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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-10182
SCOTSMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3635892
(State of incorporation) (I.R.S. Employer Identification No.)
820 Forest Edge Drive, Vernon Hills, Illinois 60061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 215-4500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common stock, $0.10 par value New York Stock Exchange
Common stock purchase rights, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[ ]
At March 4, 1998 there were 10,576,597 shares of registrant's common stock
outstanding, and the aggregate market value of the voting stock held by
nonaffiliates of the registrant as of such date was approximately $307.6
million.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's definitive Proxy Statement for its 1998 Annual Meeting of
Shareholders to be held on May 14, 1998 (the "1998 Proxy Statement"): Part III.
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PART I
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ITEM 1. BUSINESS
The registrant, Scotsman Industries, Inc. (hereinafter referred to, together
with its subsidiaries, as "Scotsman" or the "Company"), is a leading
international manufacturer and marketer of a diversified line of commercial
refrigeration products, food preparation equipment and beverage systems that is
sold primarily to customers in the restaurant, supermarket, lodging, healthcare
and convenience store industries. The Company has a leading market position in
each of its five product lines, which consist of refrigerated display cases,
ice machines, food preparation and storage equipment, walk-in coolers and
freezers, and beverage systems.
Scotsman was organized under the laws of the state of Delaware on January 26,
1989. Effective April 14, 1989, Scotsman was spun-off from Household
International, Inc. ("Household") through the issuance of one share of Scotsman
common stock for every five shares of Household common stock then outstanding
to Household shareholders. As of such date, Scotsman became a publicly traded
company listed on the New York Stock Exchange, and its operations ceased to be
owned by Household.
Scotsman conducts its domestic ice machine business through the Scotsman Ice
Systems division ("Scotsman Ice Systems") of its wholly-owned subsidiary,
Scotsman Group Inc. ("SGI"), and through the Crystal Tips product line of its
wholly-owned subsidiary, Booth, Inc. ("Booth"). Scotsman conducts its European
ice machine business through two Italian subsidiaries, Frimont S.p.A.
("Frimont") and Castel MAC S.p.A. ("Castel MAC"). In June of 1995, Scotsman
also entered into a joint venture with Shenyang Xinle Precision Machinery
Company in Shenyang, China to produce ice machines for the Chinese market.
During 1997, Scotsman increased its ownership interest in the joint venture
company from 60 to 100 percent.
Scotsman manufactures and markets food preparation and storage equipment,
including food preparation workstations, refrigerators and freezers, air
ventilating equipment, and other equipment, through its wholly-owned
subsidiary, The Delfield Company ("Delfield"), which was acquired on April 29,
1994. Scotsman also manufactures and markets, through Castel MAC, a limited
line of refrigerated cabinets, dough retarders and blast freezers in Europe.
Scotsman manufactures and markets beverage systems in the United States through
Booth and in Europe through Whitlenge Drink Equipment Limited ("Whitlenge") and
through Hartek Beverage Handling GmbH and its Austrian distributor, Hartek
Awagem Vertriebsges m.b.H. (collectively, "Hartek" or the "Hartek entities").
Whitlenge and Hartek were acquired by Scotsman on April 29, 1994 and December
31, 1995, respectively.
ACQUISITION OF KYSOR INDUSTRIAL CORPORATION
In March 1997, Scotsman acquired Kysor Industrial Corporation ("Kysor") and
("Kysor Acquisition"), which at the time was comprised of the Commercial
Products Group, through which Kysor's refrigerated display cases and walk-in
coolers and freezers businesses were conducted, and the Transportation Products
Group, through which Kysor sold a line of products to the transportation
industry. The Company paid approximately $311 million in cash and assumed $35.0
million in debt, net of cash, for both the Commercial Products Group and the
Transportation Products Group. Concurrent with the Kysor Acquisition, Scotsman
sold substantially all of the assets of the Transportation Products Group for
$86 million (approximately $71 million net of taxes) to a subsidiary of Kuhlman
Corporation. Including estimated transaction and severance costs of $22.5
million, the net purchase price for the Commercial Products Group was
approximately $298 million. The subsidiary of Kuhlman Corporation assumed
substantially all liabilities related to the Transportation Products Group,
including environmental and product liabilities.
Kysor's Commercial Products Group operates through its Kysor//Warren and Kysor
Panel Systems divisions. Kysor//Warren is the second largest U.S. manufacturer
of
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refrigerated display cases, and Kysor Panel Systems is the leading manufacturer
of walk-in coolers and freezers in the United States. In 1997, more than 80
percent of Kysor's sales were to supermarket chains, with the remaining portion
sold primarily to restaurants and convenience stores. On a pro forma basis,
sales of refrigerated display cases and walk-in coolers and freezers in 1997
were $254.3 million, which was an increase of $9.2 million, or 4 percent, over
1996 sales of $245.1 million.
In addition, as a result of the Kysor Acquisition, the Company now owns 23.8
percent of the outstanding shares of Austral Refrigeration Pty. Ltd., the
parent company of Kysor//Warren Australia, Pty. Ltd., a licensee and
manufacturer of Kysor refrigerated display cases primarily in Australia
("Kysor//Warren Australia"). Kysor//Warren Australia is a leading supplier of
refrigerated display cases in the Australian market.
ACQUISITION OF HOMARK
In December of 1997, the Company acquired 100 percent of the outstanding shares
of Homark Holdings Limited, a U.K.-based beverage equipment company
("Homark"). Homark is a leading manufacturer of counter dispense fonts, counter
mount dispensers, and line and shelf coolers sold primarily to the U.K. beer
industry. Homark's annual revenues are approximately $12 million. The Company
purchased Homark for approximately $5.6 million.
PRODUCTS
Scotsman manufactures refrigeration products that are marketed primarily to the
foodservice industry (restaurants, cafeterias, convenience stores and bars),
large supermarket chains, the lodging industry, food processors and beverage
companies. The principal commercial products of Scotsman are refrigerated
display cases and mechanical refrigeration systems, ice machines, food
preparation and storage equipment, walk-in coolers and freezers, and beverage
systems. Scotsman also manufactures self-leveling tray and plate dispensers and
ventilation systems. In addition to commercial refrigeration products, Scotsman
manufactures compact consumer ice machines and refrigerators for the luxury
segment of the consumer appliance market.
REFRIGERATED DISPLAY CASES. Through its Kysor//Warren operating unit, Scotsman
designs and manufactures refrigerated display cases and mechanical
refrigeration systems sold primarily to supermarkets. Refrigerated display
cases are used by supermarkets and convenience stores to display perishable
food items such as frozen foods, vegetables, deli items, dairy products, and
prepared meals. Remote mechanical refrigeration systems are located away from a
store's customer area and provide power, air filtration and circulation and
temperature controls to the refrigerated display cases located within the
store. These products are sold under the Kysor//Warren trademark.
Sales of refrigerated display cases accounted for approximately 27 percent of
the Company's sales in fiscal year 1997.
ICE MACHINES. The Company manufactures and markets commercial ice-making
machines under the Scotsman and Crystal Tips trademarks worldwide, under the
Icematic and Simag trademarks in Europe, the Middle East, Africa and Asia, and
under various brands through other dealer networks. The Company sells a
diversified line of commercial ice machines that produce four forms of ice:
cubes (consisting of contour, lenticular, gourmet, and square), flake, nugget
and scale. Each type of ice is designed and marketed for specific applications,
and capacity ranges from 50 to 5,000 pounds of ice per day. The Company's ice
machines are either self-contained units, which make, store and, in some cases,
dispense ice, or modular units, which make, but do not store, ice. Scotsman
also manufactures and sells ice storage bins to accompany modular units.
The Company manufactures and markets commercial ice machines and related
components through its Italian subsidiaries, Castel MAC and Frimont, under the
Icematic, Scotsman and Simag trademarks, for sale in Italy and for export
primarily to Eastern
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and Western Europe, the Middle East, Africa and the Far East. Scotsman
manufactures ice machines for the Chinese market through Scotsman Ice Systems
Shenyang Company Ltd., its wholly-owned Chinese subsidiary, and markets under
the Scotsman name. The Company also markets the Crystal Tips line
internationally through three export marketing firms based in the United States
and Canada.
Since November 1992, Scotsman has also distributed, in both foreign and
domestic markets, industrial flakers manufactured by Howe Corporation. Howe has
informed Scotsman that it wishes to terminate the distribution arrangement, and
it is unclear at present whether or not the distribution arrangement will
continue.
A significant percentage of the sales of the Company's commercial ice machines
are to the full-service and fast-food restaurant industry. Other major end-user
customers include supermarkets, hotels and motels, health care facilities,
convenience stores, schools, and government and military facilities. In
addition to commercial ice machines, Scotsman also manufactures compact
consumer ice machines and refrigerators for the luxury segment of the consumer
appliance markets.
Scotsman's commercial ice machine business accounted for 29 percent, 49
percent, and 52 percent of the Company's sales in fiscal years 1997, 1996 and
1995, respectively.
FOOD PREPARATION & STORAGE EQUIPMENT. Scotsman manufactures and markets a wide
range of commercial food preparation and storage equipment through its
wholly-owned subsidiary Delfield. Delfield's principal products are customized
and standard food preparation workstations, commercial up-right and
under-the-counter refrigerators and freezers, mobile cafeteria systems and
self-leveling tray and plate dispensers, all of which are constructed primarily
from stainless steel, as well as wood and other decorative materials.
Delfield's customized products are designed to address customer requests
regarding size, space, features and performance. Delfield's standard
refrigeration products frequently are incorporated into customers' systems or
can be sold separately. Products are sold under the Delfield, Shelleyglas and
Shelleymatic trademarks.
Within the Company's food preparation and storage equipment unit, the Company
also manufactures and markets several related products. In Europe, Castel MAC
manufactures and markets a line of refrigerated cabinets under the Icematic
brand name and a line of dough retarders and blast freezers under the Tecnomac
brand name, and Frimont markets a line of refrigerators manufactured by Castel
MAC under the Scotsman brand name.
The Company also manufactures and markets niche products primarily through
Delfield, including air ventilating equipment under the Air Tech trademark. In
addition, the Company manufactures and markets a limited line of water coolers
through its Italian subsidiaries, Frimont and Castel MAC, and small industrial
applications through Whitlenge.
Sales of food preparation and storage equipment accounted for approximately 21
percent, 32 percent and 36 percent of Scotsman's sales in fiscal years 1997,
1996 and 1995, respectively.
WALK-IN COOLERS AND FREEZERS. Scotsman designs, manufactures, markets and sells
walk-in coolers and freezers and environmental control systems through its
Kysor Panel Systems operating unit. Kysor Panel Systems' refrigeration panels
used in the construction of walk-in coolers and freezers are made from all
three primary panel types: wood rail, urethane rail and soft nose. The Company
can manufacture any of the three panel types to meet customer preferences. The
Company's environmental control systems are used in industrial applications to
test products under a range of temperatures.
Sales of walk-in coolers and freezers accounted for approximately 11 percent of
the Company's sales in fiscal year 1997.
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BEVERAGE SYSTEMS. In the United States, Scotsman manufactures soft-drink
dispensing equipment through its wholly-owned subsidiary, Booth. Booth
manufactures and markets a complete line of non-coin operated soft-drink
dispensing products and accessories. Booth offers both pre-mix and post-mix
dispensers, which can either be ice-cooled or electrically-cooled, as well as
ice and drink dispensers, hand-operated valves and other related accessory
products used in the fountain market. Booth manufactures and markets the three
major product categories of beverage systems (mechanically refrigerated, ice
cooled and ice/drink) to both Coca-Cola and Pepsi.
In Europe, Scotsman manufactures and markets soft-drink and draught beer
dispensing equipment, and related products, under the Whitlenge, Homark and
Hartek brand names through its Whitlenge and Hartek subsidiaries. Whitlenge
specializes in larger remote beverage cooling installations, typically for
large foodservice applications. Both Whitlenge and Hartek manufacture and
market a wide range of beer and soft-drink coolers and related equipment.
Homark manufactures counter dispense fonts, counter mount dispensers, and line
and shelf coolers, which are marketed through Whitlenge.
The Company is a 50 percent partner in SAW Technologies, a joint venture formed
in August 1996 to develop technologically advanced electronic beverage
dispensing valves. The joint venture's Aztec valve, presently being sold to a
major soft-drink bottler in the United Kingdom, uses technology which will be
incorporated in products for other customers and markets. The Aztec valve
differentiates between and monitors different types of soft-drink syrups,
continuously regulates the flow and mix of syrups and carbonated water, and can
dispense other beverages such as fruit juices, where pulp presents difficulties
for most of the current generation of mechanical valves.
Sales of beverage systems accounted for approximately 12 percent, 19 percent
and 12 percent of Scotsman's sales in fiscal years 1997, 1996 and 1995,
respectively.
MARKETING AND DISTRIBUTION
Scotsman's sales and distribution network, which extends through over 100
countries, uses a combination of direct sales to national accounts, exclusive
and non-exclusive distributors and independent dealers, wholesalers and sales
representatives. Scotsman has approximately 200 sales and marketing employees
and relationships with over 300 exclusive distributors in over 50 countries and
approximately 3,300 independent dealers, distributors, wholesalers and sales
representatives in over 100 countries. While each business unit has its own
marketing organization which is responsible for the marketing and distribution
of its products, certain salespeople and distributors may handle more than one
of the Company's product lines.
REFRIGERATED DISPLAY CASES. Kysor//Warren primarily sells refrigerated display
cases directly to large supermarket and convenience store chains through its
direct sales force. A smaller portion of Kysor//Warren sales are made through
independent commercial refrigeration distributors that market to independent
and small chain supermarkets and convenience stores.
ICE MACHINES. In the United States, both of the Company's Scotsman and Crystal
Tips brands maintain their own independent distribution networks. Scotsman Ice
Systems has approximately 85 distributors and Crystal Tips has approximately 68
distributors in the United States. Scotsman also owns and operates one of its
largest distributors in Southern California, which it purchased upon the
retirement of the former owners. Outside the United States, Crystal Tips has
over 29 distributors. Outside the United States, Castel MAC and Frimont
combined have approximately 1,200 dealers and 150 distributors in Eastern and
Western Europe, Africa and Asia. In the majority of countries served, Castel
MAC and Frimont each sell through separate distribution channels. The Company's
Chinese subsidiary sells commercial ice machines through its own distribution
network.
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Distributors generally do not carry competing brands of ice machines.
Independent service dealers also install and service the equipment. The
servicing functions performed by dealers are particularly important because ice
machines typically require more service, due to variable water conditions, than
other major appliances such as refrigerators. Scotsman also maintains
inventories of replacement parts to support its ice machine product line.
Scotsman sells commercial ice machines directly to national customers such as
large hotel chains, fast-food franchisers, and convenience stores, and to state
and federal governments, for use in employee dining, health care and military
facilities. The Company sells consumer ice machines and refrigerators primarily
through luxury consumer appliance distributors who sell to dealers.
FOOD PREPARATION AND STORAGE EQUIPMENT. Delfield sells its products directly
to national accounts such as large restaurant chains. Delfield also sells
equipment through a network of approximately 1,400 non-exclusive dealers and
approximately 28 independent sales representative firms. Such dealers generally
carry competing lines of equipment. In Europe, Castel MAC sells to the European
commercial bakery industry through dealers and agents specializing in that
industry.
WALK-IN COOLERS AND FREEZERS. Kysor Panel Systems sells its walk-in coolers and
freezers directly to large supermarket chains primarily through its marketing
and direct sales force. Kysor Panel Systems also sells to smaller independent
supermarkets and convenience stores through a network of approximately 600
distributors, dealers and wholesalers.
BEVERAGE SYSTEMS. Booth sells its beverage systems directly to soft-drink
bottlers franchised by large customers such as Coca-Cola, Pepsi, and the
U.S.-based businesses of Cadbury Schweppes. The systems are often labeled with
the customer's name or trademark and the names of the beverages that will be
dispensed. Whitlenge sells directly to soft-drink bottlers and brewers in the
United Kingdom, while Hartek sells directly to soft-drink bottlers in Germany.
Whitlenge and Hartek jointly export directly to bottlers and brewers through a
direct sales force and distributors and local agents in various markets
throughout Western and Central Europe and the Middle East. Products carrying
the Homark brand name are primarily sold to the U.K. brewery market through the
Whitlenge distribution network.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
For financial information pertaining to the Company's foreign and domestic
operations refer to Note 15, "Geographic Information," in Financial Statements
and Supplementary Data in Item 8 of this report.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
The operations and properties of the Company are subject to various federal,
state, local and foreign environmental regulations and standards. Because the
requirements imposed by those authorities frequently are revised and
supplemented, expenditures for compliance responsibilities are difficult to
estimate and may exceed anticipated costs. The Company believes that compliance
with existing and publicly proposed environmental regulations will not have a
material adverse effect on the business, financial condition or results of
operations of the Company.
The Company or its subsidiaries have been identified as a potentially
responsible party ("PRP") under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or similar state statutes in
connection with a number of hazardous waste sites, including a number of sites
associated with the former Transportation Products Group of Kysor. See
"Acquisition of Kysor Industrial Corporation." Under existing environmental
laws, PRPs are jointly and severally responsible for the cost of clean-up and
other remedial action at these sites, and each PRP is therefore potentially
responsible for the full cost of remediation. As a practical matter, however,
costs are generally shared with other PRPs, based on each PRP's relative
contribution to the problem. Moreover, the purchaser of the
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Transportation Products Group has assumed all environmental liabilities
associated with that business. Notwithstanding the assumption of liabilities by
the purchaser, under applicable environmental laws the Company could incur
liabilities related to these and other unknown environmental matters. Based on
the foregoing factors, the relative size of the Company's contribution to the
sites for which it has been named as a PRP (including those sites associated
with Kysor's former Transportation Products Group), currently available
information about the cost of remediation at such sites and the probability
that other PRPs, many of which are large, solvent public companies, will pay
the costs apportioned to them, the Company does not believe that any liability
imposed in connection with such environmental proceedings, either individually
or in the aggregate, will have a material adverse effect upon the Company's
financial condition or its results of operations.
