least 20 days before the date
hereinafter specified (or the earlier of the dates hereinafter specified,
in the event that more than one date is specified), a notice stating the
date on which (i) a record is expected to be taken for the purpose of such
dividend, distribution, rights, options, warrants or tender offer or if a
record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights (or in
the case of a tender offer to be entitled to tender shares of Common Stock)
are to be determined, or (ii) such reclassification, change, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding-up is
expected to become effective, and the date, if any is to be fixed, as of
which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or
other property deliverable upon such reclassification, change,
consolidation, merger, sale, conveyance, dissolution, liquidation,
winding-up or tender offer.
SECTION 4.07 Taxes on Conversion.
The Company will pay any and all documentary, stamp or similar
taxes payable to the United States (or any other jurisdiction in which the
Company is domiciled or incorporated) or any political subdivision or
taxing authority thereof or therein (other than any such tax of any such
non-United States jurisdiction that would not have been payable in respect
of the applicable Holder if such jurisdiction had been the United States or
any political subdivision or taxing authority thereof) in respect of the
issue or delivery of shares of Common Stock on conversion of Convertible
Securities pursuant hereto; provided, however, that the Holder shall pay
any such tax which is due because the Holder requests the shares to be
issued in a name other than the Holder's name, and the Conversion Agent may
refuse to deliver the certificates representing such Common Stock until the
Person requesting such issue or delivery has paid to the Company the amount
of any such tax or has established, to the satisfaction of the Company,
that such tax has been paid. The Company extends no protection with respect
to any other taxes imposed in connection with conversion of Convertible
Securities.
SECTION 4.08 Company to Provide Stock.
The Company shall at all times reserve and keep available free
from preemptive rights, out of its authorized but unissued shares of
capital stock, the full number of shares of capital stock to provide for
the conversion of Convertible Securities from time to time as such
Convertible Securities are presented for conversion; provided, however,
that nothing contained herein shall be construed to preclude the Company
from satisfying its obligations in respect of the conversion of Convertible
Securities by delivery of repurchased shares of Common Stock which are held
in the treasury of the Company.
If any shares of capital stock to be reserved for the purpose
of conversion of Convertible Securities hereunder require registration with
or approval of any governmental authority under any federal or state law or
any action in respect of any stock exchange or similar listing before such
shares may be validly issued or delivered upon conversion, then the Company
covenants that it will in good faith and as expeditiously as possible
endeavor to secure such registration, approval or action, as the case may
be; provided, however, that, nothing in this Section 4.08 shall be deemed
to affect in any way the obligations of the Company to convert Convertible
Securities into Common Stock as provided in this Article Four.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the
Common Stock, the Company will take all corporation action which may, in
the opinion of counsel, be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of Common Stock at
such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may
be issued upon conversion of Convertible Securities will upon issue be
fully paid and non-assessable by the Company and free of preemptive rights.
SECTION 4.09 Disclaimer of Responsibility for Certain Matters.
Neither the Trustee, the Conversion Agent nor any agent of
either shall at any time be under any duty or responsibility to any Holder
of Convertible Securities to determine whether any facts exist which may
require any adjustment of the Conversion Price, or with respect to the
Officers' Certificate referred to in Section 4.04(9), or with respect to
the nature or extent of any such adjustment when made, or with respect to
the method employed, herein or in any supplemental indenture provided to be
employed, in making the same. Neither the Trustee, the Conversion Agent nor
any agent of either shall be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property (including cash), which may at any time be issued or
delivered upon the conversion of any Convertible Security; and neither the
Trustee, the Conversion Agent nor any agent of either makes any
representation with respect thereto. Neither the Trustee, the Conversion
Agent nor any agent of either shall be responsible for any failure of the
Company to issue, register the transfer of or deliver any shares of Common
Stock or stock certificates or other securities or property (including
cash) upon the surrender of any Convertible Security for the purpose of
conversion or, subject to Section 3.01, to comply with any of the covenants
of the Company contained in this Article Four.
SECTION 4.10 Return of Funds Deposited for Redemption of Converted
Convertible Securities.
Any funds which at any time shall have been deposited by the
Company or on its behalf with the Trustee or any Paying Agent for the
purpose of paying the principal of and interest, if any, on any of the
Convertible Securities and which shall not be required for such purposes
because of the conversion of such Convertible Securities, as provided in
this Article Four, shall after such conversion be repaid to the Company by
the Trustee or such Paying Agent.
ARTICLE V
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 5.01 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect with respect to Securities of any series (except as to any
surviving rights of registration of transfer or exchange of Securities of
such series, replacement of lost, stolen or mutilated Securities of such
series and conversion of Securities of such series herein expressly
provided for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to such series, when
(1) either
(ii) all Securities of such series theretofore
authenticated and delivered and all Coupons appertaining
thereto (other than (i) Coupons appertaining to Bearer
Securities of such series surrendered in exchange for
Registered Securities and maturing after such exchange,
surrender of which is not required or has been waived as
provided in Section 3.05, (ii) Securities of such series and
Coupons which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.06, (iii)
Coupons appertaining to Bearer Securities of such series called
for redemption and maturing after the relevant Redemption Date,
surrender of which has been waived as provided in Section 11.06
and (iv) Securities of such series and Coupons for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 10.03) have been delivered to the Trustee
for cancellation; or
(iii) all such Securities and Coupons of such series not
theretofore delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity
within one year, or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (A), (B) or (C) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities and Coupons of such series not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities and Coupons
of such series which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with. In addition,
the Opinion of Counsel shall be to the effect that Holders of the
Securities and Coupons, if any, of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of
the Company's exercise of its option under this Section 5.01 and will
be subject to Federal income tax in the same amount, in the same
manner and at the same times as would have been the case if such
option had not been exercised and must refer to and be based upon a
ruling of the Internal Revenue Service.
At any time when no Securities of any series are outstanding,
this Indenture shall upon Company Request cease to be of further effect and
the Trustee, at the expense of the Company, shall execute proper
instruments of satisfaction and discharge of this Indenture.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 7.05
and, if money shall have been deposited with the Trustee pursuant to
subclause (ii) of clause (1) of this Section, the obligations of the
Trustee under Section 5.02 and the last paragraph of Section 10.03, shall
survive.
SECTION 5.02 Application of Trust Money.
Subject to the provisions of the last paragraph of Section
10.03, all money deposited with the Trustee pursuant to Sections 5.01 and
5.03 shall be held in trust and applied by it, in accordance with the
provisions of the Securities and Coupons, if any, and this Indenture, to
the payment, either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to
the Persons entitled thereto, of the principal (and premium, if any) and
interest for whose payment such money has been deposited with the Trustee;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 5.03 Satisfaction, Discharge and Defeasance of Securities of Any
Series.
If this Section is specified, as contemplated by Section 3.01,
to be applicable to Securities and Coupons, if any, of any series, at the
Company's option, either
(1) the Company will be deemed to have been Discharged
(as defined below) from its obligations with respect to Securities and
Coupons, if any, of such series or
(2) the Company will cease to be under any obligation to
comply with any term, provision or condition set forth in (i) Article VIII
and Sections 10.09, 10.10 and 10.11 or (ii) the terms, provisions or
conditions of such series specified pursuant to Section 3.01 (provided,
however, that the Company may not cease to comply with any obligations as
to which it may not be Discharged pursuant to the definition of
"Discharged"), if, in the case of (1) and (2), with respect to the
Securities and Coupons, if any, of such series on the 91st day after the
applicable conditions set forth below in (x) and either (y) or (z) have
been satisfied:
(x)(i) the Company has paid or caused to be paid
all other sums payable with respect to the Outstanding
Securities and Coupons, if any, of such series (in addition to
any required under (y) or (z)); and (ii) the Company has
delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge
of the entire indebtedness on all Outstanding Securities and
Coupons, if any, of any such series have been complied with;
and
(y)(i) the Company shall have deposited or caused
to be deposited irrevocably with the Trustee as a trust fund
specifically pledged as security for (on a first-priority
perfected basis), and dedicated solely to, the benefit of the
Holders of the Securities and Coupons, if any, of such series
(A) an amount (in such currency or currency unit in which the
Outstanding Securities and Coupons, if any, of such series are
payable) or (B) U.S. Government Obligations (as defined below)
or, in the case of Securities and Coupons, if any, denominated
in a Foreign Currency and if so specified pursuant to Section
3.01, Foreign Government Securities (as defined below), which
through the payment of interest and principal in respect
thereof in accordance with their terms will provide, not later
than the due date of any payment of principal (including any
premium) and interest, if any, under the Securities and
Coupons, if any, of such series, money in an amount or (C) a
combination of (A) and (B) sufficient (in the opinion with
respect to (B) and (C) of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee) to pay and
discharge each installment of principal of (including any
premium), and interest, if any, on, the Outstanding Securities
and Coupons, if any, of such series on the dates such
installments of interest or principal are due;
(ii)(A) no Event of Default or event (including
such deposit) which with notice or lapse of time or both would
become an Event of Default shall have occurred and be
continuing on the date of such deposit, (B) no Event of Default
as defined in clause (5) or (6) of Section 6.01, or event which
with notice or lapse of time or both would become an Event of
Default under either such clause, shall have occurred within 90
days after the date of such deposit and (C) such deposit and
the related intended consequence under (1) or (2) will not
result in any default or event of default under any material
indenture, agreement or other instrument binding upon the
Company or any Subsidiary or any of their properties;
(iii) the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that Holders of the
Securities and Coupons, if any, of such series will not
recognize income, gain or loss for Federal income tax purposes
as a result of the Company's exercise of its option under this
Section 5.03 and will be subject to Federal income tax in the
same amount, in the same manner and at the same times as would
have been the case if such option had not been exercised; and
(iv) the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that if the deposit
referred to in paragraph (y)(i) above shall include U.S.
Government Obligations or Foreign Government Securities, such
deposit shall not result in the Company, the Trustee or such
trust being regulated as an "investment company" under the
Investment Company Act of 1940, as amended; or
(z) the Company has properly fulfilled such other
means of satisfaction and discharge as is specified, as
contemplated by Section 3.01, to be applicable to the
Securities and Coupons, if any, of such series.
Any deposits with the Trustee referred to in clause (y)(i)
above will be made under the terms of an escrow trust agreement in form and
substance satisfactory to the Trustee. If any Outstanding Securities and
Coupons, if any, of such series are to be redeemed prior to their Stated
Maturity, whether pursuant to any mandatary redemption provisions or in
accordance with any mandatory sinking fund requirement, the applicable
escrow trust agreement will provide therefor and the Company will make such
arrangements as are satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
"Discharged" means that the Company will be deemed to have paid
and discharged the entire indebtedness represented by, and obligations
under, the Securities and Coupons, if any, of the series as to which this
Section is specified as applicable as aforesaid and to have satisfied all
the obligations under this Indenture relating to the Securities and
Coupons, if any, of such series (and the Trustee, at the expense of the
Company, will execute proper instruments acknowledging the same), except
(A) the rights of Holders thereof to receive, from the trust fund described
in clause (y)(i) above, payments of the principal of, premium and the
interest, if any, on such Securities and Coupons, if any, when such
payments are due, (B) the Company's obligations with respect to such
Securities and Coupons, if any, under Sections 3.05 and 3.06 (insofar as
applicable to Securities of such series), Article IV (insofar as applicable
to Securities of such series), Sections 5.02, 10.02 and 10.03 (last
paragraph only) and the Company's obligations to the Trustee under Sections
7.05, 7.06 and 7.07 and (C) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, will survive such discharge. The
Company will reimburse the trust fund for any loss suffered by it as a
result of any tax, fee or other charge imposed on or assessed against
deposited U.S. Government Obligations or Foreign Government Securities, as
the case may be, or any principal, premium or interest paid on such
obligations, and, subject to the provisions of Section 7.05, will indemnify
the Trustee against any claims made against the Trustee in connection with
any such loss.
"Foreign Government Securities" as used in Section 5.03 means,
with respect to Securities and Coupons, if any, of any series that are
denominated in a Foreign Currency, securities that are (i) direct
obligations of the government that issued such currency for the payment of
which obligations its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of such government (the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation of such
government) which, in either case under clauses (i) or (ii), are not
callable or redeemable at the option of the issuer thereof.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation of the United States, which, in either case
under clauses (i) or (ii), are not callable or redeemable at the option of
the issuer thereof, and will also include a depository receipt issued by a
bank or trust company as custodian with respect to any such U.S. Government
Obligation or a specified payment of interest on or principal of any such
U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligations or the
specific payment of interest on or principal of the U.S. Government
Obligation evidenced by such depository receipt.
ARTICLE VI
REMEDIES
SECTION 6.01 Events of Default.
"Event of Default," wherever used herein with respect to
Securities of any series, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any
Security of that series when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or
premium, if any, on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund
payment, when and as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in whose performance or whose breach
is elsewhere in this Section specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of
series of Securities other than the series in respect of which the
Event of Default is being determined), and continuance of such
default or breach for a period of 90 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25 percent in
principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company or a Significant Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or a Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company or a Significant Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or a Significant Subsidiary or of any substantial part
of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period
of 90 consecutive days; or
(6) the commencement by the Company or a
Significant Subsidiary of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the
entry of a decree or order for relief in respect of the Company or a
Significant Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Company or a Significant Subsidiary or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Company or a
Significant Subsidiary in furtherance of any such action; or
(7) acceleration of Indebtedness of the Company or
any Significant Subsidiary aggregating more than $50 million so that
such Indebtedness becomes due prior to the date on which the same
would otherwise become due and payable, unless such acceleration is
rescinded, annulled or otherwise cured prior to the giving of the
notice referred to in the first paragraph of Section 6.02 with
respect to the Securities of such series; or
(8) final and nonappealable judgments or orders to
pay, in the aggregate at any one time, more than $50 million rendered
by a court of competent jurisdiction against the Company or a
Significant Subsidiary, continued for 90 days (during which execution
shall not be effectively stayed or bonded) without discharge or
reduction to $50 million or less; or
(9) any other Event of Default provided with
respect to Securities of that series.
SECTION 6.02 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series
at the time Outstanding occurs and is continuing, then in every such case
the Trustee or the Holders of not less than 25 percent in principal amount
of the Outstanding Securities of that series may declare the principal
amount (or, if the Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all of the Securities of that series to be due and
payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal
amount (or specified amount) shall become immediately due and payable;
provided, however, that in the case of any Event of Default with respect to
the Company specified in clause (5) or (6) of Section 6.01, such amount
shall become immediately due and payable without any notice, declaration or
other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in
principal amount of the Outstanding Securities of that series, by written
notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that
series,
(B) the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise than
by such declaration of acceleration and interest thereon at the
rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default with respect to Securities of
that series, other than the nonpayment of the principal of Securities
of that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 6.12.
No such recission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 6.03 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security or Coupon, if any, when such interest becomes due and
payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities or Coupons, if any, the whole amount then
due and payable on such Securities for principal (and premium, if any) and
interest and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if any) and on
any overdue interest, at the rate or rates prescribed therefor in such
Securities or Coupons, if any, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amount forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due
and unpaid, and may prosecute such proceeding to judgment or final decree,
and may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon the Securities, wherever situated.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities
of such series by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture
or in aid of the exercise of any power granted herein, or to enforce any
other proper remedy.
SECTION 6.04 Trustee May Enforce Claims without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities in respect of which such judgment has been recovered.
SECTION 6.05 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee, any predecessor Trustee and the Holders allowed in any
judicial proceedings relative to the Company, its creditors or its
property.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.
SECTION 6.06 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article in
respect of the Securities of any series shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest on the Securities of such series, upon presentation of the
Securities and Coupons, if any, appertaining thereto in respect of which
moneys have been collected and the notation thereon of the distribution if
such principal, premium and interest is only partially paid and upon
surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section
7.05; and
Second: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively.
SECTION 6.07 Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to the
Securities of that series;
(2) the Holders of not less than 25 percent in principal
amount of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder,
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities of that series;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under
this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all of such Holders.
SECTION 6.08 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case,
subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 6.09 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 6.06, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 6.10 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders, as the case may be.
SECTION 6.11 Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Securities of such series, provided that
(1) such direction shall not (i) be in conflict with any
rule of law or with this Indenture, (ii) expose the Trustee to
personal liability, or (iii) be unduly prejudicial to Holders not
joining therein, and
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 6.12 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Securities of any series may on behalf of the Holders of
all the Securities of such series waive any past default hereunder with
respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any)
or interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the consent
of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 6.13 Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as though no
such law had been enacted.
SECTION 6.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee
for any action taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Holder,
or group of Holders, holding in the aggregate more than ten percent in
principal amount of the Outstanding Securities, or to any suit instituted
by any Holder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security on or after the respective
Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 6.15 Judgment Currency.
The following provisions of this Section 6.15 shall apply to
the extent permissible under applicable law: Judgments in respect of any
obligations of the Company under any Securities or Coupons, if any, of any
series shall be rendered in the currency or currency unit in which such
Securities or Coupons are payable. If for the purpose of obtaining a
judgment in any court with respect to any obligation of the Company
hereunder or under any Security or Coupon, it shall become necessary to
convert into any other currency or currency unit any amount in the currency
or currency unit due hereunder or under such Security or Coupon, then such
conversion shall be made at the Conversion Rate (as defined below) as in
effect on the date the Company shall make payment to any person in
satisfaction of such judgment. If pursuant to any such judgment, conversion
shall be made on a date other than the date payment is made and there shall
occur a change between such Conversion Rate and the Conversion Rate as in
effect on the date of payment, the Company agrees to pay such additional
amounts (if any) as may be necessary to ensure that the amount paid is the
amount in such other currency or currency unit which, when converted at the
Conversion Rate as in effect on the date of payment or distribution, is the
amount then due hereunder or under such Security or Coupon. Any amount due
from the Company under this Section 6.15 shall be due as a separate debt
and is not to be affected by or merged into any judgment being obtained for
any other sums due hereunder or in respect of any Security or Coupon so
that in any event the Company's obligations hereunder or under such
Security or Coupon will be effectively maintained as obligations in such
currency or currency unit. In no event, however, shall the Company be
required to pay more in the currency or currency unit due hereunder or
under such Security or Coupon at the Conversion Rate as in effect when
payment is made than the amount of currency or currency unit stated to be
due hereunder or under such Security or Coupon.
For purposes of this Section 6.15, "Conversion Rate" shall mean
the spot rate at which in accordance with normal banking procedures the
currency or currency unit into which an amount due hereunder or under any
Security or Coupon is to be converted could be purchased with the currency
or currency unit due hereunder or under any Security or Coupon, at the
option of the Company from major banks located in the Cities of New York or
London or any other principal market for such purchased currency or
currency unit.
ARTICLE VII
THE TRUSTEE
SECTION 7.01 Certain Rights of Trustee.
(1) Except during the continuance of an Event of Default,
(A) the Trustee may rely, in the absence of bad faith on its part, as to
the truth of the statements and the correctness of the opinions expressed
therein, and shall be protected in acting or refraining from acting, upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document furnished to the
Trustee and believed by the Trustee to be genuine and to have been signed
or presented by the proper party or parties, but, in the case of any such
papers or documents which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture and (B) the Trustee undertakes to perform
such duties and only such duties as are specifically set forth in the
Indenture and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(2) Any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution.
(3) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate.
(4) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(5) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction.
(6) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney.
(7) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
(8) The Trustee shall not be required to expend or risk
its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(9) If an Event of Default has occurred and is
continuing, the Trustee shall exercise its rights and powers and use the
same degree of care and skill in their exercise as a prudent person would
exercise in the conduct of his or her own affairs.
(10) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that the
Trustee shall not be liable for any error of judgment made in good faith by
a Responsible Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts.
(11) The Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of a majority in principal amount
of the Outstanding Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, under this
Indenture.
(12) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.01.
SECTION 7.02 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee shall not
be accountable for the use or application by the Company of Securities or
the proceeds thereof.
SECTION 7.03 May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with the
Company with the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar or such other agent.
SECTION 7.04 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money received by
it hereunder except as otherwise agreed with the Company.
SECTION 7.05 Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder as agreed to
by the Company and the Trustee (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence
or bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any
claim or liability in connection with the exercise of performance of
any of its powers or duties hereunder.
As security for the performance of the obligations of the
Company under this Section, the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the Trustee
(but only upon such property and funds collected in its capacity as Trustee
under this Indenture), except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular Securities.
SECTION 7.06 Resignation and Removal; Appointment of Successor.
(1) The Trustee may resign at any time with respect to
the Securities of one or more series by giving 30 days written notice
thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 7.07 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(2) The Trustee may be removed at any time with respect
to the Securities of any series by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series, delivered to
the Trustee and to the Company.
(3) If at any time:
(A) the Trustee shall fail to comply with Section
3.10(b) of the Trust Indenture Act after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(B) the Trustee shall cease to be eligible under
Section 3.10(a) of the Trust Indenture Act and shall fail to
resign after written request therefor by the Company or by any
such Holder, or
(C) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall take charge
or control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee with respect to all Securities, or (ii) any Holder
who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee
with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(4) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, with respect to the Securities of one or more series: the Company,
by a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to
the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable requirements of
Section 7.07. Within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series may be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee. The
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 7.07,
become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by Section 7.07, any Holder who
has been a bona fide Holder of a Security of such series for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.
(5) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and
each appointment of a successor Trustee with respect to the Securities of
any series in the manner provided in Section 1.06. Each notice shall
include the name of the successor Trustee with respect to the Securities of
such series and the address of its Corporate Trust Office.
SECTION 7.07 Acceptance of Appointment by Successor.