COMPETITION
The primary markets for Scotsman's products are highly competitive. The most
significant competitive factors are product reliability and performance,
service and price, with the relative importance of such factors varying among
product lines. The Company has a number of competitors in each product lines
that it offers. Many of the Company's competitors are small, privately owned
companies. Some of the Company's competitors , however, are divisions of larger
companies, and some have greater financial resources than the Company. The
Company's largest competitors include IMI Cornelius, plc, with whom the Company
competes in beverage systems in Europe; Hussmann International Inc., with whom
the Company competes in refrigerated display cases and related equipment in the
United States, and The Manitowoc Company, Inc., with whom the Company competes
in ice machines, food storage equipment, and walk-in coolers and freezers.
Furthermore, the Company believes that the commercial foodservice equipment
industry recently has begun to undergo significant consolidation as foodservice
chains and supermarkets reduce their supplier base. Such consolidation could
have an effect on the Company's future competitive position.
RESEARCH AND DEVELOPMENT
Scotsman conducts extensive research and development programs in each of its
product lines. These programs seek to develop product improvements and achieve
cost reductions, as well as develop new products. Approximately 68 employees of
the Company are engaged in research and development. Scotsman's total research
and development expenditures for fiscal years 1997, 1996 and 1995 were
approximately $6.2 million, $5.6 million and $4.8 million, respectively.
RAW MATERIALS
The principal materials used in the manufacture of Scotsman's products are
refrigeration components, including compressors, condensers, motors and
controls, and raw materials, including stainless steel, galvanized steel,
aluminum, copper, plastics, glass, foam insulation, brass, and wood. These
materials are readily available from several sources, and Scotsman has not
experienced difficulties with respect to their availability.
GENERAL
CUSTOMERS. Although no single customer accounted for 10 percent or more of
Scotsman's 1997 net sales on a historical basis, some of the Company's
operating units are dependent upon a limited number of major customers, most of
which do not have long-term purchase contracts with the Company. The Company's
five largest customers represented approximately 22 percent of the Company's
net sales in 1997. Sales of certain products, including, in particular,
refrigerated display cases and food preparation and storage equipment, are
largely dependent upon the expansion and renovation programs of the Company's
large chain customers.
BACKLOG OF ORDERS. The backlog of unshipped orders at the end of fiscal years
1997 and 1996 was $120.0 million and $24.8 million, respectively. The large
increase in unshipped orders at the end of 1997 was due to the inclusion of the
backlog of the Commercial Products Group of Kysor, which was acquired by
Scotsman in March 1997. The Company expects that all of the orders in the
backlog at the end of fiscal year 1997 will be shipped during 1998.
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SEASONALITY. The volume of sales of Scotsman's ice machines, food preparation
and storage equipment and beverage systems is somewhat higher in the second and
third fiscal quarters, than in the first and fourth fiscal quarters. Sales of
Scotsman's refrigerated display cases and walk-in coolers and freezers are also
subject to seasonal fluctuations. The Company expects that the second and
third fiscal quarters generally will account for a greater portion of the
annual net sales than the first and fourth fiscal quarters.
PATENTS AND TRADEMARKS. Scotsman holds or is licensed under many United States
and foreign patents covering various design features used in its products, and
also holds a number of other patents and patent applications, licenses,
trademarks and trade names including the trademarks and trade names mentioned
herein. Scotsman does not believe that any of the foregoing, considered
individually, is material to its business, with the exception of the Scotsman,
Delfield and Kysor trademarks. Scotsman believes it possesses adequate
protection with respect to these trademarks.
EMPLOYEES. As of December 28, 1997, Scotsman employed approximately 3,750
employees, approximately 1,450 of whom were covered by collective bargaining
agreements. The Company believes its relationships with employees are generally
good. A collective bargaining agreement at the Company's Delfield unit in Mt.
Pleasant, Michigan expires in April 1998. Negotiations to renew the contract
are in progress.
ITEM 2. PROPERTIES
The following chart lists the domestic and international active manufacturing,
distribution and office facilities owned or leased by Scotsman and the primary
facilities of joint ventures in which Scotsman has an interest:
DOMESTIC FACILITIES
<TABLE>
<CAPTION>
LOCATION DESCRIPTION PRINCIPAL PRODUCT OWNED/LEASED
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<S> <C> <C> <C>
Goodyear, Plant and Office; Walk-in Coolers & Leased
Arizona 50,000 square feet Freezers
Los Angeles, Distribution Facility; Ice Machines Leased
California 13,000 square feet
Columbus, Plant and Office; Refrigerated Owned
Georgia 295,826 square feet Display Cases
Columbus, Plant and Office; Refrigeration Systems Owned
Georgia 155,000 square feet
Conyers, Plant and Office; Refrigerated Owned
Georgia 480,000 square feet Display Cases
Vernon Hills, Office; Ice Machines Leased
Illinois 36,000 square feet
Vernon Hills, Office; Corporate headquarters Leased
Illinois 8,800 square feet
South Bend, Plant and Office; Refrigerated Owned
Indiana 90,000 square feet Display Cases
Des Moines, Plant, Warehouse Refrigerated Leased
Iowa and Office;93,000 Display Cases
square feet
Mt. Pleasant, Plant and Office; Food Preparation Owned
Michigan 327,000 square feet and Storage Equipment
Portland, Plant and Office; Walk-in Coolers Owned
Oregon 84,000 square feet and Freezers
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Fairfax, Plant and Warehouse; Ice Machines Owned
South Carolina 327,000 square feet
Covington, Plant and Office; Food Preparation Leased
Tennessee 188,000 square feet and Storage Equipment
Johnson City, Plant and Office; Walk-in Coolers Leased
Tennessee 60,000 square feet and Freezers
Dallas, Texas Plant and Office; Ice Machines and Leased
170,000 square feet Beverage Systems
Fort Worth, Texas Plant and Office; Walk-in Coolers Owned
118,162 square feet and Freezers
</TABLE>
INTERNATIONAL FACILITIES
<TABLE>
<CAPTION>
LOCATION DESCRIPTION PRINCIPAL PRODUCT OWNED/LEASED
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<S> <C> <C> <C>
Sydney, Plant and Office; Refrigerated *
Australia 163,000 square feet Display Cases
Vienna, Office and Warehouse; Beverage Systems Leased
Austria 11,000 square feet
Shenyang, Plant and Office; Ice Machines Leased
China 17,000 square feet
Radevormwald, Plant and Office; Beverage Systems Owned
Germany 35,000 square feet
Jakarta, Plant and Office; Refrigerated *
Indonesia 5,000 square feet Display Cases
Castelfranco, Plant and Office; Ice Machines Owned
Italy 230,000 square feet
Milan, Italy Plant and Office; Ice Machines Leased
152,000 square feet
Halesowen, Plant and Office; Beverage Systems Leased
United Kingdom 76,000 square feet
Irthlingsborough, Plant and Office; Beverage Systems *
United Kingdom 3,900 square feet
Poole, Plant and Office; Beverage Systems Owned
United Kingdom 18,000 square feet
Poole, Plant and Office; Beverage Systems Leased
United Kingdom 12,500 square feet
Croydon, Plant and Office; Beverage Systems Leased
United Kingdom 14,000 square feet
Wareham, Plant and Office; Beverage Systems Leased
United Kingdom 6,880 square feet
</TABLE>
* Facility owned or leased by a joint venture in which Scotsman has an interest
Scotsman considers the condition of its plants and other properties to be
generally good and believes the capacity of its plants is adequate for the
current needs of its business. Except for a lien on a section of its Mt.
Pleasant, Michigan facility and on its Covington, Tennessee facility, both
securing industrial revenue bonds, none of the principal properties owned by
Scotsman are subject to encumbrances material to the operations of Scotsman.
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ITEM 3. LEGAL PROCEEDINGS
LITIGATION RELATING TO INDIANAPOLIS ATHLETIC CLUB FIRE.
Delfield, which was acquired by the Company on April 29, 1994, was originally
named as a defendant in Indianapolis Athletic Club, Inc. v. The Delfield
Company, et al, a case filed in Marion County Superior Court, Indianapolis,
Indiana. The case arose out of a fire at the Indianapolis Athletic Club (the
"IAC") on February 5, 1992. The IAC alleges, in its action, that the fire was
caused by a refrigerator manufactured by Delfield, and it seeks to recover
property damages of between $10 to $12 million. Delfield was dismissed as a
defendant in the case, following an investigation of its claim that the
refrigerator in the IAC was manufactured, not by Delfield, but by the Delfield
Division of Alco Standard Corporation ("Alco") prior to the acquisition of the
Delfield Division by DFC Holding Corporation ("DFC") which was, in turn,
acquired by Scotsman. Such dismissal was, however, without prejudice to the
IAC's right to reinstate its claim against Delfield. The IAC continued to
pursue its claim against the Delfield Division of Alco, and the Company has
continued to monitor the action.
Alco and the Delfield Division have denied that the refrigerator caused the
fire. The case was tried in early 1997, and on February 17, 1997, a jury
verdict was returned, and judgment was entered, in favor of Alco and the
Delfield Division. On March 17, 1997, the IAC filed notice of an appeal of the
decision with the Indiana court of appeals. The trial court record has not yet
been transferred to the court of appeals, and the appeal is still pending.
Pursuant to the agreement by which DFC acquired the Delfield Division, Alco is
obligated to indemnify Delfield for all losses to Delfield resulting from
product liability claims relating to products manufactured by the Delfield
Division prior to its acquisition by DFC. Alco has agreed that its indemnity
applies to the IAC's action, and Delfield believes that its insurance should
cover any claims that are not covered by Alco's indemnity. Moreover, under the
terms of the agreements pursuant to which the Company acquired Delfield and
Whitlenge, the former shareholders of DFC and Whitlenge Acquisition Limited
("WAL"), an affiliate of DFC, are also required to indemnify the Company for up
to $30 million in losses and expenses arising out of, among other things,
suits, claims or proceedings arising out of the IAC fire. While no assurances
can be given, the Company does not believe that the IAC action is likely to
have a material adverse effect upon the financial condition of the Company or
its results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last fiscal
quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of all executive
officers of Scotsman, the period that each has held his position with the
Company, and a brief account of each such officer's business experience during
the past five years. Executive officers are appointed annually at a meeting of
the Board of Directors of the Company held as soon as practicable after each
annual meeting of the Company's shareholders. Officers of the Company are
appointed to serve until the next annual election of officers and until their
respective successors are chosen.
<TABLE>
<CAPTION>
NAME AND AGE OFFICE AND EXPERIENCE
- -------------------------------------------------------------------------------
<S> <C>
Richard C. Osborne, 54 Mr. Osborne is Chairman of the Board and has held
that position since May 1991. He is also President,
Chief Executive Officer and a Director of Scotsman
and President and Director of Scotsman Group and
has held those positions since April 1989.
</TABLE>
page 9
<PAGE> 11
<TABLE>
<S> <C>
David M. Frase, 50 Mr. Frase is a Vice President of the Company and
has held that position since May 1997. He is also
President and General Manager of Kysor Panel
Systems, and has held those positions since 1987.
Richard M. Holden, 47 Mr. Holden is Vice President - Human Resources of
the Company and Assistant Secretary of Scotsman
Group, and has held those positions since January
1990.
Donald D. Holmes, 60 Mr. Holmes is Vice President - Finance and Secretary
of Scotsman and Vice President-Finance, Secretary
and Director of Scotsman Group and has held those
positions since April 1989.
Christopher D. Hughes, 51 Mr. Hughes is a Vice President of the Company and
has held that position since June 1994. He is also
President of Booth and has held that position since
May 1994. From 1993 to May 1994, he was Vice
President/General Manager of the Central and Western
Transit Operations of Morrison Knudsen Corporation,
a division engaged in the business of assembling new
and overhauling used passenger rail cars.
Ludwig H. Klein, 55 Mr. Klein is a Vice President of the Company and has
held that position since February 1996. He is also
Managing Director of Hartek and has held that posi-
tion since February 1995. Effective April 1998,
Mr. Klein will become a consultant to the Company.
From June 1994 until February 1995, he worked as an
independent consultant and provided, during that
period, consulting services to Hartek and in the
capital goods industry. From July 1986 until June
1994, Mr. Klein held the position of General Manager
of Haacon Hebetechnil GmbH, a manufacturer of
industrial lifting equipment.
Emanuele Lanzani, 63 Mr. Lanzani is an Executive Vice President of the
Company and has held that position since April 1989.
He is also Managing Director, Frimont and Castel
MAC. Mr. Lanzani has been Managing Director of
Castel MAC since its acquisition by a wholly-owned
subsidiary of Household in October 1985 and he has
been Managing Director of Frimont since 1968.
Gerardo Palmieri, 58 Mr. Palmieri is Director - Sales and Marketing,
Frimont, and has held that position since 1980.
Randall C. Rossi, 47 Mr. Rossi is a Vice President of the Company and has
held that position since January 1995. He is also
President of Scotsman Ice Systems and has held that
position since January 1995. From January 1994 to
January 1995, he was Executive Vice President of
Scotsman Ice Systems. From 1989 to January 1994, he
was Vice President - Sales and Marketing of Scotsman
Ice Systems.
William J. Rotenberry, 43 Mr. Rotenberry is Vice President - Business
Development. He has been employed by the Company
since January 1996 and became a Vice President of
the Company in February 1996. From 1990 until
January 1996, he was a Director of Corporate
Development for Joslyn Corporation, a diversified
manufacturer.
</TABLE>
page 10
<PAGE> 12
<TABLE>
<S> <C>
Michael de St. Paer, 52 Mr. de St. Paer is a Vice President of the Company
and has held that position since April 1994. He is
also Managing Director of Scotsman Beverage Group -
Europe and has held that position since June 1997.
From April 1993 to June 1997, Mr. de St. Paer was
Managing Director of Whitlenge, and from June 1992
to April 1993 he was Assistant Managing Director of
Whitlenge.
Graham E. Tillotson, 46 Mr. Tillotson is a Vice President of the Company and
President of Delfield. He has held those positions
since June 1997. From January 1997 to June 1997, he
served as Interim President of Delfield. From 1984
to December 1996, he was Vice President, Sales and
Marketing of Delfield.
Logan F. Wernz, 53 Mr. Wernz is a Vice President of the Company and
has held that position since May 1997. He is also
President and General Manager of Kysor//Warren, and
has held those positions since 1988.
</TABLE>
PART II
- -------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Scotsman Industries, Inc. common stock is listed on the New York Stock
Exchange. The common stock ticker symbol is SCT. The high, low and last sales
price per share for Scotsman's Common Stock, and dividends declared, by
calendar quarter for 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
DIVIDENDS
1996 HIGH LOW LAST DECLARED
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st Quarter $18.000 $17.000 $17.875 $0.025
2nd Quarter 21.000 17.875 20.125 $0.025
3rd Quarter 24.000 19.500 22.875 $0.025
4th Quarter 24.875 22.750 23.750 $0.025
- ----------------------------------------------------------------------------------
Total dividends declared in 1996 $0.100
- ----------------------------------------------------------------------------------
Shares outstanding at December 29, 1996 10,542,464
- ----------------------------------------------------------------------------------
Shareholders of record at December 29, 1996 4,559
- ----------------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------------
1st Quarter $29.375 $23.000 $27.750 $0.025
2nd Quarter 28.250 24.500 27.750 $0.025
3rd Quarter 28.688 25.250 28.000 $0.025
4th Quarter 27.563 23.500 24.438 $0.025
- ----------------------------------------------------------------------------------
Total dividends declared in 1997 $0.100
- ----------------------------------------------------------------------------------
Shares outstanding at December 28, 1997 10,568,597
- ----------------------------------------------------------------------------------
Shareholders of record at December 28, 1997 4,234
- ----------------------------------------------------------------------------------
</TABLE>
The information contained in Note 7 of the "Notes to Consolidated Financial
Statements" included under Item 8 is incorporated herein by reference.
page 11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following historical financial data has been derived from the Company's
consolidated financial statements and should be read in conjunction with the
audited Consolidated Financial Statements and the Notes thereto contained in
Item 8 of this report and "Managements Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of this report.
Scotsman Industries, Inc. Five-Year Summary
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, DEC. 29, DEC. 31, JAN. 1, JAN. 2,
1997(a) 1996(b) 1995(c) 1995(d) 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $571,588 $356,373 $324,291 $266,632 $163,952
Income before income taxes 37,561 35,017 28,128 22,798 13,371
Income before extraordinary loss 18,919 18,568 15,408 12,785 7,411
Net income 18,286 18,568 15,408 12,785 7,411
Income per share before
extraordinary loss, diluted (e) 1.75 1.73 1.45 1.35 1.05
Net income per share, diluted (e) 1.69 1.73 1.45 1.35 1.05
Total assets 660,124 283,264 275,943 244,791 103,173
Long-term debt and capitalized
lease obligations, excluding
current portion 321,132 60,289 74,719 85,161 29,469
Cash dividends declared
per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
- -----------------------------------------------------------------------------------
</TABLE>
(a) The information for the fiscal year ended December 28, 1997, includes
the balance sheet information and the results of Kysor subsequent to its
acquisition in March, 1997.
(b) The information for the fiscal year ended December 29, 1996, includes
the balance sheet information and the results of Hartek which was acquired
on December 31, 1995.
(c) The information for the fiscal year ended December 31, 1995, includes
balance sheet informtion for Hartek which was acquired on December 31, 1995.
(d) The results for the fiscal year ended January 1, 1995, include the
results from Delfield and Whitlenge as of the date of their acquisitions on
April 29, 1994.
(e) The calculation of diluted net income per share for the fiscal years
1997, 1996, 1995, 1994 and 1993 was based on 10,803,261, 10,708,879,
10,644,697, 9,474,715 and 7,060,256 weighted average shares of common stock,
respectively. The calculation of diluted net income per share for the fiscal
years ended January 1, 1995, December 31, 1995, and December 29, 1996, is
based on net income before preferred stock dividends. The number of shares
assumes conversion of convertible preferred stock from the date of issue and
also includes the dilutive impact, as if issuance had occurred on the
acquisition date, of contingent shares which were subsequently distributed
to the sellers of Delfield and Whitlenge based on those businesses having
achieved a specified combined level of earnings during fiscal year 1994, and
also includes the dilutive impact of common stock options outstanding.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Year ended December 28, 1997 ("1997"), compared with year ended December 29,
1996 ("1996")
The Company's net sales increased by $215.2 million, or approximately 60
percent, to a record $571.6 million in 1997 from $356.4 million in 1996.