(1) In case of the appointment hereunder of a successor
Trustee with respect to any series of Securities, every such successor
Trustee so appointed shall execute, acknowledge and deliver to the Company
and to the retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(2) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series,
the Company, the retiring Trustee and each successor Trustee with respect
to the Securities of one or more series shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee shall accept
such appointment and which (i) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates, (ii) if the
retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series as to which
the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (iii) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee;
and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to
the extent provided therein and each such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates.
(3) Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers
and trusts referred to in paragraph (1) or (2) of this Section, as the case
may be.
(4) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee shall be
qualified and eligible under the Trust Indenture Act.
SECTION 7.08 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or substantially all
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise qualified
and eligible under this Article, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case
any Securities shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication
and deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 7.09 Reports by Trustee.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Securities pursuant to this
Indenture, the Trustee shall transmit by mail to all Holders of Securities
as provided in Trust Indenture Act Section 313(c) a brief report dated as
of such May 15 in accordance with and to the extent required under Trust
Indenture Act Section 313(a).
SECTION 7.10 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as
such. Each successor Trustee shall have a combined capital and surplus of
at least $50,000,000. If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of a supervising or
examining authority, then for the purposes of this Section 7.10, the
combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its more recent report of
condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinbefore specified in
this Article Seven.
SECTION 7.11 Notice of Events of Default.
The Trustee shall give the Holders of any series of Securities
notice in writing of any Event of Default with respect to Securities of
such series as and to the extent provided by the Trust Indenture Act.
SECTION 7.12 Disqualification; Conflicting Interests.
The Trustee shall comply with the terms of Section 310(b) of
the Trust Indenture Act.
ARTICLE VIII
CONSOLIDATION, MERGER OR SALE
SECTION 8.01 Consolidation, Merger or Sale.
Subject to the provisions of Section 8.03, nothing contained in
this Indenture or in any of the Securities shall prevent any consolidation
or merger of the Company with or into any other corporation or corporations
(whether or not affiliated with the Company), or successive consolidations
or mergers in which the Company or its successor or successors shall be a
party or parties, or shall prevent any sale, conveyance or lease of all or
substantially all the property of the Company to any other corporation
(whether or not affiliated with the Company) authorized to acquire and
operate the same; provided, however, and the Company hereby covenants and
agrees, that any such consolidation, merger, sale, conveyance or lease
shall be upon the conditions that (a) the corporation (if other than the
Company) formed by or surviving any such consolidation or merger, or to
which such sale, conveyance or lease shall have been made, shall be a
corporation organized under the laws of the United States, any State
thereof or the District of Columbia; (b) the due and punctual payment of
the principal of, premium, if any and interest, if any, on all the
Securities and Coupons, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company, shall be expressly assumed and
the conversion rights, if any, shall be provided for in accordance with
Article IV, by supplemental indenture satisfactory in form to the Trustee
executed and delivered to the Trustee, by the corporation (if other than
the Company) formed by such consolidation, or into which the Company shall
have been merged, or by the corporation which shall have acquired or leased
such property; and (c) immediately after giving effect to such transaction,
no Event of Default, and no event which after notice or lapse of time or
both would become an Event of Default, shall have happened and be
continuing.
SECTION 8.02 Successor Corporation to Be Substituted.
In case of any such consolidation, merger, sale, conveyance or
lease and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form
to the Trustee, of the due and punctual payment of the principal of and
interest, if any, on all of the Securities and the due and punctual
performance of all the covenants and conditions of this Indenture to be
performed by the Company, such successor corporation shall succeed to and
be substituted for the Company, with the same effect as if it had been
named herein as the party of the first part, and the Company (including any
intervening successor to the Company which shall have become the obligor
hereunder) shall, except in the case of a lease, be relieved of any further
obligation under this Indenture and the Securities; provided, however, that
in the case of a sale or conveyance of the property of the Company
(including any such intervening successor) in connection with which there
is not a plan providing for the complete liquidation of the Company
(including any such intervening successor), the Company (including any such
intervening successor) shall continue to be liable on (a) its obligations
under this Indenture and the Securities to the extent of liability to pay
the principal of and interest, if any, on the Securities at the time,
places and rate prescribed in this Indenture and the Securities and (b)
obligations the Company may have under a supplemental indenture pursuant to
Section 4.05. Such successor corporation thereupon may cause to be signed,
and may issue either in its own name or in the name of the Company, any or
all of the Securities issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the
order of such successor corporation instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver any Securities which
previously shall have been signed and delivered by the officers of the
Company to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to
the Trustee for that purpose. All the Securities so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Securities had been issued at the date
of the initial issuance of the Securities of such series.
In case of any such consolidation, merger, sale, conveyance or
lease such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued, as may be appropriate and
consented to by the Trustee.
SECTION 8.03 Securities to Be Secured in Certain Events.
If, upon any consolidation or merger or sale, conveyance or
lease to which Section 8.02 applies, or upon any acquisition by the Company
by purchase or otherwise of all or any part of the properties of any other
Person, any Principal Property or shares of stock or evidences of
indebtedness of a Subsidiary owned by the Company or a Subsidiary
immediately prior thereto would thereupon become subject to any mortgage,
security interest, pledge, lien or encumbrance to secure indebtedness for
money borrowed by any Person (which indebtedness shall be deemed to be
Secured Debt of the Company for purposes of the last paragraph of Section
10.09), the Company, immediately prior to such consolidation, merger, sale,
conveyance, lease or acquisition will, unless the incurrence of such
Secured Debt is permitted by Section 10.09, by indenture supplemental
hereto secure the due and punctual payment of the principal of, premium, if
any, and interest, if any, on the Securities then Outstanding (equally and
ratably with any other indebtedness entitled thereto immediately following
such transaction).
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01 Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to
the Company and the assumption by any such successor of the covenants
of the Company contained herein and in the Securities; or
(2) to add to the covenants of the Company for the
benefit of the Holders of all or any series of Securities (and if
such covenants are to be for the benefit of less than all series of
Securities, stating that such covenants are expressly being included
solely for the benefit of such series) or to surrender any right or
power herein conferred upon the Company; or
(3) to add any additional Events of Default with respect to
all or any series of Securities; or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or
facilitate the issuance of Securities in bearer form, registrable or
not registrable as to principal, and with or without interest coupons
or to provide for uncertificated (commonly known as "book entry")
Securities on terms satisfactory in substance to the Trustee; or
(5) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Security Outstanding of any series
created prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any
series as permitted by Sections 2.01 and 3.01; or
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Securities of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than
one Trustee, pursuant to the requirements of Section 7.07(2); or
(9) if allowed without penalty under applicable laws and
regulations, to permit payment in the United States (including any of
the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction of principal,
premium, if any, or interest, if any, on Bearer Securities or
Coupons, if any; or
(10) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect
to matters or questions arising under this Indenture, provided such
other provision shall not adversely affect the interests of the
Holders of Securities of any series in any material respect; or
(11) to add to, delete from or revise the conditions,
limitations on the authorized amount, terms or purposes of issue,
authentication and delivery of the Securities, as herein set forth;
or
(12) to make provision with respect to the conversion
rights of Holders pursuant to the requirements of Section 4.05.
SECTION 9.02 Supplemental Indentures with Consent of Holders.
With the consent of (i) the Holders of not less than a majority
in principal amount of the Outstanding Securities, or (ii) in case less
than all of the several series of Securities are affected by such addition,
change, elimination or modification, the Holders of not less than a
majority in principal amount of each series so affected by such
supplemental indenture voting as a single class, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board of Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or
any installment of principal of or interest on, any Security, or
reduce the principal amount thereof or the rate of interest thereon
or any premium payable upon the redemption thereof, or reduce the
amount of the principal of an Original Issue Discount Security that
would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 6.02, or change the coin or
currency in which, or delete any country from the Places of Payment
(other than any such country in which, in the good faith
determination of the Board of Directors, the functions to be
performed in the Places of Payment in such country are no longer
practicably performable) in which, any Securities or Coupons or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption or
repurchase (in the case of Securities of a series that are required
to be repurchased by the Company as specified pursuant to Section
3.01), on or after the Redemption Date or the repurchase date, as
applicable), or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) change any obligation of the Company to maintain an
office or agency in the places and for the purposes specified in Section
10.02, or
(4) modify any of the provisions of this Section 9.02,
Section 6.11, or Section 10.07, except to increase any such
percentage or to provide with respect to any particular series the
right to condition the effectiveness of any supplemental indenture as
to that series on the consent of the Holders of a specified
percentage of the aggregate principal amount of Outstanding
Securities of such series (which provision may be made pursuant to
Section 3.01 without the consent of any Holder) or to provide that
certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes
in the references to "the Trustee" and concomitant changes in this
Section, or the deletion of this proviso, in accordance with the
requirements of Sections 7.07(2) and 9.01(8), or
(5) if applicable, make any change that adversely affects
the right to convert any Convertible Security or, except as provided
in this Indenture, decrease the conversion rate or increase the
conversion price of any Convertible Security.
For the purposes of this Section 9.02, if the Securities of any
series are issuable upon the exercise of warrants, any holder of an
unexercised and unexpired warrant with respect to such series shall not be
deemed to be a Holder of Outstanding Securities of such series in the
amount issuable upon the exercise of such warrants.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been
included solely for the benefit of one or more particular series of
Securities, or which modifies the rights of the Holders of Securities of
such series with respect to such covenant or other provision, shall be
deemed not to affect the rights under this Indenture of the Holders of
Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 9.03 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may,
but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise.
SECTION 9.04 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as then in
effect.
SECTION 9.06 Reference in Securities to Supplemental Indentures.
Securities, including any Coupons, of any series authenticated
and delivered after the execution of any supplemental indenture pursuant to
this Article may, and shall if required by the Trustee, bear a notation in
form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities
including any Coupons of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and authenticated and delivered
by the Trustee in exchange for Outstanding Securities including any Coupons
of such series.
ARTICLE X
COVENANTS
SECTION 10.01 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series
of Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities of that series by
delivering said principal of (and premium, if any) and interest thereon in
immediately available funds to the Paying Agent no later than 10 a.m., New
York time, on the Stated Maturity and otherwise in accordance with the
terms of the Securities and this Indenture.
The interest on Securities with Coupons appertaining thereto
shall be payable only upon presentation and surrender of the several
Coupons for such interest installments as are evidenced thereby as they
severally mature. The interest, if any, on any temporary Bearer Security
shall be paid, as to any installment of interest evidenced by a Coupon
attached thereto, only upon presentation and surrender of such Coupon and,
as to other installments of interest, only upon presentation of such
Security for notation thereon of the payment of such interest.
SECTION 10.02 Maintenance of Office or Agency.
If Securities of a series are issued as Registered Securities,
the Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities and Coupons, if any, of
that series may be presented or surrendered for payment, where securities
of that series may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. If Securities
of a series are issuable as Bearer Securities, the Company will maintain,
(A) subject to any laws or regulations applicable thereto, an office or
agency in a Place of Payment for that series which is located outside the
United States, where Securities of that series and related coupons may be
presented and surrendered for payment; provided, however, that if the
Securities of that series are listed on The International Stock Exchange of
the United Kingdom and the Republic of Ireland Limited, the Luxembourg
Stock Exchange or any other stock exchange located outside the United
States and such stock exchange shall so require, the Company will maintain
a Paying Agent for the Securities of that series in London, Luxembourg or
any other required city located outside the United States, as the case may
be, so long as the Securities of that series are listed on such exchange,
and (B) subject to any laws or regulations applicable thereto, an office or
agency in a Place of Payment for that series located outside the United
States, where Securities of that series may be surrendered for exchange and
where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. The Company
will give prompt written notice to the Trustee of the location, and any
change in the location, of any such office or agency. If Securities of a
series are issuable as Convertible Securities, the Company will maintain an
office or agency where such Securities may be presented for conversion
("Conversion Agent"). If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
No payment of principal or interest on Bearer Securities shall
be made at any office or agency of the Company in the United States, by
check mailed to any address in the United States, by transfer to an account
located in the United States or upon presentation or surrender in the
United States of a Bearer Security or coupon for payment, even if the
payment would be credited to an account located outside the United States;
provided, however, that, if the Securities of a series are denominated and
payable in Dollars, payment of principal of and any interest on any such
Bearer Security may be made at the office of the Company's Paying Agent in
the Borough of Manhattan, the City of New York, New York if (but only if)
payment in Dollars of the full amount of such principal, interest or
additional amounts, as the case may be, at all offices or agencies outside
the United States maintained for the purpose by the Company in accordance
with this Indenture is illegal or effectively precluded by exchange
controls or other similar restrictions.
The Company may also from time to time designate one or more
other offices or agencies where the Securities (including any Coupons, if
any) of one or more series may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations;
provided, however, that no such designation or recession shall in any
manner relieve the Company of its obligation to maintain an office or
agency in each Place of Payment for Securities (including any Coupons, if
any) of any series for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 10.03 Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent
with respect to any series of Securities, it will, on or before each due
date of the principal of (and premium, if any) or interest on any of the
Securities of that series, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid
to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Securities of that
series in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities of that series) in the
making of any payment of principal (and premium, if any) or interest
on the Securities; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to
the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security of any series and remaining
unclaimed for three years after such principal (and premium, if any) or
interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security and Coupon, if any, shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the City of New York or mail to each such Holder or
both, or, if a Registered Security, cause to be mailed to such Holder,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 10.04 Maintenance of Properties and Corporate Existence.
The Company shall, and shall cause each of its Subsidiaries to,
(a) maintain its properties and assets used or useful in its business in
good working order and condition and make all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto; (b) maintain
with financially sound and reputable insurers such insurance as may be
required by law and such other insurance, to such extent and against such
hazards and liabilities, as is customarily maintained by companies
similarly situated; and (c) keep books of records and accounts reflecting
all of its business affairs and transactions in accordance with sound
business practices, and reflect in its financial statements adequate
accruals and reserves, all in accordance with generally accepted accounting
principles.
Subject to Article VIII, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises and
those of its Subsidiaries; provided, however, that the Company shall not be
required to preserve or cause to be preserved any such right or franchise
if the Board of Directors shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 10.05 Statements as to Compliance
The Company will deliver to the Trustee, within 105 days after
the end of each fiscal year (which on the date hereof ends on the last
Sunday in each calendar year) of the Company, a certificate from the
principal executive officer, principal financial officer or principal
accounting officer stating whether or not the signer knows of any default
by the Company in the performance or observance of any of the terms,
provisions or conditions hereof. If such signer knows of such a default,
the certificate shall describe the default. For purposes of this Section
10.05, such compliance shall be determined without regard to any period of
grace or requirement of notice under this Indenture.
SECTION 10.06 Commission Reports.
The Company shall file with the Trustee, within 15 days after
it files them with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe)
which the Company may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. So
long as the Securities remain outstanding, the Company shall cause any
annual or quarterly or other financial reports furnished by it to
shareholders to be mailed to the Holders at their addresses appearing in
the Security Register.
SECTION 10.07 Waiver of Covenant.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 10.09 and 10.10, if
before the time for such compliance the Holders of (i) a majority in
principal amount of the Outstanding Securities or (ii) in case less than
all of the several series of Securities then Outstanding are affected by
the omission, at least a majority in principal amount of the Outstanding
Securities of each series so affected voting as a single class shall, by
Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition, but no
such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 10.08 Additional Instruments and Acts.
Upon request by the Trustee, the Company will execute and
deliver such additional instruments and take such action as may be
reasonably necessary or proper to carry out more fully the purposes of this
Indenture.
SECTION 10.09 Restriction on Creation of Liens
The Company shall not at any time create, incur, assume or
guarantee, and shall not cause, suffer or permit a Subsidiary to create,
incur, assume or guarantee, any Secured Debt without making effective
provision (and the Company covenants that in such case it will make or
cause to be made such effective provision) whereby the Securities then
Outstanding and any other indebtedness of or guaranteed by the Company or
such Subsidiary then entitled thereto, subject to applicable priorities of
payment among such other indebtedness, shall be secured by the mortgage,
security interest, pledge, lien or encumbrance relating to such Secured
Debt equally and ratably with or, at the option of the Company, prior to,
any and all other obligations and indebtedness thereby secured, so long as
any such other obligations and indebtedness shall be so secured; provided,
however, that the foregoing covenants shall not be applicable to the
following:
(1)(i) Any mortgage, security interest, pledge, lien or
encumbrance on any property hereafter acquired (including acquisition
through merger or consolidation), improved or constructed by the Company or
a Subsidiary and created contemporaneously with, or within 180 days after,
such acquisition (or, in the case of property constructed or improved,
within 180 days after the completion and commencement of commercial
operation of such property) to secure or provide for the payment of all or
any part of the purchase price of such property or the cost of the
construction thereof, as the case may be; or (ii) the acquisition of
property subject to any mortgage, security interest, pledge, lien or
encumbrance upon such property existing at the time of the acquisition
thereof, whether or not assumed by the Company or such Subsidiary; or (iii)
any mortgage, security interest, pledge, lien or encumbrance existing on
the property or on the outstanding shares or indebtedness of a corporation
at the time such corporation shall become a Subsidiary (but not created in
anticipation of the transaction in which such corporation shall become a
Subsidiary); or (iv) any mortgage, security interest, pledge, lien or
encumbrance on the property, shares or indebtedness of a corporation
existing at the time such corporation is merged into or consolidated with
the Company or a Subsidiary or at the time of a sale, lease or other
disposition of the properties of a corporation or firm as an entirety or
substantially as an entirety to the Company or a Subsidiary (but not
created in anticipation of such transaction); or
(2) Any mortgage, security interest, pledge, lien or
encumbrance on property of the Company or a Subsidiary in favor of the
United States or any State thereof or any foreign government, or any
department, agency or instrumentality or political subdivision of any
thereof, to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any indebtedness incurred for the
purpose of financing all or any part of the purchase price or the cost of
construction of the property subject to such mortgages; or
(3) Any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any mortgage,
security interest, pledge, lien, encumbrance or Secured Debt referred to in
the foregoing subparagraphs (1) and (2); provided, however, that the
principal amount of Secured Debt secured thereby shall not exceed the
principal amount outstanding at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to the property which secured the mortgage, security interest,
pledge, lien or encumbrance so extended, renewal or replaced.
Notwithstanding the foregoing provisions of this Section 10.09,
the Company and any one or more Subsidiaries may create, incur, assume or
guarantee Secured Debt (including pursuant to a transaction to which
Section 8.03 applies) not otherwise permitted or excepted without equally
and ratably securing the Securities to the extent that the sum of (i) the
amount of all Secured Debt then outstanding (other than Secured Debt
referred to in subparagraphs (1), (2) and (3) above and Secured Debt deemed
outstanding under Section 8.03 in connection with which the Company secures
obligations on the Securities then outstanding in accordance with the
provisions of Section 8.03) after giving effect thereto plus (ii) the
amount of Attributable Debt in respect of Sale and Leaseback Transactions
(other than Sale and Leaseback Transactions in respect of which amounts
equal to the Attributable Debt relating to the transactions shall have been
applied, within 180 days after the effective date of such Sale and
Leaseback Transaction, to the prepayment or retirement of Securities or
other indebtedness for borrowed money which was recorded as Funded Debt, as
of the date of its creation, of the Company or a Subsidiary and which, in
the case of such indebtedness of the Company, is not subordinate and junior
in right of payment to the Securities and Sale and Leaseback Transactions
in which the property involved would have been permitted to be subjected to
a mortgage, security interest, pledge, lien or encumbrance pursuant to
subparagraphs (1) through (3)) above does not at the time exceed the
greater of ten percent of Consolidated Net Tangible Assets or $100,000,000.
SECTION 10.10 Restrictions on Sale and Leaseback Transactions.
The Company shall not, and will not cause, suffer or permit any
Subsidiary to, enter into any Sale and Leaseback Transaction of any
Principal Property unless at the effective time of such Sale and Leaseback
Transaction (a) the Company or such Subsidiary would be entitled, without
equally and ratably securing the Securities, to incur Secured Debt secured
by a mortgage or security interest on the Principal Property to be leased
pursuant to Section 10.09 above, or (b) the Company or such Subsidiary
would be entitled, without equally and ratably securing the Securities, to
incur Secured Debt in an amount at least equal to the Attributable Debt in
respect of such Sale and Leaseback Transaction, or (c) the Company shall
apply an amount equal to such Attributable Debt, within 180 days after the
effective date of such Sale and Leaseback Transaction, to the prepayment or
retirement of Securities or other indebtedness for borrowed money which was
recorded as Funded Debt as of the date of its creation and which, in the
case of such indebtedness of the Company, is not subordinate and junior in
right of payment to the prior payment of the Securities or the prepayment
or retirement of any mortgage, lien or other security interest in such
Principal Property existing prior to such Sale and Leaseback Transaction;
provided, however, that the amount to be so applied to the retirement of
such indebtedness shall be reduced by (i) the aggregate principal amount of
any Securities delivered within 180 days of the effective date of any such
Sale and Leaseback Transaction to the Trustee for retirement and
cancellation, and (ii) the aggregate principal amount of such indebtedness
(other than the Securities) retired by the Company or a Subsidiary within
180 days of the effective date of any such Sale and Leaseback Transaction.
SECTION 10.11 Names and Addresses of Holders.
The Company shall furnish of cause to be furnished to the
Trustee (a) not more than 15 days after each Regular Record Date as defined
in Section 1.01 but in any event not less frequently than semi-annually, a
list in such form as the Trustee may reasonably require, containing all the
information in the possession or control of the Company or any of its
Paying Agents other than the Trustee, as to the names and addresses of the
Holders of Securities to which such Regular Record Date applies as of such
Regular Record Date, and (b) at such other times as the Trustee may request
in writing, within 30 days after receipt by the Company of any such
request, a list of similar form and content as of a date not more than 15
days prior to the time such list is furnished, provided no such list need
be furnished if the Trustee shall be the Security Registrar.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.01 Applicability of Article.
Securities (including Coupons, if any) of any series which are
redeemable before their Stated Maturity shall be redeemable in accordance
with their terms and (except as otherwise specified as contemplated by
Section 3.01 for Securities of any series) in accordance with this Article.
SECTION 11.02 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities (including
Coupons, if any) shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of all or less than all of the
Securities (including Coupons, if any) of any series, the Company shall, at
least 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities of such
series to be redeemed. In the case of any redemption of Securities
(including Coupons, if any) prior to the expiration of any restriction on
such redemption provided in the terms of such Securities and Coupons,
if any, or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 11.03 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities (including Coupons, if any) of
any series with the same terms are to be redeemed, the particular
Securities (including Coupons, if any) to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities (including Coupons, if any) of such series not
previously called for redemption, by lot or any other such method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities (including Coupons, if any) of that series or
any integral multiple thereof) of the principal amount of Securities
(including Coupons, if any) of such series of a denomination larger than
the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company in writing of the
Securities (including Coupons, if any) selected for redemption and, in the
case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only
in part, to the portion of the principal amount of such Securities which
has been or is to be redeemed.
SECTION 11.04 Notice of Redemption.
Notice of redemption shall be given not less than 15 nor more
than 60 days prior to the Redemption Date, to each Holder of Securities to
be redeemed, as provided in Section 1.06.
Each such notice of redemption shall specify the Redemption
Date, the Redemption Price, the Place or Places of Payment, that the
Securities of such series are being redeemed at the option of the Company
pursuant to provisions contained in the terms of the Securities of such
series or in a supplemental indenture establishing such series, if such be
the case, together with a brief statement of the facts permitting such
redemption, that payment will be made upon presentation and surrender of
the applicable Securities, that all Coupons, if any, maturing subsequent to
the date fixed for redemption shall be void, that any interest accrued to
the Redemption Date will be paid as specified in said notice, that on and
after said Redemption Date any interest thereon or, in case of partial
redemptions, on the portions thereof to be redeemed, will cease to accrue,
and, if applicable, that on or after said Redemption Date such Securities
will cease to be convertible into Common Stock. If less than all the
Securities of any series are to be redeemed the notice of redemption shall
specify the numbers of the Securities of such series to be redeemed, and,
if only Bearer Securities of any series are to be redeemed, and if such
Bearer Securities may be exchanged for Registered Securities, the last date
on which exchanges of Bearer Securities for Registered Securities not
subject to redemption may be made. In case any Security of any series is to
be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and
after the Redemption Date, upon surrender of such Security and any Coupons
appertaining thereto, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof and with
appropriate Coupons will be issued, or, in the case of Registered
Securities providing appropriate space for such notation, at the option of
the Holders, the Trustee, in lieu of delivering a new Security or
Securities as aforesaid, may make a notation on such Security of the
payment of the redeemed portion thereof.
Notice of redemption of Securities and Coupons, if any, to be
redeemed at the election of the Company shall be given by the Company or,
at the Company's request, by the Trustee in the name and at the expense of
the Company.
SECTION 11.05 Deposit of Redemption Price.
On or before 10 a.m. New York time on (but in the case of
payments to be made at a Place of Payment outside of the United States, its
territories, possessions and areas subject to its jurisdiction, at least
one New York Business Day before) any Redemption Date, the Company shall
deposit in immediately available funds with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 10.03) an amount of money in the
relevant currency (or a sufficient number of currency units, as the case
may be) sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 11.06 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such
date (unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Securities shall cease to bear interest
and, if applicable, shall cease to be convertible into Common Stock. Except
as provided in the next succeeding paragraph, upon surrender of any such
Security (including Coupons, if any) for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided, however,
that installments of interest on Registered Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 3.07.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant Coupons maturing after the Redemption Date,
such Bearer Security may be paid after deducting from the Redemption Price
an amount equal to the face amount of all such missing Coupons, or the
surrender of such missing Coupon or Coupons may be waived by the Company
and the Trustee if there be furnished to them such security or indemnity as
they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Bearer Security shall surrender to the
Trustee or any Paying Agent any such missing Coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder shall
be entitled to receive the amount so deducted; provided, however, that
interest represented by Coupons shall be payable only upon presentation and
surrender of those Coupons at an office or agency located outside of the
United States except as otherwise provided pursuant to Section 9.01(9).
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall
, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security and, if applicable, such Security shall remain
convertible into common Stock until the principal of such Security shall
have been paid or duly provided for.
SECTION 11.07 Securities Redeemed in Part.
Any Security (including Coupons, if any) which is to be
redeemed only in part shall be surrendered at a Place of Payment therefor
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities (with appropriate Coupons, if
any, attached) of the same series, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security
(including Coupons, if any) so surrendered.
ARTICLE XII
SINKING FUNDS
SECTION 12.01 Applicability of Article.
The provisions of this Article shall be applicable to any
sinking fund for the retirement of Securities of a series except as
otherwise specified as contemplated by Section 3.01 for Securities of such
series.
The minimum amount of any sinking fund payment provided for by
the terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment," and any payment in excess of such minimum amount
provided for by the terms of Securities of any series is herein referred to
as an "optional sinking fund payment." If provided for by the terms of
Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 12.02. Each sinking fund
payment shall be applied to the redemption of Securities of any series as
provided for by the terms of Securities of such series.
SECTION 12.02 Satisfaction of Sinking Fund Payments with Securities.
The Company (a) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (b) may apply as a
credit Securities of a series which have been acquired or redeemed either
at the election of the Company pursuant to the terms of such Securities or
through the application of permitted optional sinking fund payments
pursuant to the terms of such Securities, in each case in satisfaction of
all or any part of any sinking fund payment with respect to the Securities
of such series required to be made pursuant to the terms of such Securities
as provided for by the terms of such series; provided that such Securities
have not been previously so credited. Such Securities shall be received and
credited for such purpose by the Trustee at the Redemption Price specified
in such Securities for redemption through operation of the sinking fund and
the amount of such sinking fund payment shall be reduced accordingly.
SECTION 12.03 Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date
for any series of Securities, the Company will deliver to the Trustee an
Officers' Certificate specifying the amount of the next ensuing sinking
fund payment for that series pursuant to the terms of that series, the
portion thereof, if any, which is to be satisfied by payment of cash and
the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities of that series pursuant to Section 12.02 and will also
deliver to the Trustee any Securities to be so delivered. Not less than 15
nor more than 60 days before each such sinking fund payment date the
Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 11.03 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 11.04. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 11.06 and 11.07.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
HASBRO, INC.
By:_____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
TRUST COMPANY OF NEW YORK,
as Trustee
By:______________________________
Name:
Title:
Exhibit 4(b)(ii)
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
HASBRO, INC.
7.95% NOTES DUE 2003
(the "Securities")
REGISTERED PRINCIPAL AMOUNT
No. III-1
INTEREST PAYABLE EACH MARCH 15 AND SEPTEMBER 15 AND AT MATURITY.
CUSIP: 418056AK3
ORIGINAL ISSUE DATE: March 15, 2000
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INTEREST RATE: 7.95%
- - - - - - - - - - - - - - - - - -------------
MATURITY DATE: March 15, 2003
- - - - - - - - - - - - - - - - - -------------
OTHER PROVISIONS:
- - - - - - - - - - - - - - - - - ----------------
Hasbro, Inc., a Rhode Island corporation (the "Company", which term
includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO. or registered
assigns, the principal sum of [ ]
on the Maturity Date set forth above, and to pay interest on the
outstanding principal amount hereof from March 15, 2000, or from the most
recent interest payment date (each such date, an "Interest Payment Date")
to which interest has been paid or duly provided for, semi-annually in
arrears on March 15 and September 15 of each year, commencing September 15,
2000 at the rate set forth above per annum until the principal hereof shall
have become due and payable, and at the same rate per annum on any overdue
principal and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually. The amount of
interest payable on any Interest Payment Date shall be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date
on which the principal of or interest on this Security is payable is not a
Business Day, then the payment payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), with the same force and effect
as if made on such date.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the person in whose name this Security (or one or
more Predecessor Securities, as defined in said Indenture) is registered at
the close of business on the regular record date for such interest
installment, which shall be the March 1 or September 1 immediately
preceding the relevant Interest Payment Date.
The principal of and interest on this Security shall be payable at
the office or agency of the Company maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is
legal tender for payment of public and private debts; provided, however,
that, payment of interest may be made at the option of the Company (i) by
check mailed to the holder at such address as shall appear in the Security
Register or (ii) by transfer to an account maintained by the Person
entitled thereto, provided that proper written transfer instructions have
been received by the relevant record date.
Unless the certificate of authentication hereon has been executed
by the Trustee by the manual signature of one of its authorized officers,
this Security shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Indenture, date as of March 15,
2000 (herein, the "Indenture"), by and between the Company and The Bank of
Nova Scotia Trust Company of New York, as Trustee (herein, the "Trustee").
The provisions of this Security are continued on the reverse
hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, HASBRO, INC. has caused this Instrument to be
signed manually or by facsimile signature by its Chairman of the Board of
Directors, Vice Chairman of the Board of Directors, President, Chief
Financial Officer or one of its Executive Vice Presidents, under its
corporate seal reproduced hereon and attested by its Secretary or one of
its Assistant Secretaries or its Treasurer or one of its Assistant
Treasurers.
HASBRO, INC.
By: _____________________________
Name:
Title:
Attested:
By: _____________________________
Name:
Title:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The Bank of Nova Scotia Trust Company
of New York,
as Trustee
By: _______________________________
as Authorized Officer
REVERSE OF SECURITY
HASBRO, INC.
7.95% Notes Due 2003
(a) Interest. The Company promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The
Company will pay interest semiannually on March 15 and September 15 of each
year, beginning September 15, 2000. Interest on the Security will accrue
from the most recent date to which interest has been paid or, if no
interest has been paid from March 15, 2000; provided, that, if there is no
existing Event of Default in the payment of interest, and if this Security
is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such
Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
(b) Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are the
registered Holders of the Security at the close of business on the March 1
or September 1 next preceding the Interest Payment Date. The Company will
pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts. The
Company, however, may pay principal and interest by its check payable in
such money.
The principal of and interest on this Security shall be payable
at the office or agency of the Company maintained for that purpose;
provided, however, that, payment of interest may be made at the option of
the Company (i) by check mailed to the holder at such address as shall
appear in the Security Register or (ii) by transfer to an account
maintained by the Person entitled thereto, provided that proper written
transfer instructions have been received by the relevant record date.
The foregoing notwithstanding, principal of and interest on
Securities which are represented by Global Securities held of record by the
Depositary will be payable in same-day funds.
(c) Registrar and Agents. Initially, The Bank of Nova Scotia
Trust Company of New York will act as Registrar, Paying Agent and agent for
service of notices and demands. The Company or any of its subsidiaries may
act as Paying Agent. The address of The Bank of Nova Scotia Trust Company
of New York is 1 Liberty Plaza, 23rd Floor, New York, NY 10006.
(d) Indenture; Limitations. The Company issued the Securities
under an Indenture dated as of March 15, 2000 (the "Indenture"), between
the Company and The Bank of Nova Scotia Trust Company of New York, as
trustee (in such capacity, the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms
of the Securities include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as
amended, 15 U.S.C. ss.ss. 77aaa-77bbbb (the "TIA"), as in effect on the
date of the Indenture. The Securities are subject to all such terms, and
the Holders of the Securities are referred to the Indenture and the TIA for
a statement of them.
The Securities are senior unsecured obligations of the Company
ranking pari passu with all other unsecured and unsubordinated indebtedness
of the Company from time to time outstanding, and are limited to
$550,000,000 aggregate principal amount. The Indenture imposes certain
limitations on the ability of the Company to, among other things, merge or
consolidate with any other Person and sell, lease, transfer or otherwise
dispose of all or substantially all of its properties or assets or to
engage in Sale and Leaseback Transactions.
(e) Optional Redemption by the Company. The Securities are not
redeemable prior to Maturity.
(f) Convertibilty. The Securities are not Convertible Debt
Securities.
(g) Sinking Fund. The Securities are not subject to any sinking
fund.
(h) Governing Law. The Securities and the Indenture shall be
deemed to be contracts made under the laws of the State of New York, and
for all purposes shall be construed in accordance with the laws of said
state.
(i) Discharge Prior to Maturity. The Company may elect under
certain conditions either (A) to defease and be discharged from any and all
obligations with respect to the Securities (except as otherwise provided in
the Indenture) ("defeasance") or (B) with respect to such Securities, to be
released from its obligations with respect to such Securities relating to
restrictions on secured debt and restrictions on Sale and Leaseback
Transactions, pursuant to Sections 10.09 and 10.10 of the Indenture,
respectively, ("covenant defeasance"), upon the irrevocable deposit with
the Trustee, in trust for such purpose, of money, and/or U.S. Government
Obligations which through the payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to
pay the principal of and interest, if any, on such Securities on the
scheduled due dates therefor. Such a trust may only be established if,
among other things, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (i) the Holders of such Securities will not
recognize income, gain or loss, for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred (such opinion, in the case of defeasance under clause (A) above,
must refer to and be based upon a ruling of the Internal Revenue Service)
and (ii) if the deposit referred to above shall include U.S. Government
Obligations, such deposit shall not result in the Company, the Trustee or
such trust being regulated as an "investment company," under the Investment
Company Act of 1940, as amended.
(j) Denominations, Transfer, Exchange. This Security is one of
a duly authorized issue of Securities of the Company designated as its
7.95% Notes Due 2003, limited in aggregate principal amount to
$550,000,000. The Securities are issuable in registered form without
coupons in denominations of $1,000 principal amount and integral multiples
thereof. A Holder may register the transfer of or exchange Securities in
accordance with the Indenture and subject to the transfer restrictions as
may be contained herein and therein from time to time. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture.
(k) Persons Deemed Owners. The registered Holder of a Security
may be treated as its owner for all purposes.
(l) Amendment and Waiver. Subject to certain exceptions,
without notice to the Holders of the Securities, the Indenture or the
Securities may be amended with the consent of (i) the Holders of not less
than a majority in principal amount of the Outstanding Securities, or (ii)
in case less than all of the several series of Securities are affected by
such amendment, the Holders of not less than a majority in principal amount
of each series so affected voting as a single class; and any existing
default or compliance with any provision may be waived with the consent of
the Holders of a majority in principal amount of the Securities then
outstanding. Without the consent of or notice to any Holder of Securities,
the Company may amend the Indenture or the Securities to, among other
things, cure any ambiguity, to correct or supplement any provision of the
Indenture which may be defective or inconsistent with any other provision
of the Indenture, or make any other provisions with respect to matters or
questions arising under the Indenture, provided that such other provision
does not adversely affect the interests of the Holders in any material
respect.
(m) Defaults and Remedies. If an Event of Default, as defined
in the Indenture, occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of Securities may declare all the
Securities to be due and payable immediately in the manner and with the
effect provided in the Indenture. Holders of Securities may not enforce the
Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it, subject to the provisions
of the TIA, before it enforces the Indenture or the Securities. Subject to
certain limitations, Holders of a majority in principal amount of the
Securities then outstanding may direct the Trustee in writing in its
exercise of any trust or power with respect to the Securities.
(n) Trustee Dealings with the Company. The Bank of Nova Scotia
Trust Company of New York, the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from,
and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee.
(o) No Recourse Against Others. No stockholder, director,
officer or incorporator, as such, past, present or future, of the Company
or any successor corporation or trust shall have any liability for any
obligation of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Security by accepting a Security waives and
releases all such liability. This waiver and release are part of the
consideration for the issuance of the Securities.
(p) Authentication. This Security shall not be valid until the
Trustee or any authenticating agent appointed by the Trustee signs the
certificate of authentication on the other side of this Security.
(q) Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with rights
of survivorship and not as tenants in common), CUST (= Custodian), AND
U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to: Hasbro,
Inc. 1027 Newport Avenue, Pawtucket, Rhode Island 02861, Attention: General
Counsel.
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Security to
______________________________________________
(Insert assignee's social security or tax ID number) _____________
______________________________________________
______________________________________________
______________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
Date:____________ Your signature:___________
(Sign exactly as your name appears on
the other side of this Security)
By:_________________________________
NOTICE: To be executed by an
executive officer
NOTICE: Signature(s) must be guaranteed by an institution which
is a participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.
EXHIBIT 10(ff)
FORM OF
AMENDMENT
DATED AS OF MARCH 10, 2000
TO
EMPLOYMENT AGREEMENT
--------------------
THE AGREEMENT by and between Hasbro, Inc., a Rhode Island
corporation (the "Company"), and ___________________________
(the "Executive"), dated as of the ___ day of _________________
is hereby amended as follows, effective March 10, 2000.
1. The preamble is amended and restated to read in its
entirety as follows:
"The Compensation and Stock Option Committee (the "Committee")
of the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and
its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by any threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company
currently and in the event of any threatened Change of Control,
and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Committee has caused the Company to enter into
this Agreement."
2. Section 2 is hereby amended to read in its entirety as
follows:
"2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (i)
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company or any of its subsidiaries, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its
subsidiaries, (iv) any acquisition by Alan or Sylvia Hassenfeld,
members of their respective immediate families or heirs of Alan
or Sylvia Hassenfeld or of any member of their respective
immediate families, the Sylvia Hassenfeld Trust, the Merrill
Hassenfeld Trust, the Stephen Hassenfeld Trust, the Alan
Hassenfeld Trust, the Hassenfeld Foundation, any trust or
foundation established by or for the primary benefit of any of
the foregoing or controlled by one or more of any of the
foregoing, or any affiliates or associates (as such terms are
defined in Rule 12b-2 promulgated under the Exchange Act) of any
of the foregoing (collectively, the "Hassenfeld Group"), (v) any
acquisition by any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately
prior to such acquisition in substantially the same proportions
as their ownership, immediately prior to such acquisition, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be.
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose appointment, election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents; or
(c) Consummation of a reorganization, merger or
consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such reorganization, merger or consolidation in substantially
the same proportions as their ownership, immediately prior to
such reorganization, merger or consolidation of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company or consummation of the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, more than 60%
of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be."
3. Section 4(b) is hereby amended to read in its entirety as
follows:
"(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary
("Annual Base Salary"), which shall be paid at a bi-weekly rate,
at least equal to 26 times the highest bi-weekly base salary
paid or payable, including by reason of any deferral, to the
Executive by the Company and its affiliated companies (as
defined below) in respect of the 52 week period immediately
preceding the bi-weekly period in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in
the ordinary course of business to other peer executives of the
Company and its affiliated companies. Any increase in Annual
Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement,
the term "affiliated companies" shall include any company
controlled by, controlling or under common control with, the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during
the Employment Period, an annual bonus (the "Annual Bonus") in
cash at least equal to the Executive's highest target bonus for
the fiscal year in which the Effective Date occurs provided,
however, that if no target bonus is established for such fiscal
year, then the Annual Bonus shall equal the average annualized
(for any fiscal year consisting of less than twelve full months
or with respect to which the Executive has been employed by the
Company for less than twelve full months) bonus paid or payable,
including by reason of any deferral, to the Executive by the
Company and its affiliated companies in respect of the three
fiscal years immediately preceding the fiscal year in which the
Effective Date occurs provided, however, that if the Executive
has not been employed for all of such period, the average
annualized bonuses over the actual number of full or partial
fiscal years of employment shall be utilized for this
computation. Each such Annual Bonus shall be paid no later than
the fifteenth day of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such
Annual Bonus.
(iii) Special Bonus. In addition to Annual Base Salary and
Annual Bonus payable as hereinabove provided, if the Executive
remains employed with the Company and its affiliated companies
through the first anniversary of the Effective Date, the Company
shall pay to the Executive a special bonus (the "Special Bonus")
in recognition of the Executive's services during the crucial
one-year transition period following the Change of Control in
cash equal to the sum of (A) 26 times the average bi-weekly base
salary paid or payable, including by reason of any deferral, to
the Executive by the Company and its affiliated companies during
the 260-week period immediately preceding the week in which the
Effective Date occurs (such product, the "Average Annual
Salary") and (B) the higher of (i) the Highest Annual Bonus (as
defined in Section 6(a)(i)A. hereof), and (ii) the average
annualized (for any fiscal year consisting of less than twelve
full months or with respect to which the Executive has been
employed by the Company for less than twelve full months) bonus
paid or payable, including by reason of any deferral, to the
Executive by the Company and its affiliated companies during the
five fiscal year period immediately preceding the fiscal year in
which the Effective Date occurs (the "Average Annual Bonus")
provided, however, that if the Executive has not been employed
for all of such period, the average annualized bonuses over the
actual number of full or partial fiscal years of employment
shall be utilized for this computation. The Special Bonus shall
be paid no later than 30 days following the first anniversary of
the Effective Date.
(iv) Incentive, Profit Sharing, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, profit sharing, savings and
retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that
such distinction is applicable), profit sharing and savings
opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable
of those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies; provided however that the amounts payable
pursuant to this Section 4(b)(iv) are not intended to duplicate
annual bonuses otherwise payable pursuant to Section 4(b)(ii).
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in
no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in
the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(vi) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including,
without limitation, auto allowances, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies at any
time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company
and its affiliated companies as in effect for the Executive at
any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies."