Results for 1997 included sales from March 10 through December 28 of $215.5
million from the Commercial Products Group of Kysor, which was acquired by the
Company in March 1997.
Sales of refrigerated display cases and walk-in coolers and freezers by Kysor
were $215.5 million in 1997, which represented approximately 38 percent of the
Company's sales for the year. On a pro forma basis, sales of refrigerated
display cases and walk-in coolers and freezers increased $9.2 million, or 4
percent, to $254.3 million
page 12
<PAGE> 14
in 1997 from $245.1 million in 1996. Kysor's backlog of orders from
supermarkets remains at record levels, although the delivery schedules of
certain customers were deferred from the fourth quarter of 1997 to future
periods.
Scotsman's worldwide ice machine sales, which represented 29 percent of total
sales of the Company in 1997, declined $4.4 million, or 3 percent, to $166.2
million in 1997 from $170.6 million in 1996, using constant foreign exchange
rates. Sales stated at actual foreign exchange rates decreased 6 percent in
1997. The decline in ice machine sales resulted from lower sales in Europe and
the United States due to soft market conditions in both regions, some slowdown
in restaurant chain activity in the United States and higher distributor
inventories in Europe at the beginning of the year. Conditions in the United
States improved in the fourth quarter of 1997 as did demand in Europe, as
distributor inventories in that region returned to normal levels.
Food preparation and storage equipment sales, which represented 21 percent of
total sales of the Company in 1997, increased by $6.9 million, or approximately
6 percent, to $119.7 million in 1997 from $112.8 million in 1996. Increased
sales in the first half of 1997 were driven by sales to Boston Market, a
customer of the Company's Delfield business unit. Although Boston Market has
significantly reduced its expansion plans, Delfield has made progress
replacing revenue recorded in late 1996 and the first half of 1997 from sales
to that customer.
Beverage systems sales, which represented 12 percent of the Company's sales in
1997, increased by $2.6 million, or approximately 4 percent, to $70.2 million
in 1997 from $67.6 million in 1996. Increased export sales and market
penetration throughout Europe by the Company's U.K.- based beverage dispensing
unit more than offset soft market conditions for the Company's dispensing
business in Germany and in the United States. The recently completed
acquisition of Homark is expected to contribute to sales growth of this product
line in 1998.
The Company's gross profit increased by $43.6 million, or approximately 44
percent, to $142.0 million in 1997 from $98.4 million in 1996, due to the
inclusion of Kysor's results of operations subsequent to its acquisition by the
Company in March 1997. However, the Company's gross profit margin decreased as
a percentage of sales to 24.8 percent in 1997 from 27.6 percent in 1996. The
reduction in gross profit margins is partially attributable to the inclusion of
the results of Kysor, which historically has reported lower gross profit
margins. Also contributing to the decline in gross profit margins were higher
production costs of food preparation and storage equipment, and the decline in
worldwide ice machine sales in 1997.
Selling and administrative expenses increased by $25.0 million, or
approximately 43 percent, to $83.1 million in 1997 from $58.1 million in 1996.
The increase in selling and administrative expenses is attributable to the
inclusion of Kysor's results subsequent to its acquisition by the Company in
March 1997, including amortization of intangibles of $3.8 million related to
the purchase of Kysor during the year. As a percentage of sales, selling and
administrative expenses decreased to 14.5 percent in 1997 from 16.3 percent in
reported in 1996. The percentage decrease is primarily attributable to Kysor's
business units which, although they have historically reported lower gross
profit margins, also have lower selling and administrative expenses as a
percentage of sales as compared with the balance of the Company's businesses.
Income from operations increased by $18.6 million, or approximately 46 percent,
to $58.9 million in 1997 from $40.3 million in 1996, which primarily reflects
Kysor's contribution to the Company's profits. As a percentage of sales, income
from operations decreased to 10.3 percent in 1997 from 11.3 percent in 1996.
The decline is the result of the lower gross profit margins and an additional
$3.8 million of amortization of intangibles resulting from the Kysor
Acquisition.
Net interest expense increased by $16.1 million to $ 21.4 million in 1997 from
$5.3 million in the prior year as a result of the increased domestic borrowings
incurred by the Company to fund the Kysor Acquisition.
page 13
<PAGE> 15
Income taxes increased by $2.2 million to $18.6 million in 1997 from $16.4
million in 1996 due to higher taxable income, and an increase in the Company's
overall income tax rate to 49.6 percent in 1997 from 47.0 percent in 1996. The
higher income tax rate is primarily attributable to the impact of
non-deductible amortization of intangibles resulting from the Kysor
Acquisition.
Net income, before a one-time after-tax charge of $633,000 incurred for the
early retirement of $20 million of 11.43 percent private placement debt,
increased by $0.3 million, or approximately 2 percent, to $18.9 million in 1997
from $ 18.6 million in 1996. On a diluted basis, earnings per share, before the
one-time charge, increased by $0.02, or approximately 1 percent, to $1.75 in
1997 from $1.73 in 1996. Excluding the effects of foreign currency translation,
1997 net income before the one-time charge would have increased 4 percent. Net
income, including the one-time charge, declined by $0.3 million, or
approximately 2 percent, to $18.3 million in 1997 from $18.6 million in 1996.
On a diluted basis, earnings per share, including the one-time charge, declined
by $0.04, or approximately 2 percent, to $1.69 in 1997 from $1.73 in 1996.
The Company has been evaluating its computer software programs and operating
systems for the Year 2000 compliance. Based on this assessment, the Company
determined that it is required to modify portions of its software during 1998
and 1999 so that its computer systems will properly utilize dates beyond
December 31, 1999. Based on present information the Company believes that it
will be able to achieve Year 2000 compliance, and that the cost associated with
achieving such compliance will not have a material effect on its financial
condition or results of operations. However, if such upgrades, modifications
and conversions are not made, or are not made in a timely manner, the Year 2000
issue could have a material impact on the Company's operations.
The Company is currently communicating with its suppliers and customers
regarding Year 2000 compliance within their organizations. In the event that
any of the Company's significant suppliers or customers does not successfully
and timely achieve Year 2000 compliance, the Company's business or operations
could be adversely affected.
RESULTS OF OPERATIONS
Year ended December 29, 1996 ("1996"), compared with year ended December 31,
1995 ("1995")
The Company experienced strong operating results in 1996 compared with 1995.
Sales increased in many of the Company's businesses and operating income as a
percentage of sales increased as well. These positive operating results were
largely attributable to the inclusion of a full year's operation of Hartek,
which was purchased by the Company on December 31, 1995, strong growth at
Whitlenge, solid sales gains from the Company's European ice machine businesses
and a continued emphasis on cost containment.
The Company's total sales increased by $32.1 million, or 10 percent, to a
record $356.4 million in 1996 from $324.3 million in 1995.
Ice machine sales, which represented 49 percent of total sales of the Company
in 1996, increased by $6.5 million, or 4 percent, to $176.0 million in 1996
from $169.5 million in 1995 primarily due to 15 percent growth in sales from
European operations while domestic sales of ice machines remained relatively
constant.
Food preparation and storage equipment sales, excluding niche product sales,
represented 29 percent of total sales of the Company in 1996, and remained
constant compared to 1995, reflecting a decline in European bakery equipment
sales and a modest increase in sales of food preparation equipment by Delfield.
page 14
<PAGE> 16
Beverage systems sales, which represented 19 percent of total sales of the
Company in 1996, increased by $27.6 million, or 69 percent, to $67.6 million in
1996 from $40.0 million in 1995, driven primarily by the inclusion of the
operating results of Hartek and growth of 24 percent at Whitlenge due to
increasing their export sales and a strong domestic beer market in the United
Kingdom.
Niche products sales, which represented 3 percent of total company sales in
1996, decreased by $2.3 million, or 21 percent, to $9.2 million in 1996 from
$11.5 million in 1995, driven primarily by a lower volume of certain contract
products and ventilation equipment.
The Company's gross profit increased by $10.5 million, or 12 percent, to $98.4
million in 1996 from $87.9 million in 1995. The Company's gross profit margin
increased to 27.6 percent of total sales in 1996 from 27.1 percent of total
sales in 1995 due to selling price increases in certain products, moderating
material costs and the impact of higher sales in relation to a base of certain
fixed production costs. These gains were partially offset by higher production
costs at Delfield due to inefficiencies incurred while implementing process
improvements and organizational changes in anticipation of future growth
requirements.
Selling and administrative expenses increased $4.7 million, or 9 percent, to
$58.1 million in 1996 from $53.4 million in 1995. Although selling and
administrative expenses increased due to the inclusion of Hartek, selling and
administrative expenses as a percentage of total sales of the Company declined
to 16.3 percent in 1996 from 16.5 percent in 1995, primarily due to higher
overall sales and lower advertising costs.
Income from operations increased by $5.8 million, or 17 percent, to $40.3
million in 1996 from $34.5 million in 1995 primarily due to increased sales
with higher associated gross margins and the continued benefit of cost
containment plans initiated during 1996 and in prior years.
Net interest expense decreased by $1.0 million, or 17 percent, to $5.3 million
in 1996 from $6.3 million in 1995 primarily due to the Company's lower average
debt levels and a favorable interest rate environment.
Income taxes increased by $3.7 million to $16.4 million in 1996 from $12.7
million in 1995 due to higher income from operations and a higher effective tax
rate. The Company's tax rate increased to 47.0 percent in 1996 from 45.2
percent in 1995 primarily due to the higher percentages of sales generated from
foreign operations with higher relative tax rates.
Overall, net income increased by $3.2 million, or 21 percent, to $18.6 million
in 1996 from $15.4 million in 1995. On a diluted basis, earnings per share
increased by $0.28, or 19 percent, to $1.73 in 1996 from $1.45 in 1995. The
effects of fluctuations in currency exchange rates on the Company's results of
operations were immaterial.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's liquidity requirements have arisen primarily from
the need to fund its working capital, capital expenditures, acquisitions and
interest expense, including fixed obligations associated with debt or lease
obligations. The Company has met these liquidity requirements through the use
of funds generated from operations, along with financing from various sources.
The Company expects to continue to generate significant cash flow from
operations, which in combination with available borrowing capacity will be used
to run the Company's businesses and fund capital expenditures. Refer to Note 7
of the Notes To Consolidated Financial Statements in Item 8 for a discussion of
the Company's loan facilities.
The Company generated cash flow from operations of $31.9 million in 1997
compared with cash flow from operations of $23.5 million in 1996. Net income
plus depreciation and amortization increased by $7.4 million, or 27 percent, to
$34.8 million in 1997 from $27.4 million in 1996.
page 15
<PAGE> 17
The changes in the balance sheet categories discussed below from December 29,
1996, to December 28, 1997, exclude the opening balances from the Kysor
Acquisition in March of 1997 and the impact of changes in foreign exchange
rates on those categories. Accounts receivable increased by $11.5 million
compared with year-end 1996 primarily as a result of increased sales in the
fourth quarter of 1997 compared with the fourth quarter of 1996. Inventories
declined by $7.1 million, which reflects a reduction in inventory at many of
the Company's businesses and an improvement in the Company's inventory turnover
ratio. Trade accounts payable and other liabilities decreased by $4.9 million,
primarily related to severance and retirement benefits paid to former
executives of Kysor.
Capital expenditures, including those funded through capital leases, increased
$5.6 million, or 90 percent, to $11.8 million in 1997 from $6.2 million in
1996. Capital expenditures in 1997 were made primarily for equipment to realize
productivity improvements, new product tooling, and replacement items, and to
fund construction of a new Kysor facility in Columbus, Georgia.
In March 1997, the Company acquired Kysor, which at the time was comprised of
the Commercial Products Group and the Transportation Products Group. The
Company paid approximately $311 million in cash and assumed $35.0 million in
debt, net of cash, for both the Commercial Products Group and the
Transportation Products Group. Concurrently with the Kysor Acquisition,
Scotsman sold substantially all of the assets of the Transportation Products
Group for $86.0 million (approximately $71 million net of taxes) to a
subsidiary of Kuhlman Corporation. Including estimated transaction and
severance costs of $22.5 million, which have not yet been fully paid out, the
net purchase price for the Commercial Products Group was approximately $298
million. All asset and liability accounts as of December 28, 1997, were
significantly impacted by the Kysor Acquisition. Goodwill increased from
December 29, 1996, due to the Kysor Acquisition, which added approximately $192
million. In December 1997, the Company also acquired 100 percent of the
outstanding shares of Homark, a U.K.-based beverage equipment company for
approximately $5.6 million. The Company converted its China joint venture to a
wholly-owned subsidiary by increasing its ownership from 60 percent to 100
percent during 1997, at a cost of approximately $1.4 million.
Cash and cash equivalents of $24.1 million as of December 28, 1997, increased
by $7.6 million from December 29, 1996, reflecting the increase in cash
balances at the Company's foreign subsidiaries.
Shareholders' equity increased $10.9 million from December 29, 1996, which
reflects net income of $18.3 million for 1997, which was partially offset by a
reduction in shareholders' equity caused by changes in accumulated foreign
currency translation adjustments of $6.6 million and the impact of dividends.
Note 7 to the Consolidated Financial Statements included in Item 8 and herein
incorporated by reference contains a summary of the changes in the Company's
debt structure as a result of the Kysor Acquisition. Long-term debt increased
by approximately $275.5 million as of December 28, 1997, primarily due to
funding of the Kysor Acquisition. Short-term debt decreased $3.1 million from
December 29, 1996, primarily due to short-term domestic borrowings being
replaced with longer-term borrowings. As of December 28, 1997, the Company was
subject to various covenants as part of its outstanding indebtedness including
a covenant which had the effect of restricting the amount of the Company's
dividends to its shareholders. Refer to Note 7 to the Company's financial
statements for a further description of this particular covenant. The Company
was in compliance with these covenants related to its long-term debt as of
December 28, 1997.
Total debt, including capital leases, was $350.7 million as of December 28,
1997, compared with $76.6 million as of December 29, 1996, due to increased
domestic borrowings incurred by the Company to fund the Kysor Acquisition. The
debt to capital ratio was approximately 71 percent at December 28, 1997,
compared with approximately 37 percent at December 29, 1996.
page 16
<PAGE> 18
Since its first quarter as a publicly-held company, the Company has paid a
quarterly dividend of 2 1/2 cents per share. The continuation, amount and
timing of this dividend will be determined by the Board of Directors and may
change as conditions warrant.
The foregoing discussions and analysis of the Company's financial condition and
results of operations contains forward looking statements that involve risks
and uncertainties. The Company's results could differ significantly from those
anticipated as a result of unforeseen factors. Factors that could cause actual
results to differ from those anticipated include (I) the strength or weakness
of the various economies in which the Company markets its products, (II)
weather conditions, (III) the utilization rates of the Company's facilities,
(IV) labor difficulties, (V) increased prices of raw materials and purchased
components, (VI) scheduling and transportation dislocations, (VII) delays in
development of new products or construction of new facilities, (VIII) product
liability or other lawsuits, warranty claims or return of goods, (IX) foreign
currency fluctuations, (X) changes in buying patterns of certain large
customers as a result of internal cost-control measures adopted by those
customers, (XI) changes in environmental, health, safety or refrigerant
regulations or standards, (XII) the level of the Company's leverage, (XIII) the
Company's ability or inability to manage growth, (XIV) the Company's loss of
key personnel and (XV) failure of the Company or its suppliers to achieve Year
2000 compliance in a timely manner. See the Cautionary Statements included as
Exhibit 99 to this report for a more detailed discussion of the foregoing and
other factors.
page 17
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SCOTSMAN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, DEC. 29, DEC. 31,
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $571,588 $356,373 $324,291
Cost of sales 429,598 257,942 236,402
- ------------------------------------------------------------------------------
Gross profit 141,990 98,431 87,889
Selling and administrative expenses 83,071 58,135 53,435
- ------------------------------------------------------------------------------
Income from operations 58,919 40,296 34,454
Interest expense, net 21,358 5,279 6,326
- ------------------------------------------------------------------------------
Income before income taxes 37,561 35,017 28,128
Income taxes 18,642 16,449 12,720
- ------------------------------------------------------------------------------
Income before extraordinary loss 18,919 18,568 15,408
Extraordinary loss (net of income taxes of $422) (633) -- --
- ------------------------------------------------------------------------------
Net income $ 18,286 $ 18,568 $ 15,408
Preferred stock dividends -- 813 1,240
- ------------------------------------------------------------------------------
Net income available to common shareholders $ 18,286 $ 17,755 $ 14,168
- ------------------------------------------------------------------------------
Basic earnings per share:
Income before extraordinary loss $ 1.79 $ 1.89 $ 1.61
Extraordinary loss (0.06) -- --
- ------------------------------------------------------------------------------
Net income per common share $ 1.73 $ 1.89 $ 1.61
- ------------------------------------------------------------------------------
Diluted earnings per share:
Income before extraordinary loss $ 1.75 $ 1.73 $ 1.45
Extraordinary loss (0.06) -- --
- ------------------------------------------------------------------------------
Net income per common share $ 1.69 $ 1.73 $ 1.45
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
page 18
<PAGE> 20
SCOTSMAN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<TABLE>
<CAPTION>
DEC. 28, DEC. 29,
1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and temporary cash investments $ 24,085 $ 16,501
Trade accounts and notes receivable,
net of allowances
of $5,371 in 1997 and $2,778
in 1996 102,880 58,734
Inventories 75,350 52,530
Deferred income taxes 12,515 4,708
Other current assets 12,266 5,101
- ---------------------------------------------------------------------------
Total current assets 227,096 137,574
Properties and equipment, net 86,762 46,659
Goodwill, net 281,855 94,975
Other noncurrent assets 64,411 4,056
- ---------------------------------------------------------------------------
TOTAL ASSETS $660,124 $283,264
===========================================================================
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt and current maturities
of capitalized lease obligations
and long-term debt $ 29,519 $ 16,317
Trade accounts payable 44,889 22,344
Accrued income taxes 4,002 6,302
Accrued expenses 69,537 33,290
- ---------------------------------------------------------------------------
Total current liabilities 147,947 78,253
Long-term debt and capitalized
lease obligations 321,132 60,289
Deferred income taxes 2,305 3,710
Other noncurrent liabilities 46,086 9,300
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 517,470 151,552
===========================================================================
Shareholders' Equity:
Common stock, $.10 par value,
authorized 50,000,000 shares;
issued 10,760,490 shares and
10,729,513 shares, respectively 1,076 1,073
Preferred stock, $1.00 par value,
authorized 10,000,000 shares;
issued 0 shares -- --
Additional paid in capital 73,639 73,053
Retained earnings 79,266 62,036
Deferred compensation and unrecognized
pension cost (165) (117)
Foreign currency translation adjustments (9,450) (2,877)
Less: Common stock held in treasury;
191,893 and 187,049 shares, respectively (1,712) (1,456)
- ---------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 142,654 131,712
- ---------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $660,124 $283,264
============================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
page 19
<PAGE> 21
SCOTSMAN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Amounts in thousands)
FOR THE FISCAL YEARS ENDED DEC. 28, DEC. 29, DEC. 31,
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 18,286 $ 18,568 $ 15,408
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,549 8,870 7,594
Loss (gain) on property dispositions 169 (82) (39)
Change in assets and liabilities:
Trade accounts receivable (11,537) (3,310) (2,607)
Inventories 7,121 237 2,006
Trade accounts payable and other liabilities (4,892) (1,877) (2,074)
Other, net 6,231 1,101 3,162
- -------------------------------------------------------------------------------------
Net cash provided by operating activities 31,927 23,507 23,450
Cash flows from investing activities:
Investment in properties and equipment (11,788) (6,195) (6,513)
Proceeds from dispositions of properties
and equipment 154 230 215
Acquisition of Kysor (264,788) -- --
Other investments in subsidiaries and
joint ventures (6,992) (2,423) (665)
Investment in Hartek (634) (991) (1,491)
- -------------------------------------------------------------------------------------
Net cash used in investing activities (284,048) (9,379) (8,454)
Cash flows from financing and capital activities:
Short-term debt, net (3,060) (6,524) 3,616
Issuance of long-term debt 464,790 16,074 17,806
Principal payments under long-term debt and
capitalized leases (189,243) (21,128) (28,071)
Financing costs of Kysor and subordinated debt
and debt discount (8,517) -- --
Dividends paid to shareholders (1,055) (2,035) (2,118)
- -------------------------------------------------------------------------------------
Net cash provided by (used in) financing and
capital activities 262,915 (13,613) (8,767)
Effect of exchange rate changes on cash and
temporary cash investments (3,210) 178 (191)
- -------------------------------------------------------------------------------------
Net increase in cash and temporary cash
investments 7,584 693 6,038
Cash and temporary cash investments at
beginning of year 16,501 15,808 9,770
- -------------------------------------------------------------------------------------
Cash and temporary cash investments
at end of year $ 24,085 $ 16,501 $ 15,808
- -------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 19,159 $ 6,812 $ 7,431
- -------------------------------------------------------------------------------------
Income taxes $ 23,092 $ 14,957 $ 10,992
- -------------------------------------------------------------------------------------
Supplemental schedule of noncash investing and
financing activities:
Investment in properties and equipment through
issuance of capitalized lease obligations $ (440) $ (42) $ (96)
Issuance of stock for acquisition of Delfield
and Whitlenge $ -- $ -- $ (12,089)
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
page 20
<PAGE> 22
SCOTSMAN INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Foreign
Common Preferred Additional Currency
Stock Stock Paid in Retained Translation Treasury
(Amounts in thousands) Par Value Par Value Capital Earnings Other(a) Adjustments Stock Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 846 $ 2,000 $58,085 $31,959 $ (53) $(5,031) $(1,343) $ 86,463
- ---------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 15,408 -- -- -- 15,408
Foreign currency
translation adjustments -- -- -- -- -- 120 -- 120
Issuance of deferred
compensation -- -- 120 -- (120) -- -- --
Amortization of deferred
compensation -- -- -- -- 129 -- -- 129
Dividends declared to
common shareholders -- -- -- (895) -- -- -- (895)
Dividends declared to
preferred shareholders -- -- -- (1,240) -- -- -- (1,240)
Issuance of common stock
relating to acquisition
of Delfield and Whitlenge 67 -- 12,022 -- -- -- -- 12,089
Stock options exercised 2 -- 287 -- -- -- -- 289
Unrecognized pension cost -- -- -- -- (44) -- -- (44)
Balance at December 31, 1995 $ 915 $ 2,000 $70,514 $45,232 $ (88) $(4,911) $(1,343) $112,319
- ---------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 18,568 -- -- -- 18,568
Foreign currency translation
adjustments -- -- -- -- -- 2,034 -- 2,034
Issuance of deferred
compensation -- -- 119 -- (119) -- -- --
Amortization of deferred
compensation -- -- -- -- 120 -- -- 120
Dividends declared to common
shareholders -- -- -- (951) -- -- -- (951)
Dividends declared to
preferred shareholders -- -- -- (813) -- -- -- (813)
Conversion of preferred stock
into common stock 153 (2,000) 1,847 -- -- -- -- --
Stock options exercised 5 -- 573 -- -- -- (113) 465
Unrecognized pension cost -- -- -- -- (30) -- -- (30)
Balance at December 29, 1996 $1,073 $ -- $73,053 $62,036 $ (117) $(2,877) $(1,456) $131,712
- ---------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 18,286 -- -- -- 18,286
Foreign currency
translation adjustments -- -- -- -- -- (6,573) -- (6,573)
Issuance of deferred
compensation -- -- 119 -- (120) -- 1 --
Amortization of deferred
compensation -- -- -- -- 120 -- -- 120
Dividends declared to
common shareholders -- -- -- (1,056) -- -- -- (1,056)
Stock options exercised 3 -- 467 -- -- -- (257) 213
Unrecognized pension cost -- -- -- -- (48) -- -- (48)
Balance at December 28, 1997 $1,076 $ -- $73,639 $79,266 $ (165) $(9,450) $(1,712) $142,654
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Other shareholders' equity includes deferred compensation and unrecognized
pension cost.
The accompanying notes to consolidated financial statements are an integral
part of this statement.
page 21
<PAGE> 23
DESCRIPTION OF BUSINESS
The Company operates in one segment, foodservice and food retail equipment, in
which it engages in the manufacture and marketing of a diversified line of
commercial refrigeration products, food preparation equipment and beverage
systems that are sold primarily to customers in the restaurant, supermarket,
lodging, healthcare and convenience store industries. The Company's revenues
are diversified among its five product lines, which consist of refrigerated
display cases, ice machines, food preparation and storage equipment, walk-in
coolers and freezers and beverage systems.
Scotsman's ice machine business accounted for 29 percent, 49 percent, and 52
percent of sales in fiscal years 1997, 1996 and 1995, respectively. Scotsman
manufactures and markets ice machines in the United States through its Scotsman
Ice Systems division and its Crystal Tips line of its Booth, Inc. subsidiary,
in Europe through its Italian subsidiaries and in China through its subsidiary.
Scotsman ice machines are sold both through a system of distributors and
directly by Scotsman to national customers and governmental and military
buyers. Scotsman also manufactures and markets a line of consumer ice machines
primarily for the luxury home market.
Scotsman manufactures and markets a line of food preparation and storage
equipment through its Delfield subsidiary which was acquired in April 1994.
Delfield's products are sold primarily to U.S. commercial foodservice
establishments. Scotsman also manufactures and markets a line of bakery
equipment and commercial refrigerators and freezers through its Italian
businesses. Food preparation and storage equipment accounted for 21 percent, 32
percent and 36 percent of Scotsman's business in fiscal years 1997, 1996 and
1995, respectively.
Scotsman manufactures and markets beverage systems in Europe through its United
Kingdom subsidiaries, Whitlenge and Homark, and its German and Austrian
subsidiaries, Hartek. Whitlenge and Hartek were acquired in April 1994 and
December 1995, respectively. Homark was acquired in December 1997. Whitlenge's
and Hartek's products are sold to soft drink bottlers and breweries.
Domestically, Scotsman also manufactures, through its Booth, Inc. subsidiary,
soft drink dispensing equipment which is sold primarily in the United States to
soft drink bottlers. Beverage systems accounted for 12 percent, 19 percent and
12 percent of sales in fiscal years 1997, 1996 and 1995, respectively.
In March of 1997, the Company acquired Kysor Industrial Corporation ("Kysor").
Through Kysor, the Company manufactures and markets refrigerated display cases,
commercial refrigeration systems and insulated panels which are sold to the
supermarket and convenience store industries. See Note 13 for additional
disclosure relating to the Kysor acquisition. Sales of Kysor display cases and
walk-in coolers represented 27 percent and 11 percent, respectively, of the
Company's sales in the fiscal year 1997.
Geographic information for Scotsman can be found in Note 15.
page 22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of Scotsman Industries, Inc. ("Scotsman" or "the Company") and its
consolidated subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.
Certain amounts in the consolidated financial statements for previous years
have been reclassified to conform to the presentation used for fiscal year
1997.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
FISCAL YEAR. The Company reports on a 52-53 week fiscal year ending on the
Sunday nearest to December 31. Fiscal years 1997, 1996 and 1995 had 52 weeks.
CASH MANAGEMENT. The Company considers all highly liquid investments with
original maturities of three months or less to be temporary cash investments.
Temporary cash investments, primarily Eurodollar deposits or repurchase
agreements with maturities of 90 days or less, are carried at cost, which
approximates market. Interest income (in thousands) included in interest
expense, net was $1,411, $791 and $633 for fiscal years 1997, 1996 and 1995,
respectively.
TRADE ACCOUNTS AND NOTES RECEIVABLE. Trade accounts and notes receivable at
December 28, 1997, and December 29, 1996, included notes of $6.4 million and
$7.5 million, respectively.
INVENTORIES. Inventories are stated at the lower of cost or market and include
the appropriate elements of material, labor and manufacturing overhead
expenses. Cost is determined using the last-in, first-out ("LIFO") method for
13 percent of domestic inventories and the first-in, first-out ("FIFO") method
for the balance of domestic and all foreign inventories.
PROPERTIES AND EQUIPMENT. Properties and equipment, including capitalized
leases, are recorded at cost to the Company at date of acquisition and
depreciated over either their estimated useful lives, ranging from 3 to 40
years, or lease terms, whichever is shorter, using principally the
straight-line method for financial reporting purposes and accelerated methods
for tax reporting purposes.
GOODWILL. Cost of investments in excess of net assets of businesses acquired
after October 1970 is being amortized using the straight-line method over 40
years. The related amortization expense was $6.3 million, $2.5 million and $2.4
million for the fiscal years 1997, 1996 and 1995, respectively. At December
28, 1997, and December 29, 1996, accumulated amortization was $14.5 million and
$8.0 million, respectively. After an acquisition, the Company continually
reviews whether subsequent events and circumstances have occurred that indicate
that the remaining estimated useful life of goodwill may warrant revision or
that the remaining balance of goodwill may not be recoverable. If events and
circumstances indicate that goodwill related to a particular business should be
reviewed for possible impairment, the Company uses projections to assess
whether future operating income of the business on a non-discounted basis is
likely to exceed the goodwill amortization over the remaining life of the
goodwill, to determine whether a writedown of goodwill to recoverable value (as
determined by the same projections) is appropriate.
page 23
<PAGE> 25
FINANCIAL INSTRUMENTS. The Company has only limited involvement with derivative
financial instruments and does not use them for trading purposes. The Company's
participation in derivatives is limited primarily to interest-rate swap
agreements and forward exchange contracts. The Company enters into
interest-rate swap agreements to reduce the impact of changes in interest rates
on its floating-rate long-term debt. The difference between the fixed and
floating rates, which is to be paid or received, is accrued as interest rates
change and is recognized over the life of the swap agreements. The cash impacts
of these instruments are included with the cash flows of the items to which
they relate in the Consolidated Statement of Cash Flows.
REVENUE RECOGNITION. Revenue is recognized when goods are shipped to a
customer.
INTEREST EXPENSE. Interest expense included in the Consolidated Statement of
Income is related to debt covered under credit agreements, a former private
placement of debt, senior subordinated debt, industrial development revenue
bonds, capitalized lease obligations, and borrowings on domestic lines of
credit and foreign lines of credit.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs related to both
present and future products are expensed currently. Research and development
expenditures for fiscal years 1997, 1996 and 1995 were $6.2 million, $5.6
million and $4.8 million, respectively.
ENVIRONMENTAL LIABILITIES. The Company's operations and products are subject to
federal, state, local and foreign regulatory requirements relating to
environmental protection. It is the Company's policy to comply fully with all
such applicable requirements. The Company may be subject to potential
liabilities for the costs of environmental remediation at currently or
previously owned or operated sites or sites to which it, or predecessor owners,
transported materials.
It is the Company's policy to accrue for the estimated cost of environmental
matters, on a non-discounted basis, when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated. Such
provisions and accruals exclude claims for recoveries from insurance carriers
or other third parties. Such claims are recognized as receivables only if
realization is probable.
FOREIGN CURRENCY TRANSLATION. The Company has foreign subsidiaries located in
Italy, Germany, Austria, China and the United Kingdom. Foreign subsidiary
income and expenses are translated into United States dollars at the average
rates of exchange prevailing during the year. The assets and liabilities are
translated into U.S. dollars at the rates of exchange on the balance sheet
date, and the related translation adjustments are accumulated as a separate
component of shareholders' equity. As the Company intends to maintain its
investments in these subsidiaries indefinitely, ultimate realization of these
translation adjustments is highly uncertain. Foreign currency transaction gains
and losses are minimal and are recorded in income as they occur.
TAXES. Federal and state income taxes are not provided on undistributed
earnings of foreign subsidiaries that have been or are intended to be
reinvested indefinitely.
EARNINGS PER SHARE. In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
("SFAS 128"). SFAS 128 established standards for computing and presenting
earnings per share ("EPS") and is effective for periods ending after December
15, 1997. SFAS 128 required restatement of all prior-period earnings per share
data presented. Accordingly, earnings per share data for all periods are
presented in accordance with SFAS 128.
Under SFAS 128, Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.
page 24
<PAGE> 26
NEW ACCOUNTING STANDARDS. In July 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.130, "Reporting
Comprehensive Income," ("SFAS 130") and Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," ("SFAS 131"). SFAS 130 establishes standards for reporting
comprehensive income in financial statements and SFAS 131 expands certain
reporting and disclosure requirements for segments from current standards. The
Company is not required to adopt these Statements until 1998 and is currently
reviewing the impact of these new Standards.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $28,564 $23,207
Work-in-process 13,891 9,052
Raw materials 32,895 20,271
- -------------------------------------------------------------------------------
TOTAL INVENTORIES $75,350 $52,530
- -------------------------------------------------------------------------------
</TABLE>
Approximately $7.0 million of total Company inventories were valued on the LIFO
method in fiscal 1997 and 1996. If inventories valued on the LIFO method had
been valued using the FIFO method, they would have been $4.1 million and $3.9
million higher at December 28, 1997, and December 29, 1996, respectively.
3. PROPERTIES AND EQUIPMENT
Properties and equipment consisted of assets owned and leased under capital
lease arrangements as follows (in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Owned:
Land $ 4,439 $ 1,966
Buildings and leasehold improvements 50,132 28,521
Machinery, fixtures and equipment 76,556 54,564
Accumulated depreciation and amortization (49,044) (43,000)
- -------------------------------------------------------------------------------
Owned, net 82,083 42,051
- -------------------------------------------------------------------------------
Leased:
Buildings and leasehold improvements 5,270 5,141
Machinery, fixtures and equipment 1,231 1,121
Accumulated depreciation and amortization (1,822) (1,654)
- -------------------------------------------------------------------------------
Leased, net 4,679 4,608
- -------------------------------------------------------------------------------
PROPERTIES AND EQUIPMENT, NET $ 86,762 $ 46,659
- -------------------------------------------------------------------------------
</TABLE>
4. SHORT-TERM DEBT
Short-term debt (in thousands) at December 28, 1997, and December 29, 1996, was
$3,305 and $6,115, respectively, and principally related to amounts owed under
lines of credit. The weighted average interest rate based on short-term debt
outstanding as of December 28, 1997, and December 29, 1996, was 7.2 percent and
6.1 percent, respectively. Average borrowings (in thousands) and the related
weighted average interest rates were as follows:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Bank and other borrowings $ 4,524 $ 4,888
Weighted average interest rate 6.7% 6.4%
- -------------------------------------------------------------------------------
</TABLE>
The maximum aggregate short-term debt outstanding (in thousands) at the end of
any month during fiscal years 1997 and 1996 was $12,333 and $11,109,
respectively.
page 25
<PAGE> 27
5. LINES OF CREDIT
The Company maintains various credit agreements which are used primarily to
fund the Company's working capital needs. At December 28, 1997, these
agreements (in thousands) included foreign and domestic lines of credit of
$15,965 and $7,500, respectively. Lines of credit are reviewed annually, with
amounts borrowed under lines of credit included in short-term debt.