4. Sections 6(a)(I)A. and 6(a)(I)B. are hereby amended to
read in their entirety as follows:
"6. Obligations of the Company upon Termination. (a) Good
Reason or during the Window Period; Other Than for Cause, Death
or Disability. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause,
death or Disability or the Executive shall terminate employment
either for Good Reason or without any reason during the Window
Period:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate
of the following amounts (such aggregate shall be hereinafter
referred to as the "Special Termination Amount"):
A. The sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the Executive's Annual Bonus for the last fiscal year,
to the extent not theretofore paid, (3) the product of (x) the
greater of (i) the Executive's target bonus for the fiscal year
in which the Date of Termination occurs, and (ii) the Annual
Bonus (such greater amount shall be hereinafter referred to as
the "Highest Annual Bonus") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and
(4) the Special Bonus, if due to the Executive pursuant to
Section 4(b)(iii) of this Agreement, to the extent not
theretofore paid and (5) any compensation previously deferred by
the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in
clauses (1), (2), (3), (4) and (5) shall be hereinafter referred
to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) two and (2) the
sum of (x) the Executive's Average Annual Salary and (y) the
greater of (A) the Highest Annual Bonus and (B) the Average
Annual Bonus; provided, however, that if the Special Bonus has
not been paid to the Executive because such termination occurs
prior to the first anniversary of the Effective Date, such
amount shall be increased by the amount of the Special Bonus;
and"
5. The first sentence of Section 9(b) is hereby amended to
read in its entirety as follows:
"(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
KPMG LLP, or such other accounting firm as shall then be serving
as the auditors for the Company (the "Accounting Firm") which
shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt
of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company."
Except as herein amended the Employment Agreement between the
Company and the Executive shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the
Compensation and Stock Option Committee of its Board of
Directors, the Company has caused these presents to be executed
in its name of its behalf, all as of the day and year first
above written.
-----------------------------
HASBRO, INC.
By --------------------------
EXHIBIT 10(ss)
December 30, 1999
Mr. John T. O'Neill
28 Narragansett Bay Avenue
Warwick, RI 02889
Dear John:
In connection with your retirement from employment with Hasbro,
Inc. (the "Company"), on December 31, 1999, the "Company" will
pay you the basic early retirement benefits described in Section
2 of the attached "Description of Early Retirement Benefits" if
you do not sign and return this letter postmarked by February 22,
2000.
If you timely sign and return this letter, the Company will pay
and provide you the enhanced early retirement benefits subject to
the terms and conditions outlined in Section 1 of the attached
"Description of Early Retirement Benefits". By signing and
returning this letter you will be agreeing to the terms and
conditions set forth in the numbered paragraphs below, including
the release of claims set forth in paragraph 2. You should
consult with your own attorney before signing this letter.
If after reviewing this letter with your attorney, you find the
terms and conditions are satisfactory to you, you should sign and
return this letter to Bob Carniaux, Sr. Vice President, Human
Resources in the enclosed Airborne Express return envelope
postmarked by February 22, 2000. If you sign this letter, you
may change your mind and revoke your agreement during the seven
(7) day period after you have signed it. If you do not so
revoke, this letter will become a binding agreement between you
and the Company upon the expiration of the seven (7) day
revocation period.
The following numbered paragraphs set forth the terms and
conditions which will apply if you timely sign and return this
letter and do not revoke it within the seven (7) day revocation
period:
1. Description of Early Retirement Benefits. The early
retirement benefits to be paid to you if you timely sign and
return this letter are as described in Section 1 of the attached
"Description of Early Retirement Benefits". The payment of these
benefits is subject to the terms of this letter. You acknowledge
and agree that the benefits payable to you if you timely sign and
return this letter are more than the Company would be obligated
to pay or provide to you if you did not sign and return this
letter.
2. Release. You hereby fully, forever, irrevocably and
unconditionally release, remise and discharge the Company, and
any subsidiary or affiliated organization of the Company or their
current or former officers, directors, stockholders, corporate
affiliates, attorneys, agents and employees (the "Released
Parties") from any and all claims, charges, complaints, demands,
actions, causes of action, suits, rights, debts, sums of money,
costs, accounts, reckonings, covenants, contracts, agreements,
promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including attorneys' fees and costs),
of every kind and nature, known or unknown, which you ever had or
now have against the Released Parties, including, but not limited
to, all claims arising out of your employment, all claims arising
out of the retirement of your employment, all claims arising from
any failure to re-employ you, all claims of race, sex, national
origin, handicap, religious, sexual preference, benefit and age
discrimination, all employment discrimination claims under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000 et seq.,
the Age Discrimination in Employment Act, 29 U.S.C. Sec. 621 et
JOHN T. O'NEILL
December 30, 1999
Page 2
seq., the Americans with Disabilities Act of 1990, 29 U.S.C.
Sec. 12101 et seq., the Employee Retirement Income Security Act
of 1974, 29 U.S.C. Sec. 1001 et seq., and similar state or local
statutes, wrongful discharge claims, common law tort, defamation,
breach of contract and other common law claims, and any claims
under any other federal, state or local statutes or ordinances
not expressly referenced above; provided, that nothing contained
herein will be construed to release your rights, as a former
employee, officer and director of the Company and various of its
divisions and subsidiaries, to indemnification under applicable
by-laws and Company policies, or to your rights to vested
benefits under Company-sponsored employee benefits plans.
3. Covenant Not To Sue. You represent and warrant that you
have not filed any complaints, charges, or claims for relief
against the Released Parties. You further agree not to bring any
complaints, charges or claims against the Released Parties with
respect to any matters arising out of your employment with or
retirement from employment with the Company.
4. Proprietary Information. You acknowledge and reaffirm your
representations and obligations as set forth in the Invention,
Assignment and Proprietary Information Agreement which you
previously signed in connection with your employment with the
Company.
5. Legal Expenses. The Company agrees to pay reasonable and
documented legal expenses, up to a maximum of fifteen thousand
dollars ($15,000), incurred by you in connection with drafting
this Letter Agreement and related documents.
6. Nature of Agreement. You and the Company understand and
agree that this letter agreement is a early retirement and
settlement agreement and does not constitute an admission of
liability or wrongdoing on the part of you, the Company, or any
other person.
7. Amendment. This letter agreement shall be binding upon the
parties and may not be modified in any manner, except by an
instrument in writing of concurrent or subsequent date signed by
a duly authorized representative of the parties hereto. This
agreement is binding upon and shall inure to the benefit of the
parties and their respective agents, assigns, heirs, executors,
successors and administrators. No delay or omission by the
Company in exercising any right under this agreement shall
operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a
bar or waiver of any right on any other occasion.
8. Validity. Should any provision of this letter agreement
be declared or be determined by any court of competent
jurisdiction to be illegal or invalid, the validity of the
remaining parts, terms, or provisions shall not be affected
thereby and said illegal and invalid part, term or provision
shall be deemed not to be a part of this agreement.
JOHN T. O'NEILL
December 30, 1999
Page 3
9. Confidentiality. You understand and agree that the terms
and contents of this letter agreement, and the contents of the
negotiations and discussions resulting in this agreement, shall
be maintained as confidential by you and your agents and
representatives, and any dispute resolved by this agreement shall
also remain confidential, and none of the above shall be
disclosed except to the extent required by federal or state law
or as otherwise agreed to in writing by an officer of the
Company; provided, that you shall not be under any restraint with
respect to disclosure of your continuing obligations to the
Company under Section 4 and 13 hereof.
10. Entire Agreement and Applicable Law. This letter
agreement contains and constitutes the entire understanding and
agreement between the parties hereto with respect to your early
retirement benefits and settlement of claims against the Company
and cancels all previous oral and written negotiations,
agreements, commitments, and writings in connection therewith.
This agreement shall be governed by the laws of the State of
Rhode Island to the extent not preempted by federal law.
11. Acknowledgments. You acknowledge that you have been given
at least twenty-one (21) days to consider this letter agreement
and that the Company advised you to consult with any attorney of
your own choosing prior to signing this letter. You may revoke
this agreement for a period of seven (7) days after signing this
letter, and the agreement shall not be effective or enforceable
until the expiration of this seven (7) day revocation period.
Additionally, you will receive another seven (7) day revocation
period if the Company's Compensation and Stock Option Committee
fails to approve the items described in Section 1(j) of the
attached Description of Early Retirement Benefits, said seven (7)
days to run from receipt by you of written notice of the
Compensation and Stock Option Committee's decision.
12. Voluntary Assent. You affirm that no other promises or
agreements of any kind have been made to or with you by any
person or entity whatsoever to cause you to sign this letter
agreement, and that you fully understand the meaning and intent
of this agreement. You state and represent that you have had an
opportunity to fully discuss and review the terms of this
agreement with an attorney. You further state and represent that
you have carefully read this letter, understand the contents
herein, freely and voluntarily assent to all of the terms and
conditions hereof, and sign your name of your own free act.
13. Covenant Not to Compete.
(a). You agree that you will not, without written consent of
the Company, at any time during which Early Retirement Benefits
are payable under this letter agreement and for a period of two
years from the date Early Retirement Benefits cease under this
letter agreement, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management,
operation or control of, render services or advice to, or be
connected with, as partner, stockholder, director, officer,
agent, employee, consultant or otherwise, any business, firm or
corporation which competes with the Company in any country or
line of business in which the Company is engaged.
(b). You agree that during the period in which Early
Retirement Benefits are paid and thereafter for a period of two
years, you will not interfere with any relationship, contractual
or otherwise, between the Company and any other party, including;
without limitation, any customer, supplier, distributor, lessor
or lessee, licenser or licensee, commercial or investment banker.
(c). You understand, acknowledge and agree that the
provisions of this Section 12 shall survive the termination of
this letter agreement.
JOHN T. O'NEILL
December 30, 1999
Page 4
If you have any questions about the matters covered in this
letter, please call Bob Carniaux, Sr. Vice President, Human
Resources at (401) 727-5654.
Very truly yours,
/s/ Alan G. Hassenfeld
Alan G. Hassenfeld
Chairman & CEO
Hasbro, Inc.
JOHN T. O'NEILL
December 30, 1999
Page 5
I hereby agree to the terms and conditions set forth above and in
the attached Description of Early Retirement Benefits. I intend
that this letter will become a binding agreement between me and
the Company if I do not revoke my acceptance within seven (7)
days.
/s/ John T. O'Neill
Signature ---------------------
(Employee's Name)
February 18, 2000
Date: --------------------
To be returned in enclosed envelope by February 22, 2000.
HASBRO, INC.
DESCRIPTION OF EARLY RETIREMENT BENEFITS
Name of Employee: JOHN T. O'NEILL
Date of Offer: December 30, 1999
Retirement Date: December 31, 1999
If you timely sign and return the attached letter and it becomes
a binding contract between you and the Company, the Company will
pay you the enhanced early retirement subject to the terms and
conditions outlined in Section 1 below, the terms and conditions
contained in the attached letter and description.
If you do not timely sign and return the attached letter, the
Company will pay you the basic early retirement benefits
described in Section 2 below, subject to the terms and conditions
contained in this description and the Company's Early Retirement
Benefits Plan for Salaried Employees.
Section 1. Enhanced Early Retirement Benefits. If you timely
sign and return the attached letter and it becomes a binding
contract between you and the Company, you will be entitled to an
enhanced program of early retirement benefits consisting of the
following. These enhanced early retirement payments are offered
in consideration of your agreement to retire early:
(a) early retirement payment in the amount of $960,000 paid in
five installments as follows: first payment by February 28, 2000
in the amount of $135,000, three quarterly payments in the amount
of $200,000 paid on March 31, 2000, June 30, 2000, September 30,
2000, and a final payment on January 3, 2001 in the amount of
$225,000.
(b) early retirement pay at the base rate of $20,280.78 bi-
weekly for 43 pay periods beginning January 21, 2000 and ending
on August 31, 2001, (the period between December 31, 1999 and
August 31, 2001 being sometimes hereinafter referred to as the
"early retirement period"). In addition, since your first week
of early retirement will be during the middle of a bi-weekly pay
period, your first week of early retirement pay (January 3, 2000
- - - - - - - - - - - - - - - - - - January 7, 2000) will be for $10,140.39 and will be combined
with your last week of employment pay in the amount of $10,140.39
for a total of $20,280.78 which will be paid on January 7, 2000.
(c) an enhanced deferred compensation program where you will
defer 40% of your early retirement pay in the amount of $8,112.31
bi-weekly on a pre-tax basis for 43 pay periods and one pay
period of 40% of your first week's retirement pay in the amount
of $4,056.16, which will be made on January 7, 2000 and
thereafter in bi-weekly deferrals (the "Deferrals"). The
Deferrals will constitute a separate deferred compensation
program ("Program") for you in consideration of your early
retirement, the terms of which shall be consistent with the terms
of the Hasbro, Inc., Nonqualified Deferred Compensation plan (the
"DCP"), in which you will continue to participate including,
without limitation, the beneficiary designation and trust
provisions, except to the extent inconsistent with the following
terms: For purposes of your Program, the Deferrals will be deemed
allocated to the same funds and in the same percentages as your
election under the DCP and your distributions will be made in ten
annual installments in a manner consistent with the DCP, but not
commencing until the month next following the termination of your
early retirement payments described above;
(d) an award equal to your target incentive (i.e. $290,015)
payable as a management bonus for 1999 when bonuses are paid by
the Company in Q1 of 2000;
JOHN T. O'NEILL
December 30, 1999
DESCRIPTION OF EARLY RETIREMENT BENEFITS (CONTINUED)
- 2 -
(e) continuance of your current level of basic, supplemental
and dependent life insurance with the Company and you sharing the
cost for this coverage on the same basis as the cost is shared
between the Company and similarly situated active employees
during the early retirement period. Long-term disability benefit
ends on December 31, 1999;
(f) continuance of your current medical and dental coverage
during the early retirement period, with the Company and you
sharing the cost for this coverage on the same basis as the cost
is shared between the Company and similarly situated active
employees during the same period, and with your and your
dependents respective rights to continued coverage (or conversion
to an individual policy) at your own expense where available
beginning when the extended coverage under this item ends and
continuing for the maximum period permitted by the law known as
COBRA notwithstanding the continuation of medical and dental
coverage during the early retirement period;
(g) continuance of your leased Company executive automobile
through the end of the current lease (i.e. January 2002);
(h) continuance of use of your personal computer during the
early retirement period provided that you will be responsible for
all operating and maintenance costs;
(i) continuance of reimbursement for reasonable expenses for
personal executive income tax filing preparation and advising
services for tax years 1999 and 2000;
(j) the vesting of all previously granted unvested stock
options will be accelerated to December 31, 1999. You will be
granted an extended exercise period expiring 36 months after the
end of the early retirement period for all your outstanding
premium priced stock options. You will be granted an extended
exercise period of 12 months after the end of the early
retirement period for: (A) all regular stock options granted in
and after 1997, and (B) 22,500 regular stock options granted on
December 21, 1993. All other regular stock options held by you
will be canceled. All of the terms in this section 1 (j) are
subject to the approval of the Compensation and Stock Option
Committee of the Board of Directors of Hasbro, Inc.
(k) during the early retirement period, your right to
reimbursement for income tax service expenses, executive
automobile, personal computer, continuance of basic, supplemental
and dependent life insurance coverage partially at Company
expense, continuance of medical and dental coverage partially at
Company expense each shall end to the extent that you are
provided with similar coverage(s) or benefit(s) through such new
employment.
Section 2. Basic Benefits. If you do not timely sign and
return the attached letter, you will be entitled to a
program of early retirement benefits consisting of:
(a) early retirement pay at your base rate of pay (as in
effect immediately before termination and exclusive of any
bonuses, commissions, overtime pay, or other extra forms of
compensation) for three (3) weeks;
(b) a lump sum payment to be made at the end of the period of
early retirement pay for your unused vacation that has been
granted for use in the current year;
JOHN T. O'NEILL
December 30, 1999
DESCRIPTION OF EARLY RETIREMENT BENEFITS (CONTINUED)
- 3 -
(c) continuance of your current level of basic, supplemental
and dependent life insurance with the company and you sharing the
cost for this coverage on the same basis as the cost is shared
between the company and similarly situated active employees
during the period of early retirement pay;
(d) continuance of your current medical and dental coverage
during the period of early retirement pay, with the Company and
you sharing the cost for this coverage on the same basis as the
cost is shared between the Company and similarly situated active
employees during the same period, and with your and your
dependents rights to continued coverage (or conversion to an
individual policy) at your own expense where available beginning
when the extended coverage under this item ends and continuing
for the maximum period permitted by the law known as COBRA
notwithstanding the continuation of medical and dental coverage
during the salary continuation period.
(e) If you begin new employment during the period of early
retirement pay, your right to early retirement pay and
continuance of basic, supplemental and dependent life insurance
coverage and of medical and dental coverage partially at Company
expense shall end when the new employment begins and you shall be
obligated to repay to the Company any early retirement pay paid
to you and any premiums paid by the Company for basic life
insurance coverage and the Company's share of the cost for
medical and dental coverage paid after you begin the new
employment.
Section 3. Other Provisions.
(a) You will be entitled to any benefits payable after or on
account of retirement from employment under any employee pension
or welfare benefit plans, stock option plans, or other plans or
programs or policies of the Company in accordance with their
terms and conditions, unless otherwise stated above in Section 1.
You also will receive a profit sharing payment for fiscal year
1999 on the same basis as other similarly-situated senior
executives. Further, for the purpose of computing your pension
benefit, you will be credited with 1.30435 years of Credited
Service for each 1.0 year of Credited Service actually earned
under the Pension Plan. The benefits attributed to the additional
service credit shall be payable by the Company and not from the
Hasbro, Inc. Pension Plan or the Hasbro, Inc. Supplemental
Benefit Retirement Plan, but shall be included and secured under
any trust established with respect to the Hasbro, Inc.,
Supplemental Benefit Retirement Plan, on the same terms and
subject to the same conditions as benefits under the Hasbro, Inc.
Supplemental Benefits Retirement Plan;
(b) The Company may withhold from any payment described
herein:
(1) any federal, state, or local income or payroll taxes
required by law to be withheld with respect to such payment;
(2) such sum as the Company may reasonably estimate is
necessary to cover any taxes for which the Company may be liable
and which may be assessed with regard to such payment; and
JOHN T. O'NEILL
December 30, 1999
DESCRIPTION OF EARLY RETIREMENT BENEFITS (CONTINUED)
- 4 -
(3) such other amounts as appropriately may be withheld
under the Company's payroll policies and procedures from time to
time in effect.
(c) The early retirement benefits described herein are the
maximum benefits that the Company will pay. To the extent that
the Company owes you any amounts in the nature of early
retirement benefits under any other program, policy or plan of
the Company, or to the extent that any federal, state or local
law, including, without limitation, so-called "plant closing"
laws, requires the Company to give advance notice or make a
payment of any kind to you because of your involuntary
termination due to a layoff, reduction in force, plant or
facility closing, sale of business, or similar event, the
benefits provided hereunder or under the other arrangement shall
either be reduced or eliminated to avoid any duplication of
payment;
(d) In the event of your death during the early retirement
period, the early retirement pay shall cease at death.
EXHIBIT 11
HASBRO, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(Thousands of Dollars and Shares Except Per Share Data)
1999 1998 1997
--------------- --------------- ---------------
Basic Diluted Basic Diluted Basic Diluted
------- ------- ------- ------- ------- -------
Net earnings $188,953 188,953 206,365 206,365 134,986 134,986
Interest and amortization
on convertible notes,
net of taxes - - - - - 4,782
------- ------- ------- ------- ------- -------
Net earnings applicable
to common shares $188,953 188,953 206,365 206,365 134,986 139,768
======= ======= ======= ======= ======= =======
Weighted average number
of shares outstanding:
Outstanding at
beginning of year 196,175 196,175 200,162 200,162 193,294 193,294
Exercise of stock
options and warrants:
Actual 3,382 3,382 2,214 2,214 1,368 1,368
Assumed - 7,186 - 7,493 - 3,835
Conversion of convertible
notes:
Actual - - - - 2,033 2,033
Assumed - - - - - 9,429
Purchase of common stock (4,640) (4,640) (4,449) (4,449) (3,606) (3,606)
------- ------- ------- ------- ------- -------
Equivalent Shares 194,917 202,103 197,927 205,420 193,089 206,353
======= ======= ======= ======= ======= =======
Earnings per share $ .97 .93 1.04 1.00 .70 .68
======= ======= ======= ======= ======= =======
EXHIBIT 12
HASBRO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Fiscal Years Ended in December
(Thousands of Dollars)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Earnings available for
fixed charges:
Net earnings $188,953 206,365 134,986 199,912 155,571
Add:
Fixed charges 88,456 53,209 43,893 47,174 52,422
Taxes on income 84,892 97,113 69,539 106,981 96,979
------- ------- ------- ------- -------
Total $362,301 356,687 248,418 354,067 304,972
======= ======= ======= ======= =======
Fixed charges:
Interest on long-term
debt $ 25,068 9,688 7,348 9,258 9,267
Other interest charges 44,272 26,423 20,138 22,207 28,321
Amortization of debt
expense 425 121 377 339 339
Rental expense representa-
tive of interest factor 18,691 16,977 16,030 15,370 14,495
------- ------- ------- ------- -------
Total $ 88,456 53,209 43,893 47,174 52,422
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges 4.10 6.70 5.66 7.51 5.82
======= ======= ======= ======= =======
EXHIBIT 13
HASBRO, INC. AND SUBSIDIARIES
Selected Information Contained in
Annual Report to Shareholders
for the Year Ended December 26, 1999
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- - - - - - - - - - - - - - - - - -------------------------------------------------------------------------
The Company's Common Stock, Par Value $.50 per share (the "Common Stock"), is
traded on the New York and London Stock Exchanges. Prior to June 23, 1999,
the common stock was traded on the American and London Stock Exchanges. The
following table sets forth the high and low sales prices as reported on the
Composite Tape of the New York Stock Exchange and the American Stock
Exchange, as applicable, and the cash dividends declared per share of Common
Stock for the periods listed.