At December 28, 1997, foreign and domestic lines of credit not in use were (in
thousands) $15,606 and $4,554, respectively. Borrowings under these agreements
are available at the prime rate or other prevailing market rates. There are no
fees or compensating balance requirements on the lines of credit.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Payroll and employee benefits $19,494 $ 7,818
Current portion of product warranties 9,583 6,673
Reserve for customer allowances 4,740 4,264
Other current liabilities 35,720 14,535
- -------------------------------------------------------------------------------
TOTAL ACCRUED EXPENSES $69,537 $33,290
- -------------------------------------------------------------------------------
</TABLE>
7. LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
Long-term debt and capitalized lease obligations consisted of the following
(in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
FNBC Facility with floating interest rates;
due 1998-2004 $230,591 $ --
Credit Agreement with floating interest rates;
repaid prior to maturity in 1997 -- 35,473
11.43% private placement agreement; due 1997-1998,
repaid prior to maturity in 1997 -- 20,000
8.625% Senior Subordinated debt; due 2007,
net of discount 99,733 --
Allendale County Industrial Revenue Bonds with
floating interest rate; due 2001 9,250 9,250
Town of Covington Industrial Revenue Bonds with
floating interest rate; due 2002 - 2006 3,150 3,150
Isabella County Industrial Revenue Bonds with
floating interest rate; due 1997 - 2003 400 450
Foreign borrowings with various interest rates;
due 1997 - 2011 2,435 2,047
Other domestic borrowings with various interest rates;
due 1998 - 2012 1,420 --
Capital lease obligations with various interest rates;
due 1997 - 2002 367 121
- -------------------------------------------------------------------------------
TOTAL $347,346 $70,491
Current portion 26,214 10,202
- -------------------------------------------------------------------------------
LONG-TERM PORTION $321,132 $60,289
- -------------------------------------------------------------------------------
</TABLE>
In March of 1997, the Company financed the acquisition of Kysor, after giving
effect to the divestiture of the Transportation Products Group and other
acquisition related transactions, through a $415 million loan facility
established between the Company, Scotsman Group and certain other subsidiaries
and The First National Bank of Chicago as agent for the lenders (the "FNBC
Facility"). The FNBC Facility originally consisted of a $150 million seven-year
term loan and a $265 million seven-year reducing revolving loan facility, both
with an initial interest rate of 1.375 percent above Eurocurrency rates. The
interest rates on both facilities adjust based on a leverage ratio as defined
in the FNBC Facility and vary between 0.5 percent to 1.50 percent above
Eurocurrency rates. The revolving portion of the FNBC Facility reduces on
December 31 in the respective years as follows: $10 million in 1998, and $15
million in each of 1999, 2000, 2001, 2002 and 2003, with the remaining amount
outstanding payable on the loan termination date in March 2004. The FNBC
Facility is guaranteed by Scotsman and certain of its subsidiaries and secured
by a pledge of stock of certain subsidiaries of Scotsman, including, but not
limited to, Scotsman Group Inc., The Delfield Company and Kysor Industrial
Corporation.
page 26
<PAGE> 28
The FNBC Facility required that a notional amount of $150 million be hedged to
reduce interest rate exposure for three years. For information on the
interest-rate swaps outstanding which were established in 1997 to comply with
the requirement imposed by the FNBC Facility, see Note 10.
In addition to financing the Kysor acquisition, proceeds of the FNBC Facility
were used to pay expenses associated with this acquisition and were used to
repay existing long-term debt (as described below), including debt outstanding
under a former $90.0 million reducing revolving credit agreement and the $20.0
million private placement agreement. This early repayment resulted in an
after-tax loss of $633,000 which is presented in the accompanying income
statement as an extraordinary loss.
In December 1997, the Company's wholly-owned subsidiary, Scotsman Group Inc.
(the "Issuer"), issued $100 million of 8 5/8% Senior Subordinated Notes (the
"Notes") which will mature on December 15, 2007. Net proceeds of the senior
subordinated notes were used to repay $30 million of the term loan under the
FNBC Facility as discussed above and also repay amounts owed under the
revolving credit portion of the FNBC Facility. The Company has issued a
guaranty of the Notes under which the Company, as primary obligor and not
merely as a surety, has fully and unconditionally guaranteed on a senior
subordinated basis the payment of the Notes when due and the due performance by
the Issuer of its other obligations under the Indenture. See Note 16 regarding
summary financial information of Scotsman Group Inc.
In April 1994, a $90 million reducing revolving credit agreement ("Credit
Agreement") was established primarily to provide the financing for the cash
consideration paid in connection with the acquisitions of Delfield and
Whitlenge. Borrowings under this Credit Agreement were repaid in March of 1997
upon the issuance of the FNBC Facility which replaced the Credit Agreement.
As of December 28, 1997, interest rates under the FNBC Facility ranged from
approximately 6.94 to 8.95 percent for Eurocurrency loans. Commitment fees on
the FNBC Facility vary from 0.175 percent to 0.35 percent per annum on the
unused portion.
The Allendale County Industrial Revenue Bonds are secured by a bank letter of
credit for $9.6 million. The current cost of the commitment fee on the letter
of credit ranges from 0.50 percent to 1.50 percent on outstanding principal and
interest depending on the Company's leverage ratio as defined in the FNBC
Facility. The interest rate applicable to the Allendale County Industrial
Revenue Bonds was 4.25 percent and 4.21 percent at December 28, 1997, and
December 29, 1996, respectively.
Delfield had two industrial revenue bonds outstanding which the Company assumed
as of the acquisition in April 1994. One series was issued by the town of
Covington, Tennessee and the other was issued by Isabella County, Michigan. The
Town of Covington Industrial Revenue Bonds are secured by a building with a net
book value of $4.4 million as of December 28, 1997. The Isabella County
Industrial Revenue Bonds are secured by a building section with a net book
value of $0.9 million as of December 28, 1997. The interest rates for these two
industrial revenue bonds as of December 28, 1997, were 5.31 percent and 6.12
percent, respectively. The interest rates for these two industrial revenue
bonds as of December 29, 1996, were 5.16 percent and 5.94 percent,
respectively.
The Company also has various capital lease obligations which are collateralized
by properties and equipment with a net book value of approximately $0.3
million.
page 27
<PAGE> 29
The weighted average effective interest rate on the Company's total long-term
debt was 7.7 percent and 7.5 percent at December 28, 1997, and December 29,
1996, respectively. Future required maturities of long-term debt and capital
leases assuming letters of credit are outstanding at the same level as December
28, 1997, were as follows (in thousands):
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
1998 $ 26,214
1999 15,764
2000 25,667
2001 21,917
2002 27,579
Thereafter 230,205
- -------------------------------------------------------------------------------
TOTAL $347,346
- -------------------------------------------------------------------------------
</TABLE>
The agreement governing the FNBC Facility and other debt agreements include
various financial covenants. The Company was in compliance with these covenants
as of December 28, 1997. One of the covenants in the FNBC Facility has the
effect of restricting the amount of the Company's dividends to its shareholders
by requiring the Company to maintain consolidated stockholders' equity of at
least $120 million (without giving effect to future changes in accumulated
translation adjustments), plus 60 percent of (i) the cumulative net income of
the Company from December 30, 1996, forward and (ii) the net cash proceeds from
any future issuance of equity securities by the Company after the closing of
the FNBC Facility. At December 28, 1997, consolidated stockholders' equity of
the Company was $142.7 million. Under this covenant the amount of retained
earnings that was restricted as of December 28, 1997 was $60.0 million. The
Company is also precluded from paying dividends to its shareholders (other than
dividends payable in its own capital stock) if a default or an unmatured
default under the agreement has occurred and is continuing or would occur after
giving effect to the payment of such dividends. Also, under a covenant included
in the senior subordinated debt indenture, $69.3 million of retained earnings
of the Company and its wholly-owned subsidiary Scotsman Group Inc. were
restricted as of December 28, 1997.
8. OPERATING LEASES
The Company leases certain of its offices, buildings, and machinery and
equipment for periods up to 10 years with various renewal options. Rental
expense under operating leases was $4.1 million in 1997, $2.5 million in 1996
and $2.4 million in 1995.
Future minimum lease commitments under noncancelable operating leases with
initial lease terms greater than one year at December 28, 1997, were as follows
(in thousands):
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
1998 $ 1,863
1999 1,618
2000 1,652
2001 1,592
2002 1,490
Thereafter 4,347
- -------------------------------------------------------------------------------
TOTAL MINIMUM LEASE COMMITMENTS $ 12,562
- -------------------------------------------------------------------------------
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit pension plans for certain salaried and
hourly employees. Plans covering salaried employees provide benefits that are
based on years of service and compensation. Plans covering hourly employees
provide benefits of stated amounts for each year of service. The pension assets
are invested in institutional mutual funds which contain both equities and
fixed investments. The Company complies with funding requirements under the
Employee Retirement Income Security Act.
For the fiscal year ended December 28, 1997, net periodic pension cost and the
funded status of the Company's pension plans presented below includes
information for the Kysor pension plans.
page 28
<PAGE> 30
Net periodic pension cost included in the Consolidated Statement of Income was
as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,313 $ 1,141 $ 919
Interest cost 2,536 790 667
Actual return on plan assets (5,548) (1,050) (797)
Net amortization and deferral 2,941 519 365
- ------------------------------------------------------------------------------
NET PERIODIC PENSION COST $ 2,242 $ 1,400 $1,154
- ------------------------------------------------------------------------------
</TABLE>
The funded status of the Company's pension plans (in thousands), excluding the
Italian and German pension plans, was as follows:
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
------------------------------ -----------------------------
Plan Assets Accumulated Plan Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Plan Assets Benefits Plan Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits obligation $ (23,343) $ (17,688) $ (4,425) $ (4,435)
Non-vested benefits obligation (2,031) (1,344) (419) (586)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (25,374) (19,032) (4,844) (5,021)
Effects of anticipated future
compensation levels (5,335) (3,242) (1,838) (612)
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (30,709) (22,274) (6,682) (5,633)
Plan assets at fair value 38,646 11,753 5,115 3,771
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
(in excess of) or less than plan assets 7,937 (10,521) (1,567) (1,862)
Unrecognized net asset -- (7) -- (9)
Unrecognized prior service cost -- 1,183 464 835
Unrecognized net (gain) or loss (1,030) 272 (396) 74
Adjustment required to recognize
minimum liability -- (393) -- (344)
- ------------------------------------------------------------------------------------------------------------------------------------
(ACCRUED) PREPAID PENSION COST $ 6,907 $ (9,466) $ (1,499) $ (1,306)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumptions used in the actuarial computations were:
<TABLE>
<CAPTION>
Dec. 28, 1997 Dec. 29, 1996 Dec. 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.0 - 7.5% 7.5 - 9.0% 7.5 - 9.0%
Rate of increase in compensation levels 4.0 - 5.0% 4.0 - 7.0% 4.0 - 7.0%
Expected long-term rate of return on assets 8.0 - 8.5% 8.5 - 10.0% 8.5 - 10.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has pension plans covering employees in its Italian subsidiaries.
These plans combine aspects of both government mandated and non-contributory
plans. Total pension expense under these plans included in the Consolidated
Statement of Income (in thousands) was $793, $895 and $888 in fiscal years
1997, 1996 and 1995, respectively. The unfunded liability for these plans
included in the Consolidated Balance Sheet at December 28, 1997, and December
29, 1996, (in thousands) was $4,208 and $4,578, respectively.
The Company also sponsors defined contribution pension plans. Participation in
one of these plans is available to substantially all domestic employees.
Company contributions to these plans are based on either a percentage of
employee contributions or a specified amount depending on the provisions of the
plan. Total costs incurred under the plans were (in thousands) $661, $742 and
$568 for fiscal years 1997, 1996 and 1995, respectively.
The Company maintains plans that provide certain health care benefits to
certain employees retiring from the Company on or after attaining a certain age
and who have rendered at least 10 years of service to the Company. These plans
are unfunded. The Company reserves the right to change or terminate the
benefits at any time.
page 29
<PAGE> 31
For the year ended December 28, 1997, net periodic post-retirement benefit cost
and the status of the plans includes information for the Kysor post-retirement
benefit plans.
Net periodic post-retirement benefit cost for the fiscal years ended December
28, 1997, December 29, 1996, and December 31, 1995, included the following
components (in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost on benefits earned $ 350 $ 146 $ 132
Interest cost on accumulated post-retirement
benefit obligation 375 148 139
- -----------------------------------------------------------------------------------------
NET PERIODIC POST-RETIREMENT BENEFIT COST $ 725 $ 294 $ 271
- -----------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the status of the plan, reconciled to the accrued
post-retirement benefit cost recognized in the Company's balance sheet
(in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- -------------------------------------------------------------------------------
ACCUMULATED POST-RETIREMENT BENEFIT OBLIGATION:
<S> <C> <C>
Retirees $ 2,424 $ 755
Fully-eligible active plan participants 1,216 171
Other active plan participants 2,838 1,110
- -------------------------------------------------------------------------------
Total $ 6,478 $ 2,036
Unrecognized net (loss) gain (470) 64
- -------------------------------------------------------------------------------
ACCRUED POST-RETIREMENT BENEFIT COST $ 6,008 $ 2,100
- -------------------------------------------------------------------------------
Assumptions used in the actuarial computations were:
1997 1996
- -------------------------------------------------------------------------------
Discount rate 7.0% 7.5%
Projected health care cost trend rates:
Pre-65 benefits 8.0% 8.5%
Post-65 benefits 6.85 - 8.0% 8.5%
Ultimate health care cost trend rates:
Pre-65 benefits 5.0% 5.0%
Post-65 benefits 5.0% 5.0%
- -------------------------------------------------------------------------------
</TABLE>
Increasing the assumed health care cost trend rate by one percentage point in
each year would increase the accumulated post-retirement benefit obligation by
approximately (in thousands) $843 for 1997 and $360 for 1996, and the aggregate
of the service and interest cost components of net periodic post-retirement
benefit cost by approximately (in thousands) $114 for 1997, $64 for 1996 and
$57 for 1995.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
During 1994, the Company adopted Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Instruments," ("SFAS 107")
and Statement of Financial Accounting Standards No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments"
("SFAS 119"). These statements require certain disclosures about the fair value
of financial instruments, including derivative financial instruments, for which
it is practicable to estimate fair value.
The following methods and assumptions were used to estimate the fair market
value of each class of financial instrument for which it is practicable to
estimate that value:
CASH AND TEMPORARY CASH INVESTMENTS. Temporary cash investments consist
principally of investments in short-term, interest-bearing instruments. The
carrying amount approximates fair market value.
page 30
<PAGE> 32
TRADE ACCOUNTS AND NOTES RECEIVABLE AND PAYABLE. The carrying amount of the
Company's trade accounts and notes receivable and payable approximates market
value.
LONG-TERM DEBT. The carrying amount of most of the Company's long-term debt and
the Company's short-term debt approximates market value since rates on those
debt agreements are variable and are set periodically based on current rates
during the year. An exception was the former private placement agreement which
had a fixed interest rate of 11.43 percent. The fair value of the private
placement agreement was estimated based on the current rates quoted to the
Company for debt with the same maturities. Another exception would be the
senior subordinated debt which was issued during December 1997. The fair value
of the senior subordinated debt was its quoted market value to the Company.
LETTERS OF CREDIT. As collateral for the Company's industrial revenue bonds and
for certain of its insurance programs, the Company had a total of $11.7 million
of letters of credit outstanding as of December 28, 1997. The Company pays
letter of credit fees to its bank group that range from 0.50 to 1.50 percent
based upon the leverage ratio as defined in the FNBC Facility. It is the
Company's opinion that the replacement costs for such letters of credit would
not significantly vary from the present fee structure.
SWAP AGREEMENTS AND FORWARD CONTRACTS. Effective March 1997, the Company
entered into two interest-rate swap agreements to reduce the impact of changes
in interest rates on its domestic floating-rate, long-term debt. The
interest-rate swap agreements had notional principal amounts of $50 million and
$100 million, respectively. Interest payable was at a fixed rate of 6.245
percent and 6.4565 percent, for the $50 million and $100 million agreements,
respectively. In return for both of these agreements, the Company will receive
floating rate interest payments based on the three-month London Interbank
Offered Rate. These agreements will expire in March 2000, but the $50 million
interest-rate swap agreement is extendable for an additional two years at the
option of the bank. These two swap agreements are accounted for as hedges. No
material loss is anticipated due to nonperformance by counterparties to these
agreements.
As of December 29, 1996, the Company had two interest-rate swap agreements
outstanding that the Company entered into in 1994. These agreements matured or
were repaid prior to maturity and were no longer outstanding as of December 28,
1997. Both of the interest-rate swap agreements had a notional principal amount
of $10 million and interest payable was at a fixed rate of 5.64 percent and 6.33
percent, respectively. In return for both of these agreements, the Company
received floating rate interest payments based on three-month London Interbank
Offered Rate. These two swap agreements were accounted for as hedges.
The Company had a forward exchange contract outstanding as of December 29, 1996,
to hedge exposure relating to an intercompany transaction.
The fair value of interest rate swaps and forward exchange contracts is the
estimated amount that the Company would receive or pay to terminate the
agreements as of the balance sheet date.
The estimated fair value of the Company's financial instruments which differ
from their carrying amount at December 28, 1997, (in thousands) was as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
- -------------------------------------------------------------
Liabilities:
<S> <C> <C>
Long-term debt $346,979 $347,496
Interest-rate swap agreements -- 2,111
- -------------------------------------------------------------
</TABLE>
page 31
<PAGE> 33
The estimated fair value of the Company's financial instruments which differ
from their carrying amount at December 29, 1996, (in thousands) was as follows:
<TABLE>
CARRYING AMOUNT FAIR VALUE
- ---------------------------------------------------------------------
Assets:
<S> <C> <C>
Forward exchange contract $ -- $ 229
Liabilities:
Long-term debt 70,370 71,535
Interest-rate swap agreements -- 44
- ---------------------------------------------------------------------
</TABLE>
11. INCOME TAXES
The components of the consolidated net deferred tax assets and liabilities as
of December 28, 1997, and December 29, 1996, were as follows (in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- --------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
<S> <C> <C>
Warranty accruals $ 4,046 $ 3,110
Severance accruals 4,685 --
Pensions 4,937 --
Excise tax 2,239 --
Receivable allowances 1,529 812
Inventory reserves 1,924 720
Accrual for post-retirement medical costs 2,308 823
German net operating loss carryforwards 2,210 3,562
Other 16,261 4,784
- --------------------------------------------------------------------------------
Deferred tax assets $ 40,139 $ 13,811
Valuation allowance (2,210) (3,681)
- --------------------------------------------------------------------------------
Deferred tax assets, net $ 37,929 $ 10,130
- --------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Properties and equipment $ (7,935) $ (6,102)
Goodwill amortization (1,751) (1,611)
Pensions (3,179) --
Other (3,201) (1,419)
- --------------------------------------------------------------------------------
Total $(16,066) $ (9,132)
- --------------------------------------------------------------------------------
</TABLE>
The above deferred tax components are reflected in the accompanying balance
sheets as follows (in thousands):
<TABLE>
<CAPTION>
DEC. 28, 1997 DEC. 29, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Current portion of deferred tax asset $ 12,515 $ 4,708
Noncurrent portion of deferred tax asset
(included in other noncurrent assets) 11,653 --
Noncurrent portion of deferred tax liability (2,305) (3,710)
- --------------------------------------------------------------------------------
</TABLE>
The valuation allowance as of December 28, 1997, includes $2.2 million to
entirely offset the tax asset established for Hartek pre-acquisition net
operating loss carry forwards which might not be realized due to the terms of
the purchase agreement of Hartek (see Note 14) which requires substantial
repayment to the seller if utilized and due to an unfavorable decision of the
Supreme Tax Court in Germany which may result in such carry forwards being not
utilizable by the Company. The German net operating loss carry forwards, if
realized, will result in a reduction of goodwill and the benefit of utilizing
the net operating loss carry forwards will not flow through the income
statement.
page 32
<PAGE> 34
<TABLE>
<CAPTION>
The provision (benefit) for income taxes consisted of the following
(in thousands):
FOR THE FISCAL YEARS ENDED DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
State:
Current $ 2,365 $ 801 $ 1,152
Deferred (971) 89 128
- -------------------------------------------------------------------------------
1,394 890 1,280
- -------------------------------------------------------------------------------
Federal:
Current $ 3,541 $ 6,717 $ 6,279
Deferred 6,324 748 727
- -------------------------------------------------------------------------------
9,865 7,465 7,006
- -------------------------------------------------------------------------------
Foreign:
Current $ 6,096 $ 7,407 $ 3,605
Deferred 1,287 687 829
- -------------------------------------------------------------------------------
7,383 8,094 4,434
- -------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES $ 18,642 $ 16,449 $ 12,720
- -------------------------------------------------------------------------------
</TABLE>
Income before income taxes from foreign operations was $14.7 million in 1997,
$15.7 million in 1996 and $8.9 million in 1995. The differences between the
Company's effective tax rate and the statutory federal income tax rate were as
follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increase in rate resulting from:
State and local income taxes, net
of federal tax benefit 2.5 1.7 2.9
Foreign tax effect 5.9 7.6 4.9
Non-deductible goodwill 5.3 2.0 2.3
Other 0.9 0.7 0.1
- -------------------------------------------------------------------------------
49.6% 47.0% 45.2%
- -------------------------------------------------------------------------------
</TABLE>
In accordance with the Company's accounting policy, provision for U.S. income
taxes has not been made on $24.7 million of undistributed earnings of foreign
subsidiaries at December 28, 1997. The Company has provided income taxes on
$14.2 million of earnings which were distributed to the Company in January
1998.
12. STOCK-BASED COMPENSATION PLANS
The Company has a long-term executive incentive program which provides for
granting key employees options to purchase the Company's common stock. Under
the program, options are exercisable at a rate set by the Compensation
Committee of the Board of Directors of the Company. To date, options have been
exercisable in cumulative annual increments of 25 percent commencing one year
after the date of grant. The option price per share is not less than the fair
market value of one share on the date of the grant. An option may not be
exercisable after more than 10 years and one day from the date of the grant.
The Company also maintains the Non-Employee Directors Stock Option Plan. The
plan provides for (a) an automatic award of options to purchase shares of the
Company's common stock to non-employee directors as of the effective date of
the plan, (b) automatic awards to non-employee directors who are elected or
appointed to the Board of Directors after the effective date and (c) automatic
annual awards thereafter. The options will vest 100 percent on the date
preceding the first annual meeting of shareholders following the date of the
grant of the options. The option price per share may not be less than the fair
market value of one share on the date of the grant. An option may not be
exercisable after more than 10 years and one day from the date of the grant.
page 33
<PAGE> 35
The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with FASB Statement No. 123 ("SFAS 123"), the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported $18,286 $18,568 $15,408
Pro forma $17,845 $18,306 $15,281
Basic net income per share:
As reported $1.73 $1.89 $1.61
Pro forma $1.69 $1.86 $1.59
Diluted net income per share:
As reported $1.69 $1.73 $1.45
Pro forma $1.65 $1.71 $1.44
- ------------------------------------------------------------------------
</TABLE>
A summary of the status of the Company's two stock option plans at December 28,
1997, December 29, 1996, and December 31, 1995, and changes during the years
then ended is presented in the following table:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 560 $13 525 $12 473 $10
Granted 98 27 92 18 79 18
Exercised (31) 11 (51) 10 (24) 9
Forfeited (13) 19 (6) 17 (3) 16
- -------------------------------------------------------------------------------------------------------
Outstanding at end of year 614 15 560 13 525 12
- -------------------------------------------------------------------------------------------------------
Exercisable at end of year 418 11 377 10 357 10
- -------------------------------------------------------------------------------------------------------
Weighted average fair value of
options granted during the year $15.30 $9.74 $10.73
- -------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding at
December 28, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- ------------------------
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
Range of at 12/28/97 Contractual Exercise at 12/28/97 Exercise
Exercise Prices (000) Life (years) Price (000) Price
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 7 to $ 9 203 2.8 $ 8 203 $ 8
$11 to $15 118 2.4 $12 118 $12
$16 to $20 198 7.2 $18 97 $18
$21 to $27 95 9.1 $27 - $ -
- -------------------------------------------------------------------------------------------------------
$ 7 to $27 614 3.9 $15 418 $11
- -------------------------------------------------------------------------------------------------------
</TABLE>
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 1997 and 1996, respectively:
<TABLE>
<CAPTION>
EXECUTIVE PLAN 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 6.49% 5.93%
Expected volatility 35.85% 36.60%
Expected dividend yield 0.40% 0.60%
Expected life, in years 10.01 10.01
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-EMPLOYEE DIRECTORS PLAN 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 6.47% 6.86%
Expected volatility 35.59% 36.60%
Expected dividend yield 0.40% 0.50%
Expected life, in years 10.01 10.01
- ------------------------------------------------------------------------
</TABLE>
page 34
<PAGE> 36
The Company issued from treasury 4,874, 5,965 and 6,219 shares of common stock
in fiscal years 1997, 1996 and 1995, respectively, as annual Board of Directors
fees. Costs relating to these fees (in thousands) of $120, $120 and $129 were
recorded in fiscal years 1997, 1996 and 1995, respectively.
13. ACQUISITION OF KYSOR
In March of 1997, the Company acquired Kysor Industrial Corporation ("Kysor"),
a major manufacturer and marketer of refrigerated display cases, commercial
refrigeration systems and insulated panels primarily serving the supermarket
industry. The Company purchased Kysor's common and preferred stock for an
aggregate purchase price of $311 million. Concurrent with the purchase, the
Company sold Kysor's Transportation Products Group to a third party for an
aggregate purchase price of $86 million plus assumption of certain liabilities.
The Company retained possession of Kysor's Commercial Products Group. Goodwill
relating to the acquisition of Kysor will be finalized by the end of the first
quarter of 1998 and will be amortized for book purposes over 40 years using the
straight-line method. The preliminary amount of goodwill recorded as of
December 28, 1997 was $191.8 million. Also there was a goodwill amount of $12.6
million related to an investment which was recorded in other noncurrent assets
in the balance sheet.
The purchase price was allocated principally to goodwill of $191.8 million,
working capital of $44.8 million, property, plant and equipment of $38.7
million, severance and other Kysor employee related liabilities of $40.5
million, and deferred tax impacts of $17.5 million.
Kysor, headquartered in Cadillac, Michigan, reported total sales in 1996 of
$381 million, of which $245 million related to commercial refrigeration
products.
The accompanying unaudited condensed pro forma income statement information is
presented to illustrate the effect of certain events on the historical income
statement information of the Company as if the acquisition of Kysor had
occurred as of the first day of the period presented. The pro forma information
includes assumptions and estimates and is not necessarily indicative of the
results of operations of the Company as they may be in the future or as they
might have been had the transaction occurred as discussed above.
The unaudited condensed pro forma income statement information should be read
in conjunction with the historical condensed financial statements and notes
thereto of the Company appearing elsewhere herein.
<TABLE>
<CAPTION>
(Amounts in thousands, except per-share data) Pro Forma (Unaudited)
TWELVE MONTHS ENDED DEC. 28, 1997 DEC. 29, 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net sales $610,422 $601,435
Net income before extraordinary loss 16,893 19,318
Net income 16,260 19,318
Net income per share, diluted $ 1.51 $ 1.80
- -----------------------------------------------------------------------------------
</TABLE>
14. ACQUISITION OF HARTEK AND OTHER INVESTMENTS
The Company's Scotsman Group Inc. subsidiary acquired on December 31, 1995, the
stock of Hartek Beverage Handling GmbH and the stock of Hartek Awagem
Vertriebsges. m.b.H., a beverage dispensing manufacturer and a small
distributor of Hartek and other products located in Radevormwald, Germany and
Vienna, Austria, respectively (collectively, "Hartek"). Hartek had 1995 annual
sales of approximately $24 million. The method of accounting used for the
combination was the purchase method. The results of the Hartek businesses have
been included in the income statements for the Company beginning on the date of
acquisition, December 31, 1995. Hartek was acquired for an initial cost of $5.8
million, including acquisition costs. No shares of stock were or will be issued
as a result of these acquisitions. The cash outlay was partially offset by cash
on the books of Hartek at closing of $3.3 million. An initial amount of
goodwill of $1.9 million was recorded as of December 29, 1996. The Company
recorded an additional amount of goodwill of $0.6 million during 1997 related
to additional payments made to the seller of Hartek for pre-purchase tax net
operating losses utilized in the 1996 tax year. The amount of goodwill from
this acquisition will be amortized for book purposes over 40 years using the
straight-line method.
page 35
<PAGE> 37
Under the terms of the agreement governing the purchase of the Hartek
businesses, the Company is required to pay to the seller 75 percent of the
actual amount of any tax saving realized by Hartek in respect of each of its
financial years 1996 through 1998 through the use of the amount of any tax loss
carry forward available to Hartek as of December 31, 1995, in reduction of
taxable profits for those financial years 1996 through 1998. Per the purchase
agreement, this additional consideration was not to exceed an amount of 2.2
million deutsche marks. During 1997, the Company paid 1.1 million deutsche
marks ($0.6 million) to the former owner of Hartek related to the utilization
of loss carry forwards utilized in the reduction of taxable profits for the
1996 financial year. Therefore only 1.1 million deutsche marks (or
approximately $0.6 million) of potential additional consideration is remaining
as of December 28, 1997. In addition, at the date of acquisition, Scotsman also
assumed Hartek debt of approximately $6.4 million.
Pro forma unaudited 1995 net sales of the Company, as if Hartek were acquired
on the first day of the fiscal year 1995, would have been $349 million. Pro
forma information relating to net income and earnings per share has not been
presented as the pro forma impact of those numbers on the Company's results was
not material. Pro forma information includes assumptions and estimates and is
not necessarily indicative of the results of operations of the Company as they
may be in the future or as they might have been had the transaction occurred as
discussed above.
In December of 1997, the Company's subsidiary, Scotsman Group Inc. acquired the
remaining 40 percent interest in a former joint venture in China for a cash
outlay of approximately $1.4 million. The results of operations of the China
subsidiary are not material and therefore pro forma information has not been
presented.
On December 16, 1997, the Company's subsidiary, Scotsman Drink Limited,
acquired Homark Holdings Limited ("Homark"), a beverage dispensing business
located in the United Kingdom, for a purchase price of approximately 3.3
million pounds sterling or approximately $5.6 million. Homark has annual sales
of approximately $12 million. Pro forma information relating to sales, net
income and earnings per share has not been presented as the pro forma impact of
those numbers on the Company's results was not material.
15. GEOGRAPHIC INFORMATION
The Company's geographic data, based on the locations of operations are as
follows (in thousands):
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States $454,690 $235,302 $239,110
Foreign 116,898 121,071 85,181
- ----------------------------------------------------------------------------------------------
TOTAL $571,588 $356,373 $324,291
- ----------------------------------------------------------------------------------------------
Operating profit:
United States $ 44,362 $ 24,248 $ 25,309
Foreign 14,557 16,048 9,145
- ----------------------------------------------------------------------------------------------
TOTAL $ 58,919 $ 40,296 $ 34,454
- ----------------------------------------------------------------------------------------------
Identifiable assets:
United States $551,895 $181,259 $181,994
Foreign 108,229 102,005 93,949
- ----------------------------------------------------------------------------------------------
TOTAL $660,124 $283,264 $275,943
- ----------------------------------------------------------------------------------------------
</TABLE>
Export sales from the United States were less than 10 percent of consolidated
net sales for all years presented.
page 36
<PAGE> 38
16. SUMMARY FINANCIAL INFORMATION
The following is summarized financial information of Scotsman Group Inc., the
Company's direct wholly-owned subsidiary, which issued $100 million aggregate
principal amount of Senior Subordinated Notes due 2007 (the "Senior
Subordinated Notes"). The Company has fully and unconditionally guaranteed the
Senior Subordinated Notes.
Summarized Financial Information (in thousands):
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets $ 227,096 $ 137,574 $ 131,342
Noncurrent assets 433,028 145,690 144,601
- -------------------------------------------------------------------------------
Total assets $ 660,124 $ 283,264 $ 275,943
- -------------------------------------------------------------------------------
Current liabilities $ 149,690 $ 79,664 $ 77,340
Noncurrent liabilities 369,523 73,298 87,110
- -------------------------------------------------------------------------------
Total liabilities $ 519,213 $ 152,962 $ 164,450
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED DEC. 28, 1997 DEC. 29, 1996 DEC. 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 571,588 $ 356,373 $ 324,291
Gross profit 141,990 98,431 87,889
Income before extraordinary loss 19,041 18,679 15,525
Net income $ 18,408 $ 18,679 $ 15,525
- -------------------------------------------------------------------------------
</TABLE>
The Company has not presented separate financial statements and other
disclosure concerning Scotsman Group Inc. because the Company's management has
determined that such information is not material to the holders of the Senior
Subordinated Notes.
17. EARNINGS PER SHARE DISCLOSURE
Following is a reconciliation of the numerators and the denominators of the
basic and diluted EPS computation.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED: DEC. 28, 1997 INCOME
IN THOUSANDS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before extraordinary loss $18,919
Less: preferred stock dividends --
Basic EPS
Income available to common stockholders $18,919 10,554,984 $1.79
- --------------------------------------------------------------------------------
Effect of Dilutive Securities:
Common stock options -- 248,277
Convertible preferred stock -- --
Contingent common stock -- --
- --------------------------------------------------------------------------------
Diluted EPS
Income available to common stockholders
and assumed conversions $18,919 10,803,261 $1.75
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED: DEC. 29, 1996 INCOME
IN THOUSANDS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before extraordinary loss $18,568
Less: preferred stock dividends (813)
Basic EPS
Income available to common stockholders $17,755 9,398,016 $1.89
- --------------------------------------------------------------------------------
Effect of Dilutive Securities:
Common stock options -- 203,406
Convertible preferred stock 813 1,107,457
Contingent common stock -- --
- --------------------------------------------------------------------------------
Diluted EPS
Income available to common stockholders
and assumed conversions $18,568 10,708,879 $1.73
- --------------------------------------------------------------------------------
</TABLE>
page 37
<PAGE> 39
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED: DEC. 31, 1995 INCOME
IN THOUSANDS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before extraordinary loss $15,408
Less: preferred stock dividends (1,240)
Basic EPS
Income available to common stockholders $14,168 8,814,924 $1.61
- -------------------------------------------------------------------------------
Effect of Dilutive Securities:
Common stock options -- 168,785
Convertible preferred stock 1,240 1,525,393
Contingent common stock -- 135,595
- -------------------------------------------------------------------------------
Diluted EPS
Income available to common stockholders
and assumed conversions $15,408 10,644,697 $1.45
- -------------------------------------------------------------------------------
</TABLE>
18. STOCK ACTIVITY
Common, preferred and treasury stock activities were as follows:
<TABLE>
<CAPTION>
COMMON STOCK
NUMBER OF SHARES: (NET OF TREASURY SHARES) PREFERRED STOCK TREASURY STOCK
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995 8,267,938 1,999,992 194,259
- ------------------------------------------------------------------------------------------------------------
Issuance of deferred compensation 6,219 -- (6,219)
Issuance of common stock relating to
acquisition of Delfield and Whitlenge 666,982 -- --
Stock options exercised 23,835 -- --
- ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 8,964,974 1,999,992 188,040
- ------------------------------------------------------------------------------------------------------------
Issuance of deferred compensation 5,965 -- (5,965)
Conversion of preferred stock into common stock 1,525,386 (1,999,992) --
Stock options exercised 46,139 -- 4,974
- ------------------------------------------------------------------------------------------------------------
Balance at December 29, 1996 10,542,464 -- 187,049
- ------------------------------------------------------------------------------------------------------------
Issuance of deferred compensation 4,874 -- (4,874)
Stock options exercised 21,259 -- 9,718
- ------------------------------------------------------------------------------------------------------------
Balance at December 28, 1997 10,568,597 -- 191,893
- ------------------------------------------------------------------------------------------------------------
</TABLE>
page 38
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF SCOTSMAN INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheet of Scotsman
Industries, Inc. (a Delaware Corporation) and subsidiaries as of December 28,
1997, and December 29, 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 28, 1997. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule 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 financial statements referred to above present fairly, in
all material respects, the financial position of Scotsman Industries, Inc. and
subsidiaries as of December 28, 1997, and December 29, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 28, 1997, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index of financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois
February 3, 1998
page 39
<PAGE> 41
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements and related information have been
prepared by management, which is responsible for the integrity and objectivity
of that information. They have been prepared in conformity with generally
accepted accounting principles and include amounts that are based on
management's best estimates and judgments where appropriate. The financial
information contained elsewhere in this annual report is consistent with that
in the consolidated financial statements.
The Company maintains internal accounting control systems that are adequate to
provide reasonable assurance that the assets are safeguarded from loss or
unauthorized use. These systems produce records adequate for preparation of
financial information.
Our independent public accountants, Arthur Andersen LLP, have audited the
financial statements and have rendered an opinion as to the statements'
fairness in all material respects in accordance with generally accepted
accounting principles. During the audit they obtain an understanding of the
Company's internal control systems, and perform tests and other procedures to
the extent required by generally accepted auditing standards.
The Audit Committee of the Board of Directors, composed of directors who are
not officers or employees of the Company, meets periodically with management
and the independent public accountants on financial reporting matters. The
independent public accountants have free access to meet with the Audit
Committee, without the presence of management, to discuss their audit results
and opinions on the quality of financial reporting.