Sales Prices
---------------- Cash Dividends
Period High Low Declared
- - - - - - - - - - - - - - - - - ------ ---- --- --------------
1998
1st Quarter $25 3/4 19 7/8 $.05
2nd Quarter 27 1/16 23 1/8 .05
3rd Quarter 27 1/4 19 5/8 .05
4th Quarter 25 7/16 18 5/8 .05
1999
1st Quarter $30 1/8 21 13/16 $.06
2nd Quarter 37 27 .06
3rd Quarter 28 5/8 21 15/16 .06
4th Quarter 24 1/4 16 7/8 .06
The approximate number of holders of record of the Company's Common Stock as
of February 29, 2000 was 7,800.
Dividends
---------
Declaration of dividends is at the discretion of the Company's Board of
Directors and will depend upon the earnings, financial condition of the
Company and such other factors as the Board of Directors deems appropriate.
Payment of dividends is further subject to restrictions contained in
agreements relating to the Company's outstanding long-term debt. At December
26, 1999, under the most restrictive agreement the full amount of retained
earnings is free of restrictions.
SELECTED FINANCIAL DATA
- - - - - - - - - - - - - - - - - -----------------------
(Thousands of Dollars and Shares Except per share Data and Ratios)
Fiscal Year
------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Statement of
Earnings Data:
Net revenues $4,232,263 3,304,454 3,188,559 3,002,370 2,858,210
Net earnings $ 188,953 206,365 134,986 199,912 155,571
Per Common Share
Data:
Earnings
Basic $ .97 1.04 .70 1.02 .79
Diluted $ .93 1.00 .68 .98 .77
Cash dividends
declared $ .24 .21 .21 .18 .14
Balance Sheet Data:
Total assets $4,463,348 3,793,845 2,899,717 2,701,509 2,616,388
Long-term debt $ 420,654 407,180 - 149,382 149,991
Ratio of Earnings to
Fixed Charges(1) 4.10 6.70 5.66 7.51 5.82
Weighted Average
Number of Common
Shares:
Basic 194,917 197,927 193,089 195,061 197,272
Diluted 202,103 205,420 206,353 209,283 210,075
(1) For purposes of calculating the ratio of earnings to fixed charges,
fixed charges include interest, amortization of debt expense and
one-third of rentals; earnings available for fixed charges
represent earnings before fixed charges and income taxes.
MANAGEMENT'S REVIEW
- - - - - - - - - - - - - - - - - -------------------
Summary
- - - - - - - - - - - - - - - - - -------
A percentage analysis of results of operations follows:
1999 1998 1997
---- ---- ----
Net revenues 100.0% 100.0% 100.0%
Cost of sales 40.1 41.3 42.6
----- ----- -----
Gross profit 59.9 58.7 57.4
Amortization 4.1 2.2 1.7
Royalties, research and development 16.8 12.9 12.1
Advertising 10.8 13.3 12.9
Selling, distribution and administration 19.0 19.8 19.4
Restructuring charge and acquired in-process
research and development 1.5 .6 3.9
Interest expense 1.6 1.1 .9
Other (income) expense, net (.4) (.4) .1
----- ----- -----
Earnings before income taxes 6.5 9.2 6.4
Income taxes 2.0 2.9 2.2
----- ----- -----
Net earnings 4.5% 6.3% 4.2%
===== ===== =====
(Thousands of Dollars Except Share Data)
Results of Operations
- - - - - - - - - - - - - - - - - ---------------------
Net earnings for the year ended December 26, 1999 were $188,953 compared to
$206,365 and $134,986 in 1998 and 1997, respectively. Diluted earnings per
share was $.93 in 1999, $1.00 in 1998 and $.68 in 1997. During 1999, the
Company reorganized its business into segments. Net revenues and operating
profits, excluding charges relating to the 1999 consolidation program, of the
U.S. Toys, Games and International segments increased in 1999 over comparable
1998 levels. The operating loss in Operations, which is not intended to be a
profit center, and the operating profit in the Company's Other segments
decreased, all largely due to the reasons discussed below. The overall
increase in operating profit of the Games segment was partially offset by the
unfavorable impact of increased costs incurred to expand the Company's
offering of interactive software games. Part of this increased cost resulted
from escalating research and development costs, coupled with the
unanticipated shortfall in fourth quarter revenues attributable to the late
introduction of new product as well as a significant industry-wide softening
of the video and personal computer CD-ROM business in the fourth quarter and
price erosion. On an after-tax basis, excluding charges attributable to the
1999 consolidation program, this resulted in an approximate $53 million
dollar loss from interactive software games.
Net revenues for 1999 were $4,232,263 compared to $3,304,454 and $3,188,559
for 1998 and 1997, respectively. This approximate 28% increase in revenues
over 1998 levels was net of an approximate $62,000 unfavorable impact of
foreign currency translation rates. The Games segment led revenue growth
during the year, accounting for approximately 71% of the increase, followed
by U.S. Toys and International, contributing 18% and 13% of revenue growth,
respectively. Increased Games segment revenue was primarily driven by FURBY,
which accounted for 24% of segment revenue in 1999 compared to 7% in 1998.
Revenues from Wizards of the Coast, Inc. (Wizards), acquired in the fourth
quarter of 1999, accounted for 14% of Games segment revenues. Increased
activity in hand-held electronic games utilizing Company and licensed brands,
interactive CD-ROM games and traditional board games such as MONOPOLY and
TRIVIAL PURSUIT also contributed to Games segment growth. U.S. Toy segment
revenues were boosted by sales of STAR WARS product associated with the
theatrical release of STAR WARS: EPISODE 1: THE PHANTOM MENACE. Revenues from
this line accounted for 36% of segment revenues in 1999 compared to 13% in
1998. This, as well as the popular POKEMON line, traditional toy offerings
such as EASY BAKE and LITE BRITE and the full year inclusion of the MICRO
MACHINES line acquired with Galoob Toys, Inc. (Galoob) in the fourth quarter
of 1998, also contributed to revenue growth over 1998 by the U.S. Toy
segment. The International segment contribution to revenue growth was
primarily driven by sales of STAR WARS, POKEMON, TELETUBBIES and FURBY and
hand-held electronic products in certain markets, all partly offset by
decreased volume in traditional board games and puzzles as well as the
negative impact of foreign currency translation. The results of Other
segments negatively affected revenue by approximately 3%, primarily due to
decreased revenues of KOOSH and candy product.
The Company's gross profit margin increased to 59.9% from 58.7% in 1998, and
57.4% in 1997. The increase in margin from 1998 principally reflects the
increased revenues in the Games segment, where many product lines carry a
higher gross margin. The improvement in 1998 from 1997 is attributable to a
lower cost structure resulting from the removal of excess capacity, the
increased level of sales of interactive products, which have a higher gross
margin, and overall favorable material prices. The improvement in the 1998
gross margin was moderated by the unanticipated shortfall in business with
Toys `R Us which resulted in lower than anticipated factory utilization.
Amortization expense of $173,533 includes amortization of both property
rights and cost in excess of net assets acquired. This compares with $72,208
in 1998 and $53,767 in 1997. During 1999, impairment charges of $38,449, or
22% of amortization expense, were recognized, arising from the decision to
discontinue or significantly reduce product line offerings as part of our
1999 consolidation program. The remaining increases in all years were
attributable to the acquisitions made during the period.
Expenditures for royalties, research and development increased to $711,790
from $424,673 in 1998 and $386,912 in 1997. Included in these amounts are
expenditures for research and development of $254,599 in 1999, $184,962 in
1998 and $154,710 in 1997. As percentages of net revenues, research and
development was 6.0% in 1999, up from 5.6% in 1998 and 4.9% in 1997.
Contractual development commitments recognized for discontinued product lines
in connection with the 1999 consolidation program amounted to $10,992. The
remaining 1999 and the 1998 increases reflect the expenditures of the
Company's 1998 acquisitions as well as the continuing investment to grow the
Company's offering of interactive game titles. Revenues derived from
entertainment based properties, such as STAR WARS and POKEMON, and resultant
royalties, while continuous over the life of a contract, are generally higher
in amount in the year a theatrical release takes place. It is anticipated
that operating profit will also generally be higher in these years. The
degree to which revenues, royalties and operating profits fluctuate is
dependent not only on theatrical release dates, but video release dates as
well. Royalty expense increased in dollars and as a percent of net revenues
from 1998. Royalty commitments on discontinued product lines recognized in
connection with the 1999 consolidation program amounted to $15,300. The
remaining increase reflects the increased percentage of 1999 revenues
obtained from licensed product carrying higher royalty rates, primarily STAR
WARS. While royalties increased in dollars during 1998, they remained
constant as a percentage of net revenues.
On December 15, 1999, the Company announced plans to launch Games.com in mid-
2000. Games.com will be the Games segment's online internet portal, allowing
users to play Company branded games, have online chats with fellow gamers,
compete in tournaments and purchase games and related product from an online
store. The Company has entered into a non-binding memorandum of understanding
for a three-year licensing and distribution agreement with Go2Net, Inc.
providing technology, engineering and software management support for this
site. Revenue sources are expected to come from advertising, online game and
related product sales and premium subscription services. The Company expects
to spend approximately $60 million during 2000 to develop and launch this
site.
Advertising expense decreased to 10.8% of net revenues from the 1998 level of
13.3%, which compared to 12.9% in 1997. The decrease in 1999 primarily
reflects the mix of more entertainment based properties, such as STAR WARS
and POKEMON, marketed throughout our segments, which tend to carry a lower
advertising to revenue ratio. Increased revenues in our Games segment from
the popular FURBY and trading card games also contributed to the decrease
from 1998, as these lines do not carry as great of an advertising spend ratio
as other products. The increase in 1998 from 1997 reflects the mix of more
non-entertainment based product in 1998 and the absence of support from a
major motion picture release.
During 1999, selling, distribution and administration costs increased in
dollars but decreased as a percentage of net revenues to $799,919, or 19.0%
of revenues, from $655,938, or 19.9% in 1998 and $617,140, or 19.4%, in 1997.
Of the increase in dollars, approximately 25% of the increase reflects the
Games segment's 1999 acquisition of Wizards and approximately 31% of the
increase reflects higher performance based bonus accruals. The remainder of
the increase in dollars primarily reflects costs associated with the higher
level of activity in 1999. The decreased percentage reflects higher 1999
revenues as well as the Company's commitment to control these costs, and the
benefit received from the 1997 global integration and profit enhancement
program. In addition to normal inflationary trends, the 1998 increase over
1997 reflects the impact of the Company's acquisitions and new operations in
those years. Also adversely affecting the 1998 rate was the unanticipated
reduction in revenues resulting from the changes in inventory management
policies at Toys `R Us.
On December 7, 1999, the Company announced a program to further consolidate
manufacturing and sourcing activities and product lines, as well as
streamline and further regionalize marketing, sales and research and
development activities worldwide. Costs associated with this consolidation
program amounted to $141,575, and were recorded in the fourth quarter as
follows:
Restructuring charge $ 64,232
--------
Other operating expenses:
Cost of sales 8,740
Amortization 38,449
Royalties, research and development 26,292
Advertising 3,862
--------
77,343
--------
Total consolidation program costs $ 141,575
========
The significant components of the restructuring charge were the planned
closing of two factories, in Mexico and the United Kingdom, the reduction of
capacity at the remaining three factories, the shift of production to third
party manufacturers in the Far East and further consolidation and
regionalization of the International marketing and sales structure. The plan
anticipates the redundancy of approximately 2,200 employees, including 1,800
in manufacturing and sourcing activities and 400 worldwide in research and
product development, marketing, sales and administration. The restructuring
charge of $64,232 represents approximately $38,700 of cash charges for
severance benefits which will be disbursed over the employee's entitlement
period, $14,300 of cash charges for lease and facility closing costs to be
expended over the contractual lease term and closing process, and non-cash
charges of $11,200 for fixed asset write-offs, arising primarily in the
manufacturing area. Of the cash amount, approximately $4,700 has been paid
for severance benefits relating to 193 employees terminated as of December
26, 1999. Non-cash charges relating to fixed asset write-offs have been
credited to the respective line items in the balance sheet. The remaining
amount of approximately $48,000 is included in accrued liabilities. The
restructuring plan is expected to be completed in fiscal 2000. The Company
expects to generate pre-tax savings of approximately $16,000 in 2000 and
$23,000 per year thereafter from these actions.
The components of the consolidation program included in other operating
expenses represent costs associated with exiting certain product lines and
reevaluating other product lines which resulted in reduced expectations. The
product lines being exited were not, either individually or in the aggregate,
material to the Company's revenues or operating results. Approximately
$12,000 represents cash charges that will be incurred on contractual royalty,
product development and advertising commitments associated with the
discontinued product lines. Non-cash charges of approximately $65,000 relate
to asset write-offs and write-downs of underutilized assets. This includes
impairment of intangible assets arising from the decision to discontinue or
significantly reduce product line offerings. The resulting sum of
undiscounted future cash flows of these assets was not sufficient to cover
the carrying amount of the assets, and as such, they were written down to
their fair market value. Items relating to property rights and licenses,
goodwill, inventory, prepaid and other current assets have been credited to
the respective asset in the balance sheet.
During the third quarter of 1998, the Company incurred a one-time charge to
write off the $20,000 appraised value of acquired in-process research and
development of MicroProse, Inc. (MicroProse), which was acquired for a total
purchase price of approximately $70,000 on September 14, 1998.
Late in the fourth quarter of 1997, the Company announced a global
integration and profit enhancement program which included the redundancy of
approximately 2,500 employees, principally in manufacturing, and provided for
actions in three principal areas: a continued consolidation of the Company's
manufacturing operations; the streamlining of marketing and sales, while
exiting from certain underperforming markets and product lines; and the
further leveraging of overheads. Of the $140,000 estimated costs related to
these actions, $125,000 was reported as a restructuring charge and $15,000
was reflected in cost of sales. Of the restructuring amount, approximately
$54,000 related to severance and people costs, $52,000 to property, plant and
equipment and leases and $19,000 to product line related costs. During 1998,
the employment of all employees planned for redundancy was terminated. The
program has been completed. The Company had initially estimated its pretax
cost savings from this initiative to be $40,000 in 1998 and $70,000 per year
thereafter. Because of the unanticipated shortfall in sales to Toys 'R Us
during 1998 and changes in product mix, factory utilization rates were not as
high as initially anticipated, which resulted in below target savings during
1998. The Company estimated pretax savings of approximately $30,000 during
1998. During 1999, the Company estimates that it has realized planned pretax
savings of approximately $70,000. The positive cash flow impact from this
program has and will occur largely in the form of reduced outflows for
payment of costs associated with the manufacture and sourcing of products.
Interest expense was $69,340 in 1999 compared to $36,111 during 1998 and
$27,486 during 1997. The increase during the current year largely reflects
the costs associated with funding the Company's 1998 acquisitions, the 1999
acquisition of Wizards and the Company's stock repurchase program, all
partially offset by the availability of funds generated during 1999 and 1998.
Due to additional debt incurred during 1999, interest expense in 2000 is
expected to increase.
Other income of $15,616 in 1999 compares with $14,707 in 1998 and expense of
$3,097 in 1997. While 1999 and 1998 were essentially flat, the change between
1998 and 1997 primarily reflects the larger benefits to Hasbro from its
consolidated and unconsolidated operations in which it either is, or has, a
minority partner, increased interest income and a decrease in foreign
currency transactional losses.
Income tax expense as a percentage of pretax earnings in 1999 decreased to
31.0% from 32.0% and 34.0% in 1998 and 1997, respectively. The decrease in
all periods reflects the downward trend of the tax on international earnings
due to the reorganization of the Company's global business.
Liquidity and Capital Resources
- - - - - - - - - - - - - - - - - -------------------------------
The Company continued to have a strong and liquid balance sheet with cash and
cash equivalents of $280,159 at December 26, 1999. Cash and cash equivalents
were $177,748 and $361,785 at December 27, 1998 and December 28, 1997,
respectively.
Hasbro generated approximately $392,000 of net cash from its operating
activities in 1999, compared with approximately $127,000 in 1998 and $544,000
in 1997. The significant change between the 1999 and 1998 amounts results
from a combination of factors. Included in the 1999 amount was $38,361
utilized by changes in operating assets and liabilities, compared with
$267,231 utilized in 1998 and $273,344 provided in 1997. Full year accounts
receivable for 1999 increased at a rate significantly below that of the
increase in fourth quarter revenues. Reflecting the acquisition of Wizards
made during the fourth quarter and growth in inventory levels in the
International segment for 2000 product introduction, inventories increased
over prior year levels. Prepaid and other current assets also increased from
the prior year, in part due to the acquisition of Wizards and the increased
spending on product development. Reflecting amounts due for the Wizards
acquisition, the remaining unpaid amounts from the 1999 consolidation program
and increased bonus accruals in high performing segments, accounts payable
and accrued liabilities increased by 35% over prior year levels. Royalty
advances made in connection with the STAR WARS license that apply to future
years have been included in long-term assets.
During 1998, $267,231 was utilized by changes in operating assets and
liabilities. With the $170,723 increase in fourth quarter revenues from the
comparable period of 1997, most of which, under Hasbro's normal trading
terms, became due after the end of the Company's fiscal year, accounts
receivable increased. Inventories also increased, in part reflecting
acquisitions made during the year, as did prepaid expenses and other current
assets, largely reflecting higher advance royalty payments. Partially
offsetting these utilizations of funds was a small increase in accounts
payable and other accrued liabilities. During 1997, $273,344 was provided by
changes in operating assets and liabilities. Contributing to this were
reductions in accounts receivable, inventories and prepaid expenses and other
current assets and an increase in trade payables and accrued liabilities,
reflecting the unpaid portion of the costs associated with the Company's
global integration and profit enhancement program.
Cash flows from investing activities were a net utilization of $429,092,
$792,700 and $269,277 in 1999, 1998 and 1997, respectively. During 1999, the
Company expended approximately $107,000 on additions to its property, plant
and equipment while during 1998 and 1997 it expended approximately $142,000
and $100,000, respectively. Of these amounts, 53% in 1999, 38% in 1998 and
51% in 1997 were for purchases of tools, dies and molds related to the
Company's products. The 1998 additions also include the expenditures
associated with the consolidation of its Spanish manufacturing and marketing
operations into one facility. During the three years, depreciation and
amortization of plant and equipment was $103,791, $96,991 and $112,817,
respectively.
On September 30, 1999, the Company acquired the outstanding shares of
Wizards, for an initial purchase price of $325,000, subject to additional
payments based upon the closing balance sheet and future payments contingent
upon achieving certain operating objectives. The total acquisition cost to
date amounts to $412,769. The Company also made other smaller acquisitions
and investments, none of which were significant. Hasbro made three major
acquisitions during 1998, having an aggregate purchase price of $669,737. On
April 1, 1998, it acquired substantially all of the business and operating
assets of Tiger Electronics, Inc. and certain affiliates. On September 14,
1998, it acquired the outstanding shares of MicroProse through a cash tender
offer of $6.00 for each outstanding share of MicroProse. On October 30, 1998,
it acquired the outstanding shares of Galoob through a cash tender offer of
$12.00 for each outstanding share of Galoob. During 1997, Hasbro acquired
certain assets of OddzOn Products, Inc. and Cap Toys, Inc., wholly owned
subsidiaries of Russ Berrie and Company, Inc., for $167,379.
As part of the traditional marketing strategies of the toy industry, many
sales made early in the year are not due for payment until the fourth quarter
or early in the first quarter of the subsequent year, thus making it
necessary for the Company to borrow significant amounts pending these
collections. During the year, the Company borrowed through the issuance of
commercial paper and short-term lines of credit to fund its seasonal working
capital requirements in excess of funds available from operations and the
issuance of long-term debt. During 2000, the Company expects to fund these
needs in a similar manner and believes that the funds available to it are
adequate to meet its needs. At March 5, 2000, the Company's unused committed
and uncommitted lines of credit, including revolving credit agreements for
$350,000 (long-term) and $350,000 (short-term), were in excess of $1,300,000.
During 1999, net financing activities provided approximately $145,000 of
funds to the Company, primarily through the use of short-term borrowings. Net
financing activities during 1998 provided approximately $490,000, principally
through the issuance of $100,000 of 5.60% notes due November 1, 2005,
$150,000 of 6.15% notes due July 15, 2008 and $150,000 of 6.60% debentures
due July 15, 2028. In 1997, net financing activities utilized approximately
$125,000 of Hasbro's funds. During 1999, the Company also invested
approximately $240,000 to repurchase its common stock in the open market.
This compares with approximately $180,000 and $135,000 repurchased in the
open market in 1998 and 1997, respectively.
During October 1997, the Company called its 6% Convertible Subordinated Notes
Due 1998 for redemption. Substantially all of these notes were converted into
approximately 11.4 million shares of Hasbro common stock.
On December 9, 1997, the Board of Directors (the Board) canceled all prior
share repurchase authorizations and authorized the purchase of up to an
additional $500,000 of the Company's common stock. At December 26, 1999,
$72,008 remained under this authorization. In addition to the remaining
amount under this repurchase authorization, on December 6, 1999 the Board
authorized an additional common share repurchase program up to $500,000. The
Company anticipates that it will continue to repurchase its shares in the
future, when it deems conditions to be favorable (see discussion of the Dutch
Auction Tender Offer below), and will fund such purchases from working
capital or available lines of credit. The shares acquired under these
programs are being used for corporate purposes including issuance upon the
exercise of stock options and warrants.
Financial Risk Management
- - - - - - - - - - - - - - - - - -------------------------
The Company is exposed to market risks attributable to fluctuations in
foreign currency exchange rates primarily as a result of sourcing products in
four currencies while marketing those products in more than thirty
currencies. Results of operations will be affected primarily by changes in
the value of the U.S. dollar, Hong Kong dollar, British pound, Euro and
Mexican peso versus other currencies, principally in Europe and the United
States.