/s/ Richard C. Osborne
Richard C. Osborne
Chairman of the Board,
President and Chief Executive Officer
/s/ Donald D. Holmes
Donald D. Holmes
Vice President - Finance and Secretary
page 40
<PAGE> 42
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
FISCAL YEAR 1997
--------------------------------------------
FOR THE THREE MONTHS ENDED DEC. 28, SEPT. 28, JUNE 29, MAR. 30,
1997 1997 1997 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $140,059 $159,675 $173,777 $98,077
Cost of sales 109,314 119,527 128,311 72,446
- -------------------------------------------------------------------------------------------
Gross profit 30,745 40,148 45,466 25,631
Selling and administrative expenses 19,622 22,346 24,979 16,124
- -------------------------------------------------------------------------------------------
Income from operations 11,123 17,802 20,487 9,507
Interest expense, net 6,151 6,426 6,574 2,207
- -------------------------------------------------------------------------------------------
Income before income taxes 4,972 11,376 13,913 7,300
Income taxes 3,037 5,343 6,827 3,435
- -------------------------------------------------------------------------------------------
Income before extraordinary loss $1,935 $6,033 $7,086 $3,865
Extraordinary loss -- -- -- (633)
- -------------------------------------------------------------------------------------------
Net income $1,935 $6,033 $7,086 $3,232
- -------------------------------------------------------------------------------------------
Basic earnings per share (a):
Income before extraordinary loss $0.18 $0.57 $0.67 $0.37
Extraordinary loss -- -- -- (0.06)
- -------------------------------------------------------------------------------------------
Net income per common share $0.18 $0.57 $0.67 $0.31
- -------------------------------------------------------------------------------------------
Diluted earnings per share (b):
Income before extraordinary loss $0.18 $0.56 $0.66 $0.36
Extraordinary loss -- -- -- (0.06)
- -------------------------------------------------------------------------------------------
Net income per common share $0.18 $0.56 $0.66 $0.30
- -------------------------------------------------------------------------------------------
Weighted average common shares
outstanding:
Basic 10,566,637 10,558,231 10,550,977 10,544,095
Diluted 10,801,118 10,813,359 10,830,127 10,795,445
- -------------------------------------------------------------------------------------------
</TABLE>
(a) Basic earnings per common share are computed by dividing net income
available to common shareholders by the weighted average number of common
shares outstanding.
(b) Diluted earnings per common share includes options, warrants and
convertible securities in the calculation.
page 41
<PAGE> 43
SELECTED QUARTERLY FINANCIAL DATA (continued)
(Unaudited)
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
Fiscal year 1996
--------------------------------------------
For The Three Months Ended Dec. 29, Sept. 29, June 30, Mar. 31,
1996 1996 1996 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $73,653 $92,764 $104,423 $85,533
Cost of sales 55,692 66,558 73,562 62,130
- -------------------------------------------------------------------------------------------
Gross profit 17,961 26,206 30,861 23,403
Selling and administrative expenses 13,063 14,195 15,854 15,023
- -------------------------------------------------------------------------------------------
Income from operations 4,898 12,011 15,007 8,380
Interest expense, net 1,120 1,322 1,422 1,415
- -------------------------------------------------------------------------------------------
Income before income taxes 3,778 10,689 13,585 6,965
Income taxes 1,677 4,906 6,520 3,346
- -------------------------------------------------------------------------------------------
Income before extraordinary loss $ 2,101 $ 5,783 $ 7,065 $ 3,619
Extraordinary loss -- -- -- --
- -------------------------------------------------------------------------------------------
Net income $ 2,101 $ 5,783 $ 7,065 $ 3,619
- -------------------------------------------------------------------------------------------
Basic earnings per share (a):
Income before extraordinary loss $ 0.20 $ 0.60 $ 0.75 $ 0.37
Extraordinary loss -- -- -- --
- -------------------------------------------------------------------------------------------
Net income per common share $ 0.20 $ 0.60 $ 0.75 $ 0.37
- -------------------------------------------------------------------------------------------
Diluted earnings per share (b):
Income before extraordinary loss $ 0.20 $ 0.54 $ 0.66 $ 0.34
Extraordinary loss -- -- -- --
- -------------------------------------------------------------------------------------------
Net income per common share $ 0.20 $ 0.54 $ 0.66 $ 0.34
- -------------------------------------------------------------------------------------------
Weighted average common shares
outstanding:
Basic 10,253,885 9,259,504 9,113,489 8,965,187
Diluted 10,760,208 10,713,995 10,695,790 10,665,543
- -------------------------------------------------------------------------------------------
</TABLE>
(a)Basic earnings per common share are computed by dividing net income
available to common shareholders by the weighted average number of common
shares outstanding.
(b)Diluted earnings per common share includes options, warrants and convertible
securities in the calculation.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements with accountants on
accounting and financial disclosures during 1997.
page 42
<PAGE> 44
PART III
- -------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in "Information Regarding Nominees and Directors" and
"Compliance with Section 16(a) of the Exchange Act" in the 1998 Proxy Statement
is incorporated herein by reference. See also "Executive Officers of the
Registrant," Part I, above.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the sections entitled "Executive Compensation,"
"Options and Stock Appreciation Rights," "Pension Plan," "Executive
Compensation and Severance Agreements, Including Change of Control Provisions,"
and "Directors' Fees and Compensation" in the 1998 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the sections entitled "Security Ownership of
Management" and "Security Ownership of Certain Beneficial Owners" in the 1998
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the sections entitled "Executive Compensation,"
"Executive Compensation and Severance Agreements, Including Change of Control
Provisions" and "Other Agreements" in the 1998 Proxy Statement is incorporated
herein by reference.
PART IV
- ------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a)(1) LIST OF FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Scotsman Industries, Inc.
and Subsidiaries are included in Item 8 of this report.
Consolidated Statement of Income for each of the three years ended December 28,
1997, December 29, 1996, and December 31, 1995.
Consolidated Balance Sheet as of December 28, 1997, and December 29, 1996.
Consolidated Statement of Cash Flows for each of the three years ended December
28, 1997, December 29, 1996, and December 31, 1995.
Consolidated Statement of Shareholders' Equity for each of the three years
ended December 28, 1997, December 29, 1996, and December 31, 1995.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
Selected Quarterly Financial Data (Unaudited).
page 43
<PAGE> 45
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULE
Scotsman Industries, Inc.
Schedule II - Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Additions
---------------------------
Balance at Charged Balance
Beginning Charged to to Other at End of
of Period Costs/Expenses Accounts(a) Deductions Period
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 - Accounts Receivable Reserves $2,296 $ 645 $ 572 $(553) $2,960
1996 - Accounts Receivable Reserves $2,960 $ 435 $ (128) $(489) $2,778
1997 - Accounts Receivable Reserves $2,778 $1,126 $1,972 $(505) $5,371
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the foreign currency translation impact and also includes
increases due to inclusion of the accounts receivable reserves of the acquired
businesses as of the date of their acquisition by the Company.
(a)(3) LIST OF EXHIBITS
The following exhibits are filed as part of this report. Each management
contract or compensatory plan or arrangement required to be filed as an exhibit
to this report has been marked with an asterisk. Unless otherwise indicated,
all documents incorporated by reference to prior filings have been filed under
Commission File No. 1-10182.
<TABLE>
<S> <C>
Exhibit 2.1 Agreement and Plan of Merger, dated as of February 2, 1997, among
the Company, K Acquisition Corp., and Kysor Industrial Corporation
(incorporated herein by reference from Exhibit (c)(1) to the
Company's Tender Offer Statement on Schedule 14D-1, filed with the
Commission on February 7, 1997), as amended by the First Amendment
to Agreement and Plan of Merger, dated as of March 7, 1997
(incorporated herein by reference to the Company's 8-K, dated
March 8, 1997).
Exhibit 2.2 Asset Purchase Agreement dated as of February 2, 1997, among
Kuhlman Corporation, Transpro Group, Inc., Kysor Industrial
Corporation, and certain subsidiaries of Kysor Industrial
Corporation (incorporated herein by reference to Exhibit (c)(2) of
the Company's Schedule 14D-1 filed with the Commission on February
7, 1997).
Exhibit 2.3 Agreement for the Sale, Purchase and Assignment of the Entire Share
Capital of Hartek Beverage Handling GmbH and Hartek Awagem
Vertriebsges, m.b.H., dated December 31, 1995, among Hartek
Beverage Handling B.V., Hartwall Bolagen AB, Scotsman Group Inc.
and Scotsman Industries, Inc. (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December 31, 1995).
Exhibit 2.4 Agreement and Plan of Merger, dated as of January 11, 1994, among
Scotsman Industries, Inc., Scotsman Acquisition Corporation, DFC
Holding Corporation, The Delfield Company, Onex Corporation,
Onex DHC LLC, Pacific Mutual Life Insurance Co., PM Group Life
Insurance Co., EJJM, Matthew O. Diggs, Jr., Timothy C. Collins,
W. Joseph Manifold, Charles R. McCollom, Anita J. Moffatt Trust,
Anita J. Moffatt, Remo Panella, Teddy F. Reed, Robert L. Schafer,
Graham E. Tillotson, John A. Tilmann Trust, John A. Tilmann, Kevin
E. McCrone, Michael P. McCrone, Ronald A. Anderson and Continental
Bank N.A. (incorporated herein by reference to the Company's 8-K,
dated January 13, 1994), as amended by the First Amendment thereto,
dated as of March 17, 1994 (incorporated herein by reference to the
Company's 10-K for the fiscal year ended January 2, 1994).
</TABLE>
page 44
<PAGE> 46
<TABLE>
<S> <C>
Exhibit 2.5 Share Acquisition Agreement, dated as of January 11, 1994, among
Scotsman Industries, Inc., Whitlenge Acquisition Limited,
Whitlenge Drink Equipment Limited, Timothy C. Collins, Graham F.
Cook, Christopher R.L. Wheeler, Michael de St. Paer and John
Rushton (incorporated herein by reference to the Company's 8-K,
dated January 13, 1994), as amended by the First Amendment
thereto, dated as of March 17, 1994 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended January
2, 1994).
Exhibit 3.1 Restated Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
Exhibit 3.2 By-Laws of the Company, as amended (incorporated herein by
reference to the Company's 8-K, dated June 21, 1991).
Exhibit 4 Rights Agreement dated as of April 14, 1989, between Scotsman
Industries, Inc. and Harris Trust & Savings Bank (incorporated
herein by reference to the Company's 8-K, dated April 25, 1989),
as amended by Amendment No. 1 thereto, dated as of January 11,
1994 (incorporated herein by reference to Scotsman Industries,
Inc. Amendment No. 4 to General Form for Registration of
Securities on Form 10/A, as filed with the Commission on January
27, 1994), Amendment 2 thereto, dated as of February 10,1998
(incorporated herein by reference to the Company's 8-K, dated
February 10, 1998), and Amendment 3 thereto, dated as of February
11, 1998 (incorporated herein by reference to the Company's 8-K,
dated February 10, 1998).
Exhibit 10.1 Reorganization and Distribution Agreement dated as of March 15,
1989, by and among Household International, Inc., Eljer
Industries, Inc., Schwitzer, Inc. and Scotsman Industries, Inc.
(incorporated herein by reference to the Company's 8-K,dated
April 25, 1989).
Exhibit 10.2 Tax Sharing Agreement dated as of March 15, 1989, among Household
International, Inc., Eljer Industries, Inc., Schwitzer, Inc. and
Scotsman Industries, Inc. (incorporated herein by reference to the
Company's 8-K, dated April 25, 1989).
Exhibit 10.3 Benefits and Labor Agreement dated as of March 15, 1989, among
reference to the Company's 10-K for the fiscal year ended December
31, 1989).
Exhibit 10.4 Credit Agreement dated March 12, 1997 (the "Credit Agreement"),
among Scotsman Group Inc. and the other parties named therein, as
Borrowers, the Lenders named therein, and The First National
Bank of Chicago, as Agent (incorporated herein by reference to the
Company's 10-K for the fiscal year ended December 29, 1996), as
amended by the first amendment thereto, dated March 24, 1997, the
second amendment thereto dated June 30, 1997, and the third
amendment thereto dated December 15, 1997.
Exhibit 10.5 Domestic Guaranty, dated as of March 12, 1997, entered into by
Scotsman Industries, Inc., in favor of The First National Bank of
Chicago, as agent, and the lenders named in the Credit Agreement
(incorporated herein by reference to the Company's 10-Q for the
quarter ended March 30, 1997).
Exhibit 10.6 Domestic Guaranty, dated as of March 12, 1997, in the form
separately entered into by each of Scotsman Group Inc., Booth,
Inc., DFC Holding Corporation, The Delfield Company and Kysor
Industrial Corporation, in favor of The First National Bank of
Chicago, as agent, and the lenders named in the Credit Agreement
(incorporated herein by reference to the Company's 10-Q for the
quarter ended March 30, 1997).
</TABLE>
page 45
<PAGE> 47
<TABLE>
<S> <C>
Exhibit 10.7 Foreign Guaranty, dated as of March 12, 1997, in the form
separately entered into by each of Whitlenge Drink
Equipment Limited, Scotsman Drink Limited, Frimont S.p.A.and
Castel MAC S.p.A., in favor of The First National Bank of
Chicago, as agent, and the lenders named in the Credit
Agreement (incorporated herein by reference to the Company's
10-Q for the quarter ended March 30, 1997).
Exhibit 10.8 Stock Pledge Agreements, dated as of December 15, 1997, between
each of Scotsman Industries, Inc., Scotsman Group Inc., DFC
Holding Corporation and Kysor Industrial Corporation, and The
First National Bank of Chicago, as agent under the Credit
Agreement.
Exhibit 10.9 Indenture, dated as of December 17, 1997, among Scotsman
Industries, Inc., Scotsman Group Inc., and Harris Trust and
Savings Bank, together with the form of 8 5/8% Senior
Subordinated Notes Due 2007 issued by Scotsman Group Inc. under
the Indenture.
Exhibit 10.10 Promissory Note in the principal amount of $15,000,000, made
as of March 12, 1997, by Scotsman Group Inc. to Comerica Bank
(incorporated by reference to the Company's 10-K for the fiscal
year ended December 29, 1996), together with the related
Reaffirmation of Guaranty and Consent, dated March 12, 1996, by
Scotsman Industries, Inc. in favor of Comerica Bank, Guaranty
Agreement, dated June 30, 1996, by Scotsman Industries, Inc. in
favor of Comerica Bank (incorporated herein to the Company's
10-Q, dated June 30, 1996) and Guaranty by Booth, Inc., DFC
Holding Corporation, The Delfield Company and Kysor Industrial
Corporation, dated March 12, 1997, in favor of Comerica Bank
(incorporated herein by reference to the Company's 10-K for the
fiscal year ended December 29, 1996).
Exhibit 10.11 Reimbursement Agreement, dated March 1, 1988, among Household
Manufacturing, Inc., King-Seeley Thermos Co. and the National
Westminster Bank PLC, as amended by the Amendments dated as of
April 14, 1989, December 12, 1989, June 26, 1992,November 20,
1992 and March 17, 1993, among Scotsman Group Inc., Scotsman
Industries, Inc. and The Bank of Nova Scotia (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended January 3, 1993), the Amendment dated April 29, 1994
(incorporated herein by reference to the Company's 10-Q for the
quarter ended April 3, 1994), Amendment No. 7 thereto, dated
March 12, 1997 (incorporated by reference to the Company's 10-K
for the fiscal year ended December 29,1996), among Scotsman
Group Inc., Scotsman Industries, Inc., The Bank of Nova Scotia
and The First National Bank of Chicago.
Exhibit 10.12 ISDA Master Agreement, dated as of March 3, 1994, including the
Schedule and Amended Confirmation (2) thereto, between The First
National Bank of Chicago and Scotsman Group Inc. (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended January 1, 1995), together with the related Confirmation
of Interest Rate Swap Transactions, dated March 17, 1997, in
the notional amounts of $100 million and $50 million,
respectively (incorporated herein by reference to the Company's
10-Q for the quarter ended March 30, 1997).
Exhibit 10.13* Long-Term Executive Incentive Compensation Plan of Scotsman
Industries, Inc., as amended February 10, 1998.
Exhibit 10.14* Scotsman Industries, Inc. Executive Incentive Compensation
Program, Plans AA, A-1 and A-2.
Exhibit 10.15* Scotsman Group Inc. Supplemental Tax Reduction Investment Plan,
dated as of April 14, 1989 (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December 30, 1990).
</TABLE>
page 46
<PAGE> 48
<TABLE>
<S> <C>
Exhibit 10.16* Non-Employee Directors Stock Option Plan, effective as of
August 11, 1994 (incorporated herein by reference to the
Company's Registration Statement on Form S-8, No. 33-59397).
Exhibit 10.17* Employment Agreement dated September 16, 1991, between Scotsman
Group Inc. and Richard C. Osborne (incorporated herein by
reference to the Company's 10-Q for the quarter ended September
29, 1991).
Exhibit 10.18* Employment Agreement dated September 16, 1991, between Scotsman
Group Inc. and Emanuele Lanzani (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 29, 1991).
Exhibit 10.19* Employment Agreement dated September 16, 1991, between Scotsman
Group Inc. and Donald D. Holmes (incorporated herein by
reference to the Company's 10-Q for the quarter ended
September 29, 1991).
Exhibit 10.20* Employment Agreement dated October 17, 1996, between Scotsman
Group Inc. and Michael de St. Paer (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 29, 1996).
Exhibit 10.21* Service Agreement dated February 1, 1995, as amended by the
Service Agreement Addendum, dated January 31, 1997, between
Hartek Beverage Handling GmbH and Ludwig H. Klein (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 29, 1996), and further amended by the letter
agreement dated October 20, 1997, from Richard C. Osborne to
Ludwig H. Klein.
Exhibit 10.22* Executive Severance Agreement dated as of September 16, 1991,
between Richard C. Osborne and Scotsman Group Inc.(incorporated
herein by reference to the Company's 10-Q for the quarter ended
September 29, 1991), as amended by Amendment No. 1 thereto,
dated as of January 11, 1994 (incorporated herein by reference
to the Company's 10-K for the fiscal year ended January 2,
1994).