To manage this exposure, as of December 26, 1999, Hasbro has hedged a portion
of its estimated fiscal 2000 foreign currency transactions using a
combination of forward foreign exchange contracts and purchased foreign
currency options. The Company estimates that a hypothetical immediate 10%
unfavorable movement in the currencies involved could result in an
approximate $4.7 million decrease in the fair value of these instruments. The
Company is also exposed to foreign currency risk with respect to its net cash
and cash equivalents or short-term borrowing positions in other than the U.S.
dollar. Hasbro believes, however, that the risk on this net exposure would
not be material to its financial condition. In addition, the Company's
revenues and costs have been and will likely continue to be affected by
changes in foreign currency rates. The Company does not speculate in and
other than set forth above, the Company does not hedge foreign currencies.
At December 26, 1999, the Company had fixed rate long-term debt of $420,654.
Interest rate changes affect the fair value of this fixed rate debt but do
not impact earnings or cash flows. The Company estimates that a hypothetical
one percentage point decrease or increase in interest rates would increase or
decrease the fair value of this debt by approximately $27,000 or $24,000,
respectively.
The Economy and Inflation
- - - - - - - - - - - - - - - - - -------------------------
The Company continued to experience difficult economic environments in some
parts of the world during 1999. The principal market for the Company's
products is the retail sector where certain customers have experienced
economic difficulty. The Company closely monitors the creditworthiness of its
customers and adjusts credit policies and limits as it deems appropriate.
The effect of inflation on the Company's operations during 1999 was not
significant and the Company will continue its policy of monitoring costs and
adjusting prices accordingly.
Year 2000
- - - - - - - - - - - - - - - - - ---------
During 1999, the Company concluded its efforts to address the Year 2000
issue. A planned global 'enterprise' system became operational at many of the
Company's major units replacing a number of older non-compliant systems and
modifications or replacements were made of other non-compliant systems.
Readiness reviews were completed on customers, vendors and service providers.
Contingency plans were expanded to include potential Year 2000 related
failures. Excluding costs related to the enterprise system, the Company's out
of pocket costs associated with becoming Year 2000 compliant were
approximately $2,500. These costs were expensed as incurred, and the Company
does not anticipate any additional material expenditure as a result of Year
2000 issues.
Based on operations since January 1, 2000, including the leap year date of
February 29, 2000, the Company has not experienced any significant disruption
or change, and does not expect any significant impact to its ongoing business
as a result of the Year 2000 issue. Additionally, the Company is not aware of
any significant Year 2000 issues or problems that have arisen for its
significant customers, vendors or service providers. As there can be no
assurance that the Company's efforts to achieve Year 2000 readiness have been
completely successful or that customers, vendors and service providers will
not experience Year 2000 related failures in the future, the Company will
continue to monitor its exposure to Year 2000 issues and will leave its
contingency plans in place in the event that any significant Year 2000
related issues arise.
Euro Conversion
- - - - - - - - - - - - - - - - - ---------------
Certain member countries of the European Union established fixed conversion
rates between their existing currencies and the European Economic Monetary
Union common currency, or Euro. While the Euro was introduced on January 1,
1999, member countries will continue to use their existing currencies through
January 1, 2002, with the transition period for full conversion to the Euro
ending June 30, 2002. Transition to the Euro creates certain issues for the
Company with respect to upgrading information technology systems for 2002
full use requirements, reassessing currency risk, product pricing, amending
business and financial contracts as well as processing tax and accounting
records. The Company has and will continue to address these transition issues
and does not expect the Euro to have a material effect on the results of
operations or financial condition of the Company.
Forward-Looking Statements
- - - - - - - - - - - - - - - - - --------------------------
This discussion contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements may be
identified by the use of forward-looking words or phrases such as
"anticipate," "believe," "expect," "intend," "may," "planned," "potential,"
"should," "will," and "would." These forward-looking statements are
inherently subject to known and unknown risks and uncertainties. A variety of
factors could cause actual results and experience to differ materially from
the anticipated results or other expectations expressed in the forward-
looking statements. These factors include, but are not limited to market
conditions, third party actions or approvals and the impact of competition
that could delay or increase the cost of implementation of our consolidation
program or alter our actions and reduce actual results, and with respect to
our on-line gaming site initiative, technical difficulties in adapting games
to on-line format and establishing the on-line game site that could delay or
increase the cost of the site becoming operational; the acceptance by
customers of the games and other products and services to be offered at our
on-line game site; and competition from other on-line game sites and other
game playing formats as well as competition from other internet companies in
recruiting and retaining talented employees. We undertake no obligation to
revise the forward-looking statements contained in this discussion or to
update the forward-looking statements to reflect events or circumstances
occurring after the date of this discussion.
Other Information
- - - - - - - - - - - - - - - - - -----------------
The Company's revenue pattern continues to show the second half of the year
more significant to its overall business and within that half, the fourth
quarter most prominent. The first half of 1999 represented a greater
proportion of full year revenues than the first half of 1998, principally
because of the May 19, 1999 theatrical release of STAR WARS: EPISODE 1: THE
PHANTOM MENACE. The trend of retailers over the past few years has been to
make a higher percentage of their purchases within or close to the fourth
quarter holiday consumer selling season, which includes Christmas.
The Company is not aware of any material amounts of potential exposure
relating to environmental matters and does not believe its compliance costs
or liabilities to be material to its operating results or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 was
amended during 1999, requiring the Company to adopt SFAS 133 effective
January 1, 2001. SFAS 133 will require that the Company record all
derivatives, such as foreign exchange contracts, in the balance sheet at fair
value. Changes in derivative fair values will either be recognized in
earnings as an offset to the changes in the fair value of the related hedged
assets, liabilities and firm commitments or, for forecasted transactions,
deferred and recorded as a component of other shareholders' equity until the
hedged transactions occur and are recognized in earnings. The ineffective
portion of a hedging derivative's change in fair value will be immediately
recognized in earnings. The impact of SFAS 133 on the Company's financial
statements will depend on several factors, including interpretive guidance
issued from the FASB, the extent of the Company's hedging activities and use
of equity and other financial derivatives, the Company's ability to forecast
foreign currency transactions compared to actual results and the
effectiveness of the hedging instruments used. However, the Company does not
believe adoption of SFAS 133 will have a material impact on either the
Company's financial condition or its results of operations.
On February 25, 2000, the Company announced plans to repurchase up to 17.25
million shares of its common stock at a purchase price between $15.25 and
$17.50 per share through a Modified Dutch Auction Tender Offer, commencing
February 29 and expiring on March 27, 2000, unless extended by the Company.
The Modified Dutch Auction tender procedure allows shareholders to select the
price within the specified range at which each shareholder is willing to sell
all or a portion of his or her shares to the Company. This repurchase will
complete the repurchase authorization of 1997 and utilize part of the
additional $500 million share repurchase authorization of December 1999.
On March 15, 2000 the Company issued $750 million of debt securities in the
form of $550 million of notes at 7.95% due March 15, 2003 and $200 million
notes at 8.50% due March 15, 2006. The Company intends to use the proceeds of
these notes to pay down short term debt primarily incurred in connection with
the acquisition of Wizards and the repurchase of shares of its common stock,
including repurchases of shares under the Modified Dutch Auction Tender
Offer.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - - - - - - - - - - - - - - - - -------------------------------------------
See attached pages.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Hasbro, Inc.:
We have audited the accompanying consolidated balance sheets of
Hasbro, Inc. and subsidiaries as of December 26, 1999 and December 27, 1998
and the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the fiscal years in the three-year period ended
December 26, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Hasbro, Inc. and subsidiaries as of December 26, 1999 and December 27, 1998
and the results of their operations and their cash flows for each of the
fiscal years in the three-year period ended December 26, 1999 in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
Providence, Rhode Island
February 7, 2000
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 26, 1999 and December 27, 1998
(Thousands of Dollars Except Share Data)
Assets 1999 1998
------ ---- ----
Current assets
Cash and cash equivalents $ 280,159 177,748
Accounts receivable, less allowance for
doubtful accounts of $65,000 in 1999
and $64,400 in 1998 1,084,118 958,826
Inventories 408,571 334,801
Prepaid expenses and other current assets 358,804 318,611
--------- ---------
Total current assets 2,131,652 1,789,986
Property, plant and equipment, net 318,825 330,355
--------- ---------
Other assets
Cost in excess of acquired net assets, less
accumulated amortization of $193,947 in 1999
and $152,008 in 1998 806,092 704,282
Other intangibles, less accumulated amortization
of $300,632 in 1999 and $192,268 in 1998 949,789 837,899
Other 256,990 131,323
--------- ---------
Total other assets 2,012,871 1,673,504
--------- ---------
Total assets $4,463,348 3,793,845
========= =========
HASBRO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 26, 1999 and December 27, 1998
(Thousands of Dollars Except Share Data)
Liabilities and Shareholders' Equity 1999 1998
------------------------------------ ---- ----
Current liabilities
Short-term borrowings $ 714,669 372,249
Trade payables 284,772 209,119
Accrued liabilities 983,280 729,605
Income taxes 88,606 55,327
--------- ---------
Total current liabilities 2,071,327 1,366,300
Long-term debt 420,654 407,180
Deferred liabilities 92,392 75,570
--------- ---------
Total liabilities 2,584,373 1,849,050
--------- ---------
Shareholders' equity
Preference stock of $2.50 par value.
Authorized 5,000,000 shares; none issued - -
Common stock of $.50 par value. Authorized
300,000,000 shares; issued 209,694,630 shares
in 1999 and 209,698,516 shares in 1998 104,847 104,849
Additional paid-in capital 468,329 521,316
Retained earnings 1,764,110 1,621,799
Accumulated other comprehensive earnings (32,982) (9,625)
Treasury stock, at cost, 16,710,620 shares in
1999 and 13,523,983 shares in 1998 (425,329) (293,544)
--------- ---------
Total shareholders' equity 1,878,975 1,944,795
--------- ---------
Total liabilities and shareholders' equity $4,463,348 3,793,845
========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Fiscal Years Ended in December
(Thousands of Dollars Except Share Data)
1999 1998 1997
---- ---- ----
Net revenues $4,232,263 3,304,454 3,188,559
Cost of sales 1,698,242 1,366,061 1,359,058
--------- --------- ---------
Gross profit 2,534,021 1,938,393 1,829,501
--------- --------- ---------
Expenses
Amortization 173,533 72,208 53,767
Royalties, research and development 711,790 424,673 386,912
Advertising 456,978 440,692 411,574
Selling, distribution and administration 799,919 655,938 617,140
Restructuring charge 64,232 - 125,000
Acquired in-process research and
development - 20,000 -
--------- --------- ---------
Total expenses 2,206,452 1,613,511 1,594,393
--------- --------- ---------
Operating profit 327,569 324,882 235,108
--------- --------- ---------
Nonoperating (income) expense
Interest expense 69,340 36,111 27,486
Other (income) expense, net (15,616) (14,707) 3,097
--------- --------- ---------
Total nonoperating expense 53,724 21,404 30,583
--------- --------- ---------
Earnings before income taxes 273,845 303,478 204,525
Income taxes 84,892 97,113 69,539
--------- --------- ---------
Net earnings $ 188,953 206,365 134,986
========= ========= =========
Per common share
Net earnings
Basic $ .97 1.04 .70
========= ========= =========
Diluted $ .93 1.00 .68
========= ========= =========
Cash dividends declared $ .24 .21 .21
========= ========= =========
See accompanying notes to consolidated financial statements.
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Fiscal Years Ended in December
(Thousands of Dollars)
1999 1998 1997
---- ---- ----
Cash flows from operating activities
Net earnings $188,953 206,365 134,986
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization of plant
and equipment 103,791 96,991 112,817
Other amortization 173,533 72,208 53,767
Deferred income taxes (38,675) 1,679 (40,555)
Acquired in-process research and
development - 20,000 -
Change in operating assets and liabilities
(other than cash and cash equivalents):
(Increase) decrease in accounts
receivable (11,248) (126,842) 11,920
(Increase) decrease in inventories (44,212) (44,606) 40,739
(Increase) decrease in prepaid expenses
and other current assets (26,527) (113,451) 20,326
Long-term royalty advance (150,000) - -
Increase in trade payables
and other current liabilities 193,626 17,668 200,359
Other 2,271 (3,425) 9,482
------- ------- -------
Net cash provided by operating
activities 391,512 126,587 543,841
------- ------- -------
Cash flows from investing activities
Additions to property, plant and
equipment (107,468) (141,950) (99,356)
Investments and acquisitions, net of
cash acquired (352,417) (667,736) (172,116)
Other 30,793 16,986 2,195
------- ------- -------
Net cash utilized by investing
activities (429,092) (792,700) (269,277)
------- ------- -------
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Fiscal Years Ended in December
(Thousands of Dollars)
1999 1998 1997
---- ---- ----
Cash flows from financing activities
Proceeds from borrowings with original
maturities of more than three months 460,333 407,377 295,132
Repayments of borrowings with original
maturities of more than three months (308,128) (24,925) (304,927)
Net proceeds of other short-term
borrowings 226,103 271,895 21,599
Purchase of common stock (237,532) (178,917) (134,880)
Stock option and warrant transactions 50,358 58,493 37,258
Dividends paid (45,526) (42,277) (39,694)
------- ------- -------
Net cash provided (utilized) by
financing activities 145,608 491,646 (125,512)
------- ------- -------
Effect of exchange rate changes on cash (5,617) (9,570) (6,238)
------- ------- -------
Increase (decrease) in cash
and cash equivalents 102,411 (184,037) 142,814
Cash and cash equivalents at beginning
of year 177,748 361,785 218,971
------- ------- -------
Cash and cash equivalents at end
of year $280,159 177,748 361,785
======= ======= =======
Supplemental information
Cash paid during the year for
Interest $ 64,861 25,135 23,480
======= ======= =======
Income taxes $108,342 128,436 135,446
======= ======= =======
Non-cash financing activities
6% Convertible Subordinated Notes Due
1998, converted into common stock $ - - 149,354
======= ======= =======
See accompanying notes to consolidated financial statements.
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Thousands of Dollars)
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Treasury Shareholders'
Stock Capital Earnings Earnings Stock Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 29, 1996 $ 66,080 282,922 1,364,285 19,993 (81,234) 1,652,046
Three-for-two stock split 33,039 (33,039) - - - -
--------- --------- --------- --------- --------- ---------
Balance, December 29, 1996,
as restated for stock split 99,119 249,883 1,364,285 19,993 (81,234) 1,652,046
Net earnings - - 134,986 - - 134,986
Other comprehensive earnings - - - (23,896) - (23,896)
Comprehensive earnings 111,090
Purchase of treasury stock - - - - (134,880) (134,880)
Stock option and warrant
transactions - 57,378 - - 41,287 98,665
Dividends declared - - (41,783) - - (41,783)
Conversion of 6% debt 5,730 147,354 - - - 153,084
Other - (117) 7 - 5 (105)
--------- --------- --------- --------- --------- ---------
Balance, December 28, 1997 104,849 454,498 1,457,495 (3,903) (174,822) 1,838,117
Net earnings - - 206,365 - - 206,365
Other comprehensive earnings - - - (5,722) - (5,722)
Comprehensive earnings 200,643
Purchase of treasury stock - - - - (178,917) (178,917)
Stock option and warrant
transactions - 66,818 - - 60,195 127,013
Dividends declared - - (42,061) - - (42,061)
--------- --------- --------- --------- --------- ---------
Balance, December 27, 1998 $ 104,849 521,316 1,621,799 (9,625) (293,544) 1,944,795
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
HASBRO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity, continued
(Thousands of Dollars)
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Treasury Shareholders'
Stock Capital Earnings Earnings Stock Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 27, 1998 $ 104,849 521,316 1,621,799 (9,625) (293,544) 1,944,795
Net earnings - - 188,953 - - 188,953
Other comprehensive earnings - - - (23,357) - (23,357)
Comprehensive earnings 165,596
Purchase of treasury stock - - - - (237,532) (237,532)
Stock option and warrant
transactions - (52,892) - - 105,747 52,855
Dividends declared - - (46,642) - - (46,642)
Other (2) (95) - - - (97)
--------- --------- --------- --------- --------- ---------
Balance, December 26, 1999 $ 104,847 468,329 1,764,110 (32,982) (425,329) 1,878,975
========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Thousands of Dollars Except Share Data)
(1) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Hasbro,
Inc. and all significant majority-owned subsidiaries (Hasbro or the
Company). Investments in affiliates representing 20% to 50% ownership
interest are accounted for using the equity method. All significant
intercompany balances and transactions have been eliminated.
Preparation of Financial Statements
-----------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and notes thereto. Actual results could differ from those estimates.
Fiscal Year
-----------
Hasbro's fiscal years end on the last Sunday in December. Each of the
reported three fiscal years are fifty-two week periods.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include all cash balances and highly liquid
investments purchased with a maturity to the Company of three months or
less.
Inventories
-----------
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Long-Lived Assets
-----------------
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate the carrying value may not be
recoverable. Recoverability is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. If such assets were considered to be impaired,
the impairment to be recognized would be measured by the amount by which
the carrying value of the assets exceed their fair value. Fair value is
determined based on discounted cash flows or appraised values, depending
on the nature of the asset. Assets to be disposed of are carried at the
lower of the carrying amount or their fair value less disposal costs.
Cost in Excess of Net Assets Acquired and Other Intangibles
-----------------------------------------------------------
Approximately 45% of Hasbro's goodwill results from the 1984 acquisition
of Milton Bradley Company (Milton Bradley), including its Playskool and
international units, and the 1991 acquisition of Tonka Corporation
(Tonka), including its Kenner, Parker Brothers and international units.
Approximately 29% results from the Company's 1998 acquisitions of Tiger
Electronics, Inc., MicroProse, Inc. and Galoob Toys, Inc. An additional
approximate 15% results from the Company's 1999 acquisition of Wizards of
the Coast, Inc. Goodwill is being amortized on the straight-line basis
over lives ranging from seven to forty years.
Substantially all of the other intangibles consist of the cost of
acquired product rights. In establishing the value of such rights, the
Company considers, but does not individually value, existing copyrights,
trademarks, patents, license agreements and other product-related rights.
Approximately 61% of these other intangibles relate to rights acquired in
the acquisitions noted above. These rights, which were valued at their
acquisition date based on the anticipated future cash flows from the
underlying product lines, are being amortized over three to twenty-five
years using the straight-line method. An additional approximate 12% of
these other intangibles relate to rights acquired from a major motion
picture studio and are being amortized over the contract life, in
proportion to projected sales of the licensed products during the same
period.
Depreciation and Amortization
-----------------------------
Depreciation and amortization are computed using accelerated and
straight-line methods to amortize the cost of property, plant and
equipment over their estimated useful lives. The principal lives, in
years, used in determining depreciation rates of various assets are: land
improvements 15 to 19, buildings and improvements 15 to 25 and machinery
and equipment 3 to 12.
Tools, dies and molds are amortized over a three year period or their
useful lives, whichever is less, using an accelerated method.
Revenue Recognition
-------------------
Revenue from product sales is recognized upon shipment to customers.
Provisions for discounts, rebates and returns are made when the related
revenues are recognized.
Research and Development
------------------------
Research and product development costs for 1999, 1998 and 1997 were
$254,599, $184,962 and $154,710, respectively.
Advertising
-----------
Production costs of commercials and programming are charged to operations
in the fiscal year during which the production is first aired. The costs
of other advertising, promotion and marketing programs are charged to
operations in the fiscal year incurred.
Income Taxes
------------
Hasbro uses the asset and liability approach for financial accounting and
reporting for income taxes. Deferred income taxes have not been provided
on undistributed earnings of international subsidiaries as substantially
all of such earnings are indefinitely reinvested by the Company.
Comprehensive Income
--------------------
Comprehensive income is comprised primarily of gains and losses on the
translation of foreign currency financial statements and also includes
unrealized gains and losses on certain investment securities, net of tax.
The related tax (benefit) expense of other comprehensive income items was
$(3,187), $(1,684) and $1,005 for the years 1999, 1998 and 1997,
respectively. Reclassification adjustments were not material for all
years presented.
Foreign Currency Translation
----------------------------
Foreign currency assets and liabilities are translated into dollars at
current rates, and revenues, costs and expenses are translated at average
rates during each reporting period. Current earnings include gains or
losses resulting from foreign currency transactions as well as
translation gains and losses resulting from the use of the U.S. dollar as
the functional currency in highly inflationary economies. Other gains and
losses resulting from translation of financial statements are the
principal component of other comprehensive earnings.
Pension Plans, Postretirement and Postemployment Benefits
---------------------------------------------------------
Hasbro, except for certain international subsidiaries, has pension plans
covering substantially all of its full-time employees. Pension expense is
based on actuarial computations of current and future benefits. The
Company's policy is to fund amounts which are required by applicable
regulations and which are tax deductible. The estimated amounts of future
payments to be made under other retirement programs are being accrued
currently over the period of active employment and are also included in
pension expense.
Hasbro has a contributory postretirement health and life insurance plan
covering substantially all employees who retire under any of its United
States defined benefit pension plans and meet certain age and length of
service requirements. It also has several plans covering certain groups
of employees which may provide benefits to such employees following their
period of employment but prior to their retirement.
Risk Management Contracts
-------------------------
Hasbro does not enter into derivative financial instruments for
speculative purposes. The Company enters into foreign currency forward
and option contracts to mitigate its exposure to foreign currency
exchange rate fluctuations. This exposure relates to future purchases of
inventory not denominated in the functional currency of the unit
purchasing the inventory as well as other cross-border currency
requirements. Premiums on option contracts are amortized over their term
and if such contract is terminated before its maturity, the unamortized
premium is expensed and included in other expense, net. The carrying
value of options is included in prepaid expenses and other current
assets. Gains and losses on forward and option contracts meeting hedge
accounting requirements are deferred and recognized as adjustments to the
carrying value of the related transactions. In the event hedge accounting
requirements are not met, gains and losses on such instruments are
included currently in the statements of earnings.
Earnings Per Common Share
-------------------------
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding for the year. Diluted
earnings per share is similar except that the weighted average number of
shares outstanding is increased by shares issuable upon exercise of stock
options and warrants for which market price exceeds exercise price, less
shares which could have been purchased by the Company with the related
proceeds.
A reconciliation of earnings per share for the three fiscal years ended
December 26, 1999 is as follows:
1999 1998 1997
--------------- --------------- ---------------
Basic Diluted Basic Diluted Basic Diluted
------- ------- ------- ------- ------- -------
Net earnings $188,953 188,953 206,365 206,365 134,986 134,986
Effect of dilutive
securities:
6% Convertible
Notes due 1998 - - - - - 4,782
------- ------- ------- ------- ------- -------
Adjusted net
earnings $188,953 188,953 206,365 206,365 134,986 139,768
======= ======= ======= ======= ======= =======
Average shares
outstanding (in
thousands) 194,917 194,917 197,927 197,927 193,089 193,089
Effect of dilutive
securities:
6% Convertible
Notes due 1998 - - - - - 9,428
Options and
warrants - 7,186 - 7,493 - 3,836
------- ------- ------- ------- ------- -------
Equivalent shares 194,917 202,103 197,927 205,420 193,089 206,353
======= ======= ======= ======= ======= =======
Earnings per share $ .97 .93 1.04 1.00 .70 .68
======= ======= ======= ======= ======= =======
(2) Acquisitions
------------
On September 30, 1999, Hasbro acquired Wizards of the Coast, Inc. for an
initial purchase price of $325,000 subject to additional payments based
upon the closing balance sheet and future payments contingent upon
achieving certain operating objectives. The total acquisition cost to
date amounts to $412,769 and has been accounted for using the purchase
method. Based upon estimates of fair market value, $77,039 has been
allocated to net tangible assets, $214,700 has been allocated to property
and related rights and $121,030 to goodwill.
Hasbro made three major acquisitions during 1998, having an aggregate
purchase price of $669,737. On April 1, it acquired substantially all of
the business and operating assets of Tiger Electronics, Inc. and certain
affiliates (Tiger). On September 14, 1998, it acquired MicroProse, Inc.
(MicroProse) through a cash tender offer of $6.00 for each outstanding
share of MicroProse. Upon completion of a short-form merger, MicroProse
became a wholly owned subsidiary of the Company and each untendered share
was converted into the right to receive $6.00 in cash. On October 30,
1998, it acquired Galoob Toys, Inc. (Galoob) through a cash tender offer
of $12.00 for each outstanding share of Galoob. Upon completion of a
short-form merger, Galoob became a wholly owned subsidiary of the Company
and each untendered share was converted into the right to receive $12.00
in cash.
These three acquisitions were accounted for using the purchase method,
and accordingly, the net assets acquired have been recorded at their fair
value and the results of their operations included from the dates of
acquisition. Based on fair market value, $86,926 has been allocated to
net tangible assets, $301,100 to product rights, $261,711 to goodwill and
$20,000 to acquired in-process research and development. The appraised
fair value of this acquired in-process research and development
(interactive game software projects under development at the date of
acquisition) was determined using the discounted cash flow approach,
considered the percentage of completion at the date of acquisition and
was expensed at acquisition.
On a pro forma basis, reflecting the acquisitions described above as if
they had taken place at the beginning of each period and after giving
effect to adjustments recording the acquisitions, and excluding the
charge for in-process research and development, unaudited net revenues,
net earnings and basic and diluted earnings per share for the year ended
December 26, 1999 would have been $4,630,368, $270,386, $1.39 and $1.34,
respectively, and for the year ended December 27, 1998 would have been
$3,685,696, $143,205, $.72 and $.70, respectively. These pro forma
results are not indicative of either future performance or actual results
which would have occurred had the acquisitions taken place at the
beginning of the respective periods.
(3) Inventories
-----------
1999 1998
---- ----
Finished products $348,058 283,160
Work in process 13,470 12,698
Raw materials 47,043 38,943
------- -------
$408,571 334,801
======= =======
(4) Property, Plant and Equipment
-----------------------------
1999 1998
---- ----
Land and improvements $ 16,323 14,748
Buildings and improvements 199,713 197,295
Machinery and equipment 355,958 295,810
------- -------
571,994 507,853
Less accumulated depreciation 298,766 227,820
------- -------
273,228 280,033
Tools, dies and molds, net of
amortization 45,597 50,322
------- -------
$318,825 330,355
======= =======
Expenditures for maintenance and repairs which do not materially extend
the life of the assets are charged to operations.
(5) Short-Term Borrowings
---------------------
Hasbro has available unsecured committed and uncommitted lines of credit
from various banks approximating $760,000 and $645,000, respectively.
Substantially all of the short-term borrowings outstanding at the end of
1999 and 1998 represent borrowings made under, or supported by, these
lines of credit and the weighted average interest rates of the
outstanding borrowings were 6.4% and 6.0%, respectively. Hasbro's working
capital needs were fulfilled by borrowing under these lines of credit and
through the issuance of commercial paper, both of which were on terms and
at interest rates generally extended to companies of comparable
creditworthiness. The committed lines include $350,000 and $350,000
available under long-term and short-term revolving credit agreements,
respectively. These agreements contain certain restrictive covenants with
which the Company is in compliance. Compensating balances and facility
fees were not material.
(6) Accrued Liabilities
-------------------
1999 1998
---- ----
Royalties $178,211 116,603
Advertising 140,129 172,621
Payroll and management incentives 114,852 54,622
Other 550,088 385,759
------- -------
$983,280 729,605
======= =======
(7) Long-Term Debt
--------------
1999 1998
---- ----
5.60% Notes Due 2005 $100,000 100,000
6.15% Notes Due 2008 150,000 150,000
6.60% Debentures Due 2028 150,000 150,000
Other 20,654 7,180
------- -------
$420,654 407,180
======= =======
Current installments of $4,142 in 1999 and $260 in 1998 are aggregated with
short-term borrowings. The maturities of long-term debt in 2001 and in the
succeeding three years are $2,007, $1,041, $1,076 and $1,112.
(8) Income Taxes
------------
Income taxes attributable to earnings before income taxes are:
1999 1998 1997
---- ---- ----
Current
United States $ 77,512 40,256 62,042
State and local 5,566 5,226 8,296
International 40,489 49,952 39,756
------- ------- -------
123,567 95,434 110,094
------- ------- -------
Deferred
United States (40,131) (6,458) (31,533)
State and local (3,440) (554) (2,793)
International 4,896 8,691 (6,229)
------- ------- -------
(38,675) 1,679 (40,555)
------- ------- -------
$ 84,892 97,113 69,539
======= ======= =======
Certain tax benefits are not reflected in income taxes in the statements
of earnings. Such benefits of $16,735 in 1999, $14,377 in 1998 and $4,036
in 1997, relate primarily to stock options.
A reconciliation of the statutory United States federal income tax rate
to Hasbro's effective income tax rate is as follows:
1999 1998 1997
---- ---- ----
Statutory income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net .5 1.0 1.7
Goodwill amortization 3.3 1.8 2.4
Tax on international earnings (7.9) (5.4) (4.9)
Other, net .1 (.4) (.2)
---- ---- ----
31.0% 32.0% 34.0%
==== ==== ====
The components of earnings before income taxes, determined by tax
jurisdiction, are as follows:
1999 1998 1997
---- ---- ----
United States $ 79,519 123,969 157,987
International 194,326 179,509 46,538
------- ------- -------
$273,845 303,478 204,525
======= ======= =======
The components of deferred income tax expense arise from various
temporary differences and relate to items included in the statements of
earnings.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 26, 1999
and December 27, 1998 are:
1999 1998
---- ----
Deferred tax assets:
Accounts receivable $ 36,696 27,556
Inventories 26,205 14,718
Net operating loss carryovers 28,930 31,608
Operating expenses 39,512 44,491
Postretirement benefits 12,243 12,269
Other 99,143 74,955
------- -------
Gross deferred tax assets 242,729 205,597
Valuation allowance (15,146) (13,261)
------- -------
Net deferred tax assets 227,583 192,336
------- -------
Deferred tax liabilities 100,820 46,174
------- -------
Net deferred income taxes $126,763 146,162
======= =======
Hasbro has a valuation allowance for deferred tax assets at December 26,
1999 of $15,146, which is an increase of $1,885 from the $13,261 at
December 27, 1998. The allowance pertains to United States and
international operating loss carryforwards, some of which have no
expiration and others that would expire beginning in 2002. If fully
realized, $9,672 will reduce goodwill and the balance will reduce future
income tax expense. Deferred tax liabilities relate primarily to property
rights.
Based on Hasbro's history of taxable income and the anticipation of
sufficient taxable income in years when the temporary differences are
expected to become tax deductions, it believes that it will realize the
benefit of the deferred tax assets, net of the existing valuation
allowance.
Deferred income taxes of $115,646 and $100,332 at the end of 1999 and
1998, respectively, are included as a component of prepaid expenses and
other current assets, and $19,592 and $53,331, respectively, are included
as a component of other assets. At the same dates, deferred income taxes
of $1,236 and $491, respectively, are included as a component of accrued
liabilities, and $7,239 and $7,010, respectively, are included as a
component of deferred liabilities.
The cumulative amount of undistributed earnings of Hasbro's international
subsidiaries held for reinvestment is approximately $347,000 at December
26, 1999. In the event that all international undistributed earnings were
remitted to the United States, the amount of incremental taxes would be
approximately $48,000.
(9) Capital Stock
-------------
Preference Share Purchase Rights
--------------------------------
Hasbro maintains a Preference Share Purchase Rights plan (the Rights
Plan). Under the terms of the Rights Plan, each share of common stock is
accompanied by a Preference Share Purchase Right. Each Right is only
exercisable under certain circumstances and, until exercisable, the
Rights are not transferable apart from Hasbro's common stock. When
exercisable, each Right will entitle its holder to purchase until June
30, 2009, in certain merger or other business combination or
recapitalization transactions, at the Right's then current exercise
price, a number of the acquiring company's or Hasbro's, as the case may
be, common shares having a market value at that time of twice the Right's
exercise price. Under certain circumstances, the Company may substitute
cash, other assets, equity securities or debt securities for the common
stock. At the option of the Board of Directors of Hasbro (the Board),
the rightholder may, under certain circumstances, receive shares of
Hasbro's stock in exchange for Rights.
Prior to the acquisition by the person or group of beneficial ownership
of a certain percentage of Hasbro's common stock, the Rights are
redeemable for $.01 per Right. The Rights Plan contains certain
exceptions with respect to the Hassenfeld family and related entities.
Common Stock
------------
On December 9, 1997, the Board canceled all prior share repurchase
authorizations and authorized the purchase of up to an additional
$500,000 of the Company's common stock. At December 26, 1999, $72,008
remained under this authorization. In addition to the remaining amount
under this repurchase authorization, on December 6, 1999, the Board
authorized an additional common share repurchase program up to $500,000.
On February 19, 1999, the Board declared a three-for-two stock split,
payable in the form of a 50% stock dividend, on March 15, 1999 to
shareholders of record on March 1, 1999. All earnings per common share
amounts, references to common stock and shareholders' equity amounts have
been restated as if the stock split had occurred as of the earliest
period presented.
(10) Stock Options and Warrants
--------------------------
Hasbro has various stock option plans for employees as well as a plan for
non-employee members of the Board (collectively, the plans) and has
reserved 31,771,373 shares of its common stock for issuance upon exercise
of options granted or to be granted under the plans. These options
generally vest in equal annual amounts over three to five years. The
plans provide that options be granted at exercise prices not less than
market value on the date the option is granted and options are adjusted
for such changes as stock splits and stock dividends. No options are
exercisable for periods of more than ten years after date of grant.
Certain of the plans permit the granting of awards in the form of stock
options, stock appreciation rights, stock awards and cash awards. At
December 26, 1999,awards made under these plans have been in the form of
stock options.
As permitted by Statement of Financial Accounting Standards No. 123 (SFAS
123), Hasbro continues to apply Accounting Principles Board Opinion No.
25 (APB 25) in accounting for the plans under which no compensation cost
is recognized. Had compensation expense been recorded under the
provisions of SFAS 123, the impact on the Company's net earnings and
earnings per share would have been:
1999 1998 1997
---- ---- ----
Reported net earnings $188,953 206,365 134,986
Pro forma compensation expense,
net of tax (18,335) (10,339) (5,880)
------- ------- -------
Pro forma net earnings $170,618 196,026 129,106
======= ======= =======
Pro forma earnings per share
Basic $ .88 .99 .67
Diluted $ .84 .95 .65
======= ======= =======
The weighted average fair value of options granted in 1999, 1998 and 1997
were $12.13, $8.66 and $5.76, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for
grants in 1999, 1998 and 1997, respectively: risk-free interest rates of
5.60%, 5.70% and 6.20%; expected dividend yields of 0.78%, 0.85% and
1.12% and expected volatility of approximately 34%, 26% and 21%, and
expected lives of approximately 6 years.
Additionally, the Company has reserved 16,762,500 shares of its common
stock for issuance upon exercise of outstanding warrants. During 1999,
5,737,500 warrants were exercised at an exercise price of $14.00. During
1998, warrants to purchase 6,000,000 shares at an exercise price of
$23.3333 per share were issued in connection with the acquisition of
certain rights. The fair value of these warrants was $11.42 each on the
date of grant.
Information with respect to options and warrants, in thousands of shares,
for the three years ended December 26, 1999 is as follows:
1999 1998 1997
---- ---- ----
Number of shares:
Outstanding at beginning of year 36,361 31,424 20,452
Granted 7,168 8,639 14,191
Exercised (8,313) (3,468) (2,651)
Expired or canceled (1,440) (234) (568)
------ ------ ------
Outstanding at end of year 33,776 36,361 31,424
====== ====== ======
Exercisable at end of year 23,456 11,673 11,090
====== ====== ======
Weighted average exercise price:
Granted $ 31.32 23.86 18.77
Exercised $ 14.51 13.34 12.30
Expired or canceled $ 27.43 18.75 15.80
Outstanding at end of year $ 21.46 18.17 16.08
Exercisable at end of year $ 19.09 14.43 13.46
====== ====== ======
Information, in thousands of shares, with respect to the 33,776 options
and warrants outstanding and the 23,456 exercisable at December 26, 1999,
is as follows:
Weighted
Average Weighted
Remaining Average
Range of Contractual Exercise
Exercise Prices Shares Life Price
--------------- ------- ---------- -------
Outstanding
$ 4.56-$13.86 1,531 3.1 years $10.67
$14.00-$16.64 4,924 4.3 years $15.25
$18.67-$23.27 13,347 8.8 years $18.93
$23.33-$36.27 13,974 9.6 years $27.25
====== =====
Exercisable
$ 4.56-$13.86 1,531 $10.67
$14.00-$16.64 3,719 $15.57
$18.67-$23.27 11,379 $18.72
$23.33-$36.27 6,827 $23.52
====== =====
(11) Pension, Postretirement and Postemployment Benefits
---------------------------------------------------
Pension and Postretirement Benefits
-----------------------------------
Hasbro's net pension and profit sharing cost for 1999, 1998 and 1997 was
approximately $12,600, $12,900 and $13,400, respectively.
United States Plans
-------------------
Substantially all United States employees are covered under at least one
of several non-contributory defined benefit pension plans maintained by
the Company. Benefits under the two major plans, principally covering
non-union employees, are based primarily on salary and years of service.
One of these plans is funded. Benefits under the remaining plans are
based primarily on fixed amounts for specified years of service. One of
these plans is also funded. At December 26, 1999, the two funded plans
have plan assets of $242,889 and accumulated benefit obligations of
$137,828. The unfunded plans have accumulated benefit obligations of
$16,878.
Hasbro also provides certain postretirement health care and life
insurance benefits to eligible employees who retire and have either
attained age 65 with 5 years of service or age 55 with 10 years of
service. The cost of providing these benefits on behalf of employees who
retired prior to 1993 is and will continue to be substantially borne by
the Company. The cost of providing benefits on behalf of employees who
retire after 1992 is shared, with the employee contributing an increasing
percentage of the cost, resulting in an employee-paid plan after the year
2002. The plan is not funded.
Pension Postretirement
--------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
Change in projected benefit
---------------------------
obligation
----------
Projected benefit obligation
at beginning of year $ 207,063 184,589 $ 28,428 28,885
Service cost 9,356 9,362 227 224
Interest cost 13,670 12,798 1,775 1,893
Plan amendments (2,298) - - -
Actuarial (gain) loss (32,438) 6,468 (3,263) (271)
Benefits paid (6,305) (5,539) (2,484) (2,303)
Expenses paid (730) (615) - -
------- ------- ------- -------
Projected benefit obligation
at end of year $ 188,318 207,063 $ 24,683 28,428
======= ======= ======= =======
Change in plan assets
---------------------
Fair value of plan assets at
beginning of year $ 219,410 196,634 $ - -
Actual return on plan assets 30,061 28,522 - -
Employer contribution 453 408 - -
Benefits paid (6,305) (5,539) - -
Expenses paid (730) (615) - -
------- ------- ------- -------
Fair value of plan assets at
end of year $ 242,889 219,410 $ - -
======= ======= ======= =======
Funded status $ 54,571 12,347 $(24,683) (28,428)
Unrecognized net (gain) loss (80,496) (39,402) (406) 2,885
Unrecognized prior service cost 5,836 9,268 - -
------- ------- ------- -------
Accrued benefit cost $(20,089) (17,787) $(25,089) (25,543)
======= ======= ======= =======
The assets of the funded plans are managed by investment advisors and
consist primarily of pooled indexed and actively managed bond and stock
funds. For measuring the expected pension accumulated benefit obligation,
assumed discount rates of 7.75%, 6.75% and 7.00% were used for 1999, 1998
and 1997, respectively; assumed long-term rates of compensation increase
of 4.50% in 1999 and 1998 and 5.00% in 1997, and an assumed long-term
rate of return on plan assets of 9.00% in all years.
For measuring the expected postretirement benefit obligation, an 7.25%,
7.50% and 8.00% annual rate of increase in the per capita cost of covered
health care benefits was assumed for 1999, 1998 and 1997, respectively.
The 1999 and 1998 rates were further assumed to decrease gradually to
4.50% in 2012, while the 1997 rate was assumed to decrease to 5.00% over
this same period. All were assumed to remain constant after 2012. The
discount rates used in the pension calculation were also used for the
postretirement calculation.
1999 1998 1997
---- ---- ----
Components of net periodic cost
-------------------------------
Pension
-------
Service cost $ 9,356 9,362 8,022
Interest cost 13,670 12,798 11,451
Expected return on assets (19,484) (17,465) (14,517)
Net amortization and deferrals (786) (448) (465)
------- ------- -------
Net periodic benefit cost $ 2,756 4,247 4,491
======= ======= =======
Postretirement
--------------
Service cost $ 227 224 205
Interest cost 1,775 1,893 2,039
Net amortization and deferrals 27 57 22
------- ------- -------
Net periodic benefit cost $ 2,029 2,174 2,266
======= ======= =======
If the health care cost trend rate were increased one percentage point in
each year, the accumulated postretirement benefit obligation at December
26, 1999 and the aggregate of the benefits earned during the period and
the interest cost would have each increased by approximately 10%.
Hasbro also has a profit sharing plan covering substantially all of its
United States non-union employees. The plan provides for an annual
discretionary contribution by the Company which for 1999, 1998 and 1997
was approximately $4,900, $5,000 and $5,100, respectively.
International Plans
-------------------
Pension coverage for employees of Hasbro's international subsidiaries is
provided, to the extent deemed appropriate, through separate defined
benefit and defined contribution plans. These plans were neither
significant individually nor in the aggregate.
Postemployment Benefits
-----------------------
Hasbro has several plans covering certain groups of employees which may
provide benefits to such employees following their period of active
employment but prior to their retirement. These plans include certain
severance plans which provide benefits to employees involuntarily
terminated and certain plans which continue the Company's health and life
insurance contributions for employees who have left Hasbro's employ under
terms of its long-term disability plan.
(12) Leases
------
Hasbro occupies certain manufacturing facilities and sales offices and
uses certain equipment under various operating lease arrangements. The
rent expense under such arrangements, net of sublease income which is not
material, for 1999, 1998 and 1997 amounted to $56,072, $50,932 and
$48,090, respectively.
Minimum rentals, net of minimum sublease income which is not material,
under long-term operating leases for the five years subsequent to 1999
and in the aggregate are as follows:
2000 $ 40,084
2001 33,976
2002 26,274
2003 22,834
2004 20,451
Later years 107,623
-------
$251,242
=======
All leases expire prior to 2015. Real estate taxes, insurance and
maintenance expenses are generally obligations of the Company. It is
expected that in the normal course of business, leases that expire will
be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will not be less than
the amounts shown for 1999.
In addition, Hasbro leases certain facilities which, as a result of
restructurings, are no longer in use. Future costs relating to such
facilities were included as a component of the restructuring charge and
are not included in the table above.
(13) Consolidation Program and Restructuring Charge
----------------------------------------------
On December 7, 1999, the Company announced a program to further
consolidate manufacturing and sourcing activities and product lines, as
well as streamline and further regionalize marketing, sales and research
and development activities worldwide. Costs associated with this
consolidation program amounted to $141,575, and were recorded in the
fourth quarter as follows:
Restructuring charge $ 64,232
--------
Other operating expenses:
Cost of sales 8,740
Amortization 38,449
Royalties, research and development 26,292
Advertising 3,862
--------
77,343
--------
Total consolidation program costs $ 141,575
========
The significant components of the restructuring plan include the closing
of two factories in Mexico and the United Kingdom, reducing capacity at
the remaining three factories, shifting production to third party
manufacturers in the Far East and further consolidation and
regionalization of the International marketing and sales structure. This
plan anticipates the redundancy of approximately 2,200 employees,
including 1,800 in manufacturing and sourcing activities and 400
worldwide in research and product development, marketing, sales and
administration. The restructuring charge of $64,232 represents
approximately $38,700 of cash charges for severance benefits which will
be disbursed over the employee's entitlement period, $14,300 of cash
charges for lease and facility closing costs to be expended over the
contractual lease term and closing process and non-cash charges of
$11,200 for fixed asset write-offs, arising primarily in the
manufacturing area. Of the cash amount, approximately $4,700 has been
paid for severance benefits relating to 193 employees terminated as of
December 26, 1999. Non-cash charges relating to fixed asset write-offs
have been credited to the respective line items on the balance sheet. The
remaining amount of approximately $48,000 is included in accrued
liabilities. The restructuring plan is expected to be completed in fiscal
2000.
The components of the consolidation program included in other operating
expenses represent costs associated with exiting certain product lines
and reevaluating other product lines resulting in reduced expectations.
The product lines being exited were not, either individually or in the
aggregate, material to the Company's revenues or operating results.
Approximately $12,000 represents cash charges which will be incurred on
contractual royalty, product development and advertising commitments
associated with the discontinued product lines. Non-cash charges of
approximately $65,000 relate to asset write-offs and write-downs of
underutilized assets. This includes impairment of intangible assets
arising from the decision to discontinue or significantly reduce product
line offerings. The resulting sum of undiscounted future cash flows of
these assets was not sufficient to cover the carrying amount of the
assets, and as such, they were written down to their fair market value.
Items relating to property rights and licenses, goodwill, inventory,
prepaid and other current assets have been credited to the respective
asset in the balance sheet.
Late in the fourth quarter of 1997, the Company announced a global
integration and profit enhancement program which anticipated the
redundancy of approximately 2,500 employees, principally in
manufacturing, and provided for actions in three principal areas: a
continued consolidation of the Company's manufacturing operations; the
streamlining of marketing and sales, while exiting from certain
underperforming markets and product lines; and the further leveraging of
overheads. Of the $140,000 estimated costs related to these actions,
$125,000 was reported as a restructuring charge and $15,000 was reflected
in cost of sales. Of the restructuring amount, approximately $54,000
related to severance and people costs, $52,000 to property, plant and
equipment and leases and $19,000 to product line related costs. During
1998, the employment of all employees planned for redundancy was
terminated. This program has been completed.
(14) Financial Instruments
---------------------
Hasbro's financial instruments include cash and cash equivalents,
accounts receivable, short- and long-term borrowings, accounts payable
and accrued liabilities. At December 26, 1999, the carrying cost of these
instruments approximated their fair value. Its financial instruments also
include foreign currency forwards and options. At December 26, 1999, the
carrying value of these instruments approximated their fair value based
on quoted or publicly available market information.
Hasbro uses foreign currency forwards and options, generally purchased
for terms of not more than twelve months, to protect itself from adverse
currency rate fluctuations on firmly committed and anticipated foreign
currency transactions. These over-the-counter contracts, which hedge
future purchases of inventory and other cross-border currency
requirements, are primarily denominated in United States and Hong Kong
dollars and Irish punts and entered into with counterparties who are
major financial institutions with which Hasbro also has other financial
relationships. The Company believes any risk related to default by a
counterparty to be remote.
The Company had the equivalent of approximately $85,000 and $130,000 of
foreign currency forwards outstanding at December 26, 1999 and December
27, 1998, respectively, and approximately $132,000 of foreign currency
options outstanding at December 26, 1999. Gains and losses deferred under
hedge accounting provisions are subsequently included in the measurement
of the related foreign currency transaction. Gains and losses on
contracts not meeting hedge accounting provisions are included currently
in earnings. The aggregate amount of gains and losses resulting from all
foreign currency transactions was not material.
(15) Commitments and Contingencies
-----------------------------
Hasbro had unused open letters of credit of approximately $15,000 and
$20,000 at December 26, 1999 and December 27, 1998, respectively.
The Company routinely enters into license agreements with inventors,
designers and others for the use of intellectual properties in its
products. Certain of these agreements contain provisions for the payment
of guaranteed or minimum royalty amounts. Under terms of currently
existing agreements, in certain circumstances the Company may become
liable for remaining guaranteed minimum royalties of up to $665,000
between 2000 and 2007. Of this amount, approximately $233,000 has been
paid. Approximately $83,000 is included in the $111,523 of prepaid
royalties which are a component of prepaid expenses and other current
assets in the balance sheet. Included in other assets is $150,000
representing the long-term portion of the amount paid in 1999. Of the
remaining unpaid minimum guaranty, Hasbro may be required to pay amounts
as follows:
2000 $ 88,000
2001 84,000
2002 130,000
2003 6,000
2004 2,000
2005 122,000
-------
$ 432,000
=======
Such payments are related to royalties which are expected to be incurred
on anticipated revenues in the years 2000 through 2007.
Hasbro is party to certain legal proceedings, substantially involving
routine litigation incidental to the Company's business, none of which,
individually or in the aggregate, is deemed to be material to the
financial condition of the Company.
(16) Segment Reporting
-----------------
Segment and Geographic Information
----------------------------------
Hasbro is a worldwide marketer and distributor of children's and family
entertainment products, principally engaged in the design, manufacture
and marketing of games and toys ranging from traditional to high-tech.
During the second quarter of 1999, the Company redefined its focus and
method of managing its business into two major areas, Toys and Games.
Following this organizational adjustment, within its two key areas, under
the provisions of Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information, the
Company's reportable segments are U.S. Toys, Games, International and
Global Operations. Prior year amounts have been reclassified to reflect
the Company's current focus.
In the United States, the U.S. Toy segment includes the design, marketing
and selling of boys action figures, vehicles and playsets, girls toys,
preschool toys and infant products and creative play products. The Games
segment includes the development, marketing and selling of traditional
board games and puzzles, handheld electronic games, electronic
interactive plush, children's consumer electronics, electronic learning
aids, trading card and role-playing games and interactive software games
based on the Company's owned and licensed brands. Within the
International segment, the Company develops, markets and sells both toy
and game products in non-U.S. markets. Global Operations manufactures and
sources product for the majority of the Company's segments. The Company
also has other segments which license certain toy properties and which
develop and market non-traditional toy and game based product realizing
more than half of their revenues and the majority of their operating
profit in the first half of the year, which is contra-seasonal to the
rest of the Company's business. These other segments do not meet the
quantitative thresholds for reportable segments and have been combined
for reporting purposes.
Segment performance is measured at the operating profit level, prior to
certain charges. In 1999, segment profitability was measured prior to
$141,575 in charges incurred in connection with the 1999 consolidation
program. For 1998, operating profits are reflected prior to the $20,000
charge incurred to write-off acquired in-process research and development
arising on the MicroProse acquisition. For 1997, operating profit is
reflected prior to $140,000 of restructuring charges. Included in
Corporate and eliminations are general corporate expenses, the
elimination of intersegment transactions and assets not identified with a
specific segment. Intersegment sales and transfers are reflected in
management reports at amounts approximating cost.
As a result of the complexity of the Company's organizational changes, it
currently is unable to segregate assets and related expenses between the
U.S. Toys and Games segments, and thus they are currently reported as
one. It is anticipated that such items will be segregated in the future
and will then be separately reported. Certain asset related expense items
including depreciation and amortization of intangibles have been
allocated to segments based upon estimates in order to arrive at segment
operating profit. During 1999, the Company's Games segment acquired
Wizards of the Coast, Inc. During 1998, the Company's present U.S. Toys
segment acquired Galoob and the present Games segment acquired Tiger and
MicroProse.
The accounting policies of the segments are the same as those described
in note 1 to the consolidated financial statements.
Information by segment and a reconciliation to reported amounts are as
follows.
<TABLE>
<CAPTION>
Revenues
from Depreciation
External Affiliate Operating and Capital Total
Customers Revenues Profit Amortization Additions Assets
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999
- - - - - - - - - - - - - - - - - ----
U.S. Toys (a) $1,056,700 - 91,588
Games (a) 1,703,216 81,948 259,314
--------- --------- --------- --------- --------- ---------
U.S. Toys and Games (a) 2,759,916 81,948 350,902 109,250 12,077 3,588,994
International 1,227,949 6,403 140,567 34,150 9,539 1,285,342
Global Operations (b) 24,923 1,030,028 (1,878) 61,175 67,644 572,454
Other segments 219,475 18,988 5,777 22,517 4,301 269,435
Corporate and eliminations - (1,137,367) (26,224) 11,783 13,907 (1,252,877)
--------- --------- --------- --------- --------- ---------
Segment total 4,232,263 - 469,144 238,875 107,468 4,463,348
Consolidation program (c) - - (141,575) 38,449 - -
--------- --------- --------- --------- --------- ---------
Consolidated Total $4,232,263 - 327,569 277,324 107,468 4,463,348
========= ========= ========= ========= ========= =========
1998
- - - - - - - - - - - - - - - - - ----
U.S. Toys (a) $ 894,279 61 55,103
Games (a) 1,043,623 1,019 143,216
--------- --------- --------- --------- --------- ---------
U.S. Toys and Games (a) 1,937,902 1,080 198,319 54,543 12,739 2,390,147
International 1,106,565 (174) 130,232 23,905 34,480 840,246
Global Operations (b) 6,453 935,683 (6,560) 62,397 71,585 415,872
Other segments 253,534 8,992 35,565 19,106 4,925 354,717
Corporate and eliminations - (945,581) (12,674) 9,248 18,221 (207,137)
--------- --------- --------- --------- --------- ---------
Segment total 3,304,454 - 344,882 169,199 141,950 3,793,845
Acquired in-process research
and development - - (20,000) - - -
--------- --------- --------- --------- --------- ---------
Consolidated Total $3,304,454 - 324,882 169,199 141,950 3,793,845
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Revenues
from Depreciation
External Affiliate Operating and Capital Total
Customers Revenues Profit Amortization Additions Assets
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
- - - - - - - - - - - - - - - - - ----
U.S. Toys (a) $1,068,736 - 59,354
Games (a) 725,683 3,151 151,352
--------- --------- --------- --------- --------- ---------
U.S. Toys and Games (a) 1,794,419 3,151 210,706 45,381 13,604 1,676,254
International 1,212,811 24,616 133,374 25,153 6,976 887,256
Global Operations (b) 8,108 1,117,281 5,061 74,153 60,821 714,656
Other segments 173,221 3,148 8,586 14,045 2,222 267,756
Corporate and eliminations - (1,148,196) 17,381 7,852 15,733 (646,205)
--------- --------- --------- --------- --------- ---------
Segment total 3,188,559 - 375,108 166,584 99,356 2,899,717
Restructuring - - (140,000) - - -
--------- --------- --------- --------- --------- ---------
Consolidated Total $3,188,559 - 235,108 166,584 99,356 2,899,717
========= ========= ========= ========= ========= =========
(a) As a result of the complexity of the Company's organizational changes, it currently is unable to
segregate assets and related expenses between the U.S. Toys and Games segments, and thus they are
currently reported as one. It is anticipated that such items will be segregated beginning in fiscal 2000
and will then be separately reported. Certain asset related expense items including depreciation and
amortization of intangibles have been allocated to segments based upon estimates in order to arrive at
segment operating profit.
(b) The Global Operations segment derives substantially all of its revenues, and thus its operating
results, from intersegment activities.
(c) The impact of the consolidation program to operating profit by segment was $16,150 to U.S. Toys,
$35,732 to Games, $23,044 to International, $44,324 to Global Operations and $22,325 to Other segments.
</TABLE>
The following table presents consolidated net revenues by classes of
principal products for the years ended in December:
1999 1998 1997
---- ---- ----
Boys toys $1,232,300 891,600 1,152,900
Games and puzzles 1,936,100 1,268,700 1,093,700
Interactive software games 229,400 192,300 87,000
Preschool toys 273,600 341,600 317,200
Other 560,863 610,254 537,759
------- --------- ---------
Net revenues $4,232,263 3,304,454 3,188,559
========= ========= =========
Information as to Hasbro's operations in different geographical areas is
presented below on the basis the Company uses to manage its business.
Net revenues and the related pretax earnings are categorized based on
location of the customer, while long-lived assets (property, plant and
equipment, cost in excess of acquired net assets and other intangibles)
are categorized based on their location:
1999 1998 1997
---- ---- ----
Net revenues
United States $2,818,837 2,113,057 1,947,824
International 1,413,426 1,191,397 1,240,735
--------- --------- ---------
$4,232,263 3,304,454 3,188,559
========= ========= =========
Pretax earnings
United States $ 158,834 194,050 117,436
International 115,011 109,428 87,089
--------- --------- ---------
$ 273,845 303,478 204,525
========= ========= =========
Long-lived assets
United States $1,880,029 1,694,967 1,119,836
International 194,677 177,569 126,067
--------- --------- ---------
$2,074,706 1,872,536 1,245,903
========= ========= =========
Principal international markets include Western Europe, Canada, Mexico,
Australia, New Zealand and Hong Kong.
Other Information
-----------------
Hasbro markets its products primarily to customers in the retail sector.
Although the Company closely monitors the creditworthiness of its
customers, adjusting credit policies and limits as deemed appropriate, a
substantial portion of its customers' ability to discharge amounts owed
is dependent upon the overall retail economic environment.
Sales to the Company's two largest customers, Wal-Mart Stores, Inc. and
Toys `R Us, Inc., amounted to 16% each of consolidated net revenues
during 1999, 18% and 17%, respectively, during 1998 and 15% and 22%,
respectively, during 1997.
Hasbro purchases certain components and accessories used in its
manufacturing process and certain finished products from manufacturers
in the Far East. The Company's reliance on external sources of
manufacturing can be shifted, over a period of time, to alternative
sources of supply for products it sells, should such changes be
necessary. However, if Hasbro were prevented from obtaining products
from a substantial number of its current Far East suppliers due to
political, labor or other factors beyond its control, the Company's
operations would be disrupted while alternative sources of product were
secured. The imposition of trade sanctions by the United States or the
European Union against a class of products imported by Hasbro from, or
the loss of "most favored nation" trading status by, the Peoples
Republic of China could significantly increase the cost of the Company's
products imported into the United States or Europe from China.
(17) Quarterly Financial Data (Unaudited)
------------------------------------
1999
----
Quarter
-----------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
Net revenues $668,398 874,574 1,098,179 1,591,112 4,232,263
Gross profit $411,881 529,548 654,166 938,426 2,534,021
Earnings before
income taxes $ 19,993 46,796 123,434 83,622(a) 273,845
Net earnings $ 13,795 32,289 85,170 57,699 188,953
======= ======= ======= ========= =========
Per common share
Earnings
Basic $ .07 .17 .44 .30 .97
Diluted $ .07 .16 .43 .29 .93
Market price
High $ 30 1/8 37 28 5/8 24 1/4 37
Low $ 21 13/16 27 21 15/16 16 7/8 16 7/8
Cash dividends
declared $ .06 .06 .06 .06 .24
======= ======= ======= ========= =========
1998
----
Quarter
-------------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
Net revenues $482,820 572,057 945,498 1,304,079 3,304,454
Gross profit $278,508 324,962 543,129 791,794 1,938,393
Earnings before
income taxes $ 11,808 8,262 89,601(a) 193,807 303,478
Net earnings $ 7,793 5,453 61,330 131,789 206,365
======= ======= ======= ========= =========
Per common share
Earnings
Basic $ .04 .03 .31 .67 1.04
Diluted $ .04 .03 .30 .65 1.00
Market price
High $ 25 3/4 27 1/16 27 1/4 25 7/16 27 1/4
Low $ 19 7/8 23 1/8 19 5/8 18 5/8 18 5/8
Cash dividends
declared $ .05 .05 .05 .05 .21
======= ======= ======= ========= =========
1997
----
Quarter
-----------------------------------
First Second Third Fourth Full Year
----- ------ ----- ------ ---------
Net revenues $555,784 583,886 915,533 1,133,356 3,188,559
Gross profit $320,413 330,969 512,506 665,613 1,829,501
Earnings before
income taxes $ 40,147 20,283 115,441 28,654(a) 204,525
Net earnings $ 25,694 12,981 77,400 18,911 134,986
======= ======= ======= ========= =========
Per common share
Earnings
Basic $ .13 .07 .41 .10 .70
Diluted $ .13 .07 .38 .09 .68
Market price
High $ 19 3/4 19 5/8 20 3/4 24 5/16 24 5/16
Low $ 16 1/16 15 1/4 17 5/8 17 1/8 15 1/4
Cash dividends
declared $ .05 .05 .05 .05 .21
======= ======= ======= ========= =========
(a) In 1999 and 1997, includes $64,232 and $125,000, respectively
relating to restructuring of operations and, in 1998, includes the
expense impact of $20,000 relating to acquired in-process research
and development.
EXHIBIT 21
HASBRO, INC. AND SUBSIDIARIES
Subsidiaries of the Registrant (a)
Name Under Which Subsidiary State or Other Jurisdiction of
Does Business Incorporation or Organization
- - - - - - - - - - - - - - - - - --------------------------- ------------------------------
Galoob Toys, Inc. Delaware
Hasbro Interactive, Inc. Delaware
Hasbro Interactive GmbH Germany
Hasbro International, Inc. Delaware
Hasbro de Mexico S.A. de C.V. Mexico
Hasbro France S.A. France
Hasbro Deutschland GmbH Germany
Hasbro Italy S.r.l. Italy
Hasbro Latin America Inc. Delaware
Hasbro Argentina S.A. Argentina
Hasbro Chile LTDA Chile
Hasbro Latin America, L.P. Delaware
Hasbro S.A. Switzerland
Hasbro Canada Corporation / Corporation
Hasbro Canada Nova Scotia
Hasbro Asia-Pacific Marketing Ltd. Hong Kong
Tiger Electronics Far East Services, Limited Hong Kong
Hasbro (Schweiz) AG Switzerland
Hasbro U.K. Limited United Kingdom
Hasbro Interactive Limited United Kingdom
Tiger Electronics UK Limited United Kingdom
EuroPress Limited United Kingdom
MB International B.V. The Netherlands
Hasbro B.V. The Netherlands
Hasbro Hellas Industrial & Commercial
Company S.A. Greece
Hasbro Importacao e Exportacao
e de Jogos e Brinquedos Lds Portugal
Hasbro Magyarorszag Kft Hungary
Hasbro Osterreich Ges.m.b.H Austria
Hasbro Poland SpZoo Poland
Hasbro Toys & Games Holdings, S.L. Spain
MB Espana, S.A. Spain
Hasbro Iberia SL Spain
S.A. Hasbro N.V. Belgium
Inter-Toy Eqitim Araclari Sanayi Ve
Ticaret A.S. Turkey
Hasbro Osterreich Ges.m.b.H Austria
Hasbro Far East LTD Hong Kong
Tiger Electronics Far East, Limited Hong Kong
Hasbro Ireland Limited Ireland
Hasbro Australia Limited Australia
Hasbro New Zealand Limited New Zealand
Juguetrenes S.A. de C.V. Mexico
Palmyra Holdings Pte Ltd. Singapore
Hasbro Hong Kong Limited Hong Kong
Hasbro Singapore Pte Ltd. Singapore
Hasbro Toy (Malaysia) Sdn Bhd Malaysia
Hasbro Managerial Services, Inc. Rhode Island
Larami Limited Delaware
OddzOn, Inc. Delaware
Tiger Electronics, Ltd. Delaware
Wizards of the Coast, Inc. Washington
Hasbro Internet Holdings, Inc Delaware
Games.Com, Inc. Delaware
(a) Inactive subsidiaries and subsidiaries with minimal operations have
been omitted. Such subsidiaries, if taken as a whole, would not
constitute a significant subsidiary.
EXHIBIT 23
ACCOUNTANTS' CONSENT
The Board of Directors
Hasbro, Inc.:
We consent to incorporation by reference in the Registration Statements Nos.
2-78018, 2-93483, 33-57344, 33-59583, 333-38159, 333-10404 and 333-10412 on
Form S-8 and Nos. 33-41548, 333-44101 and 333-82077 on Form S-3 of Hasbro,
Inc. of our reports dated February 7, 2000 relating to the consolidated
balance sheets of Hasbro, Inc. and subsidiaries as of December 26, 1999 and
December 27, 1998 and the related statements of earnings, shareholders'
equity and cash flows and related schedule for each of the fiscal years in
the three-year period ended December 26, 1999, which report on the
consolidated financial statements is incorporated by reference and which
report on the related schedule is included in the Annual Report on Form 10-K
of Hasbro, Inc. for the fiscal year ended December 26, 1999.
/s/ KPMG LLP
Providence, Rhode Island
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-END> DEC-26-1999
<CASH> 280,159
<SECURITIES> 0
<RECEIVABLES> 1,149,118
<ALLOWANCES> 65,000
<INVENTORY> 408,571
<CURRENT-ASSETS> 2,131,652
<PP&E> 617,591
<DEPRECIATION> 298,766
<TOTAL-ASSETS> 4,463,348
<CURRENT-LIABILITIES> 2,071,327
<BONDS> 400,000
0
0
<COMMON> 104,847
<OTHER-SE> 1,774,128
<TOTAL-LIABILITY-AND-EQUITY> 4,463,348
<SALES> 4,232,263
<TOTAL-REVENUES> 4,232,263
<CGS> 1,698,242
<TOTAL-COSTS> 1,698,242
<OTHER-EXPENSES> 1,406,533
<LOSS-PROVISION> 9,053
<INTEREST-EXPENSE> 69,340
<INCOME-PRETAX> 273,845
<INCOME-TAX> 84,892
<INCOME-CONTINUING> 188,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,953
<EPS-BASIC> .97
<EPS-DILUTED> .93
</TABLE>