Exhibit 10.23* Executive Severance Agreement dated as of September 16, 1991,
between Emanuele Lanzani and Frimont S.p.A. (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 29, 1991), as amended by Amendment No. 1
thereto, dated as of January 11, 1994 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
January 2, 1994).
Exhibit 10.24* Executive Severance Agreement dated as of September 16, 1991,
between Donald D. Holmes and Scotsman Group Inc. (incorporated
herein by reference to the Company's 10-Q for the quarter ended
September 29, 1991), as amended by Amendment No. 1 thereto,
dated as of January 11, 1994, between Donald D. Holmes and
Scotsman Group Inc. (incorporated herein by reference to the
Company's 10-K for the fiscal year ended January 2, 1994).
Exhibit 10.25* Retirement Program for Emanuele Lanzani of Frimont, S.p.A.,
Subsidiary of King-Seeley Thermos Co. dated July 25, 1984
(incorpo rated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
Exhibit 10.26 Agreement dated March 27, 1981, by and between Emanuele
Lanzani and King-Seeley Thermos Co. and Frimont, S.p.A.
(incorporated herein by reference to the Company's 10-K for the
fiscal year ended December 31, 1989), as amended by the
Amendment dated March 20, 1990 (incorporated herein by
reference to the Company's 10-Q for the quarter ended September
30, 1990).
Exhibit 10.27 Industrial Building Lease Agreement dated September 21, 1988,
by and between American National Bank and Trust Company of
Chicago, as Trustee under Trust Agreement No. 64661 dated June
17, 1985, and Household Manufacturing, Inc. (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
</TABLE>
page 47
<PAGE> 49
<TABLE>
<S> <C>
Exhibit 10.28 Lease Agreement, dated as of April 16, 1993, by and between the
Western and Southern Life Insurance Company and Booth, Inc.
together with the related Guaranty by Scotsman Group Inc. dated
as of April 8, 1993 (incorporated herein by reference to the
Company's 10-Q for the quarter ended October 2, 1993), as
amended by First Amendment to the Lease Agreement, dated October
27, 1993, (incorporated herein by reference to the Company's
10-K for the fiscal year ended January 1, 1995) and Second
Amendment to the Lease Agreement, dated December 3, 1993,
(incorporated herein by reference to the Company's 10-K for the
fiscal year ended January 1, 1995).
Exhibit 21 List of Subsidiaries.
Exhibit 23 Consent of Arthur Andersen LLP.
Exhibit 27 Article 5 Financial Data Schedule for the Fiscal Year Ended
December 28, 1997.
Exhibit 99 Cautionary Statements.
</TABLE>
Copies of the exhibits referred to above will be furnished to shareholders upon
written request at a cost of 15 cents per page. Requests should be made to
Scotsman Industries, Inc., 820 Forest Edge Drive, Vernon Hills, Illinois 60061,
Attention: Donald D. Holmes, Secretary.
(b) REPORTS ON FORM 8-K
During the quarter ended December 28, 1997, Scotsman filed reports on Form 8-K,
dated September 29, 1997, October 22, 1997, November 25, 1997, and December 17,
1997, reporting under Items 5 and 7, Items 5 and 7, Item 7, and Items 5 and 7,
respectively. No financial statements were filed with any of these reports.
(c) EXHIBITS
The exhibits required under this Item 14(c) are filed as a separate section of
this report.
(d) FINANCIAL STATEMENT SCHEDULES
See Item 14 (a) (2), above
page 48
<PAGE> 50
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.
DATED: MARCH 17, 1998 SCOTSMAN INDUSTRIES, INC.
BY: /s/ R. C. Osborne
--------------------------------------
R.C. Osborne, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Scotsman and
in the capacities and on the dates indicated.
Signature Title Date
- --------------------------------------------------------------------------------
/s/ R. C. Osborne ,
------------------------- Chairman of the Board, President, March 17, 1998
(R.C. Osborne) Chief Executive Officer and
Director(Principal Executive
Officer)
/s/ D. C. Clark ,
------------------------- Director March 17, 1998
(D.C. Clark)
/s/ F. W. Considine ,
------------------------- Director March 17, 1998
(F. W. Considine)
/s/ G. D. Kennedy ,
------------------------- Director March 17, 1998
(G. D. Kennedy)
/s/ R. G. Rettig ,
------------------------- Director March 17, 1998
(R. G. Rettig)
/s/ R. L. Thomas ,
------------------------- Director March 17, 1998
(R. L. Thomas)
/s/ D. D. Holmes ,
------------------------- Vice President - Finance March 17, 1998
(D.D. Holmes) and Secretary(Principal Financial
and Accounting Officer)
page 49
<PAGE> 51
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of February 2, 1997,
among the Company, K Acquisition Corp., and Kysor Industrial
Corporation (incorporated herein by reference from Exhibit
(c)(1) to the Company's Tender Offer Statement on Schedule
14D-1, filed with the Commission on February 7, 1997), as
amended by the First Amendment to Agreement and Plan of
Merger, dated as of March 7, 1997 (incorporated herein by
reference to the Company's 8-K, dated March 8, 1997).
2.2 Asset Purchase Agreement dated as of February 2, 1997, among
Kuhlman Corporation, Transpro Group, Inc., Kysor Industrial
Corporation, and certain subsidiaries of Kysor Industrial
Corporation (incorporated herein by reference to Exhibit
(c)(2) of the Company's Schedule 14D-1 filed with the
Commission on February 7, 1997).
2.3 Agreement for the Sale, Purchase and Assignment of the Entire
Share Capital of Hartek Beverage Handling GmbH and Hartek
Awagem Vertriebsges, m.b.H., dated December 31, 1995, among
Hartek Beverage Handling B.V., Hartwall Bolagen AB, Scotsman
Group Inc. and Scotsman Industries, Inc. (incorporated herein
by reference to the Company's 10-K for the fiscal year ended
December 31, 1995).
2.4 Agreement and Plan of Merger, dated as of January 11, 1994,
among Scotsman Industries, Inc., Scotsman Acquisition
Corporation, DFC Holding Corporation, The Delfield Company,
Onex Corporation, Onex DHC LLC, Pacific Mutual Life Insurance
Co., PM Group Life Insurance Co., EJJM, Matthew O. Diggs, Jr.,
Timothy C. Collins, W. Joseph Manifold, Charles R. McCollom,
Anita J. Moffatt Trust, Anita J. Moffatt, Remo Panella, Teddy
F. Reed, Robert L. Schafer, Graham E. Tillotson, John A.
Tilmann Trust, John A. Tilmann, Kevin E. McCrone, Michael P.
McCrone, Ronald A. Anderson and Continental Bank N.A.
(incorporated herein by reference to the Company's 8-K, dated
January 13, 1994), as amended by the First Amendment thereto,
dated as of March 17, 1994 (incorporated herein by reference
to the Company's 10-K for the fiscal year ended January 2,
1994).
2.5 Share Acquisition Agreement, dated as of January 11, 1994,
among Scotsman Industries, Inc., Whitlenge Acquisition
Limited, Whitlenge Drink Equipment Limited, Timothy C.
Collins, Graham F. Cook, Christopher R.L. Wheeler, Michael de
St. Paer and John Rushton (incorporated herein by reference to
the Company's 8-K, dated January 13, 1994), as amended by the
First Amendment thereto, dated as of March 17, 1994
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended January 2, 1994).
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C> <C>
3.2 By-Laws of the Company, as amended (incorporated herein by
reference to the Company's 8-K, dated June 21, 1991).
4 Rights Agreement dated as of April 14, 1989 between Scotsman
Industries, Inc. and Harris Trust & Savings Bank (incorporated
herein by reference to the Company's 8-K, dated April 25,
1989), as amended by Amendment No. 1 thereto, dated as of
January 11, 1994 (incorporated herein by reference to Scotsman
Industries, Inc. Amendment No. 4 to General Form for
Registration of Securities on Form 10/A, as filed with the
Commission on January 27, 1994), Amendment 2 thereto, dated as
of February 10, 1998 (incorporated herein by reference to the
Company's 8-K, dated February 10, 1998), and Amendment 3
thereto, dated as of February 11, 1998 (incorporated herein by
reference to the Company's 8-K, dated February 10, 1998).
10.1 Reorganization and Distribution Agreement dated as of March
15, 1989, by and among Household International, Inc., Eljer
Industries, Inc., Schwitzer, Inc. and Scotsman Industries,
Inc. (incorporated herein by reference to the Company's 8-K,
dated April 25, 1989).
10.2 Tax Sharing Agreement dated as of March 15, 1989 among
Household International, Inc., Eljer Industries, Inc.,
Schwitzer, Inc. and Scotsman Industries, Inc. (incorporated
herein by reference to the Company's 8-K, dated April 25,
1989).
10.3 Benefits and Labor Agreement dated as of March 15, 1989 among
Household International, Inc., Eljer Industries, Inc.,
Schwitzer, Inc. and Scotsman Industries, Inc. (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
10.4 Credit Agreement dated March 12, 1997 (the "Credit
Agreement"), among Scotsman Group Inc. and the other parties
named therein, as Borrowers, the Lenders named therein, and
The First National Bank of Chicago, as Agent (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 29, 1996), as amended by the first amendment
thereto, dated March 24, 1997, the second amendment thereto
dated June 30, 1997, and the third amendment thereto dated
December 15, 1997.
10.5 Domestic Guaranty, dated as of March 12, 1997, entered into by
Scotsman Industries, Inc., in favor of The First National Bank
of Chicago, as agent, and the lenders named in the Credit
Agreement (incorporated herein by reference to the Company's
10-Q for the quarter ended March 30, 1997).
10.6 Domestic Guaranty, dated as of March 12, 1997, in the form
separately entered into by each of Scotsman Group Inc., Booth,
Inc., DFC Holding Corporation, The Delfield Company and Kysor
Industrial Corporation, in favor of The First National Bank of
Chicago, as agent, and the lenders named in the Credit
Agreement (incorporated herein by reference to the Company's
10-Q for the quarter ended March 30, 1997).
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C> <C>
10.7 Foreign Guaranty, dated as of March 12, 1997, in the form
separately entered into by each of Whitlenge Drink Equipment
Limited, Scotsman Drink Limited, Frimont S.p.A. and Castel MAC
S.p.A., in favor of The First National Bank of Chicago, as
agent, and the lenders named in the Credit Agreement
(incorporated herein by reference to the Company's 10-Q for
the quarter ended March 30, 1997).
10.8 Stock Pledge Agreements, dated as of December 15, 1997,
between each of Scotsman Industries, Inc., Scotsman Group
Inc., DFC Holding Corporation and Kysor Industrial
Corporation, and the First National Bank of Chicago,
as agent under the Credit Agreement.
10.9 Indenture, dated as of December 17, 1997, among Scotsman
Industries, Inc., Scotsman Group, Inc., and Harris Trust and
Savings Bank, together with the form of 8 5/8% Senior
Subordinated Notes Due 2007 issued by Scotsman Group Inc.
under the Indenture.
10.10 Promissory Note in the principal amount of $15,000,000, made
as of March 12, 1997 by Scotsman Group Inc. to Comerica Bank
(incorporated by reference to the Company's 10-K for the
fiscal year ended December 29, 1996), together with the
related Reaffirmation of Guaranty and Consent, dated March 12,
1996, by Scotsman Industries, Inc. in favor of Comerica Bank,
Guaranty Agreement, dated June 30, 1996, by Scotsman
Industries, Inc. in favor of Comerica Bank (incorporated
herein to the Company's 10-Q, dated June 30, 1996) and
Guaranty by Booth, Inc., DFC Holding Corporation, The Delfield
Company and Kysor Industrial Corporation, dated March 12,
1997, in favor of Comerica Bank (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 29, 1996).
10.11 Reimbursement Agreement, dated March 1, 1988, among Household
Manufacturing, Inc., King-Seeley Thermos Co. and the National
Westminster Bank PLC, as amended by the Amendments dated as of
April 14, 1989, December 12, 1989, June 26, 1992, November 20,
1992, March 17, 1993, among Scotsman Group Inc., Scotsman
Industries, Inc. and The Bank of Nova Scotia (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended January 3, 1993), the Amendment dated April 29, 1994
(incorporated herein by reference to the Company's 10-Q for
the quarter ended April 3, 1994) , Amendment No. 7 thereto,
dated March 12, 1997 (incorporated by reference to the
Company's 10-K for the fiscal year ended December 29, 1996),
among Scotsman Group Inc., Scotsman Industries, Inc., The Bank
of Nova Scotia and The First National Bank of Chicago.
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C> <C>
10.12 ISDA Master Agreement, dated as of March 3, 1994, including
the Schedule and Amended Confirmation (2) thereto, between The
First National Bank of Chicago and Scotsman Group Inc.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended January 1, 1995), together with the
related Confirmation of Interest Rate Swap Transactions, dated
March 17, 1997, in the notional amounts of $100 million and
$50 million, respectively (incorporated herein by reference to
the Company's 10-Q for the quarter ended March 30, 1997).
10.13 Long-Term Executive Incentive Compensation Plan of Scotsman
Industries, Inc., as amended February 10, 1998.
10.14 Scotsman Industries, Inc. Executive Incentive Compensation
Program, Plans AA, A-1 and A-2.
10.15 Scotsman Group Inc. Supplemental Tax Reduction Investment
Plan, dated as of April 14, 1989 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 30, 1990).
10.16 Non-Employee Directors Stock Option Plan, effective as of
August 11, 1994 (incorporated herein by reference to the
Company's Registration Statement on Form S-8, No. 33-59397).
10.17 Employment Agreement dated September 16, 1991 between Scotsman
Group Inc. and Richard C. Osborne (incorporated herein by
reference to the Company's 10-Q for the quarter ended
September 29, 1991).
10.18 Employment Agreement dated September 16, 1991 between Scotsman
Group Inc. and Emanuele Lanzani (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 29, 1991).
10.19 Employment Agreement dated September 16, 1991 between Scotsman
Group Inc. and Donald D. Holmes (incorporated herein by
reference to the Company's 10-Q for the quarter ended
September 29, 1991).
10.20 Employment Agreement dated October 17, 1996 between Scotsman
Group Inc. and Michael de St. Paer (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 29, 1996).
10.21 Service Agreement dated February 1, 1995, as amended by the
Service Agreement Addendum, dated January 31, 1997, between
Hartek Beverage Handling GmbH and Ludwig H. Klein
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 29, 1996), and further amended
by the letter agreement dated October 20, 1997, from Richard
C. Osborne to Ludwig H. Klein.
10.22 Executive Severance Agreement dated as of September 16, 1991
between Richard C. Osborne and Scotsman Group Inc.
(incorporated herein by reference to the Company's 10-Q for
the quarter ended September 29, 1991), as amended by Amendment
No. 1 thereto, dated as of January 11, 1994 (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended January 2, 1994).
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C> <C>
10.23 Executive Severance Agreement dated as of September 16, 1991
between Emanuele Lanzani and Frimont S.p.A. (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 29, 1991), as amended by Amendment No. 1
thereto, dated as of January 11, 1994 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
January 2, 1994).
10.24 Executive Severance Agreement dated as of September 16, 1991
between Donald D. Holmes and Scotsman Group Inc. (incorporated
herein by reference to the Company's 10-Q for the quarter
ended September 29, 1991), as amended by Amendment No. 1
thereto, dated as of January 11, 1994, between Donald D.
Holmes and Scotsman Group Inc (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
January 2, 1994).
10.25 Retirement Program for Emanuele Lanzani of Frimont, S.p.A.,
Subsidiary of King-Seeley Thermos Co. dated July 25, 1984
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
10.26 Agreement dated March 27, 1981, by and between Emanuele
Lanzani and King-Seeley Thermos Co. and Frimont, S.p.A.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989), as amended by the
Amendment dated March 20, 1990 (incorporated herein by
reference to the Company's 10-Q for the quarter ended
September 30, 1990).
10.27 Industrial Building Lease Agreement dated September 21, 1988
by and between American National Bank and Trust Company of
Chicago, as Trustee under Trust Agreement No. 64661 dated June
17, 1985, and Household Manufacturing, Inc. (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
10.28 Lease Agreement, dated as of April 16, 1993, by and between
the Western and Southern Life Insurance Company and Booth,
Inc. together with the related Guaranty by Scotsman Group Inc.
dated as of April 8, 1993 (incorporated herein by reference to
the Company's 10-Q for the quarter ended October 2, 1993), as
amended by First Amendment to the Lease Agreement, dated
October 27, 1993, (incorporated herein by reference to the
Company's 10-K for the fiscal year ended January 1, 1995) and
Second Amendment to the Lease Agreement, dated December 3,
1993, (incorporated herein by reference to the Company's 10-K
for the fiscal year ended January 1, 1995).
21 List of Subsidiaries.
23 Consent of Arthur Andersen LLP.
27 Article 5 Financial Data Schedule for the Fiscal Year Ended
December 28, 1997.
99 Cautionary Statements.
- -------------------
</TABLE>
<PAGE> 56
(1) Unless otherwise indicated, all documents incorporated herein by
reference to prior filings have been incorporated by reference to
filings made under Commission File No 1-10182.
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into as of March 24, 1997 among Scotsman Group Inc., a Delaware
corporation, The Delfield Company, a Delaware corporation, Scotsman Drink
Limited, a private company limited by shares registered in England, Whitlenge
Drink Equipment Limited, a private company limited by shares regis tered in
England, Frimont S.p.A., a societa per azioni incorporated with limited
liability in the Republic of Italy, Castel MAC S.p.A., a societa per azioni
incorpo rated with limited liability in the Republic of Italy, and Kysor
Industrial Corporation, a Michigan corporation (collectively, the "Borrowers"),
Scotsman Industries, Inc., a Delaware corporation ("Industries"), and The First
National Bank of Chicago, individually as a Lender (as defined in the Credit
Agreement referred to below) and as Agent.
R E C I T A L S:
WHEREAS, the Borrowers, Industries, the Agent, and the Lenders
are parties to that certain Credit Agreement dated as of March 12, 1997 (the
"Cred it Agreement"; capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement as
amended hereby); and
WHEREAS, the Borrowers, Industries, the Lenders and the Agent
have agreed to amend certain provisions of the Credit Agreement upon the terms
and conditions contained herein;
NOW, THEREFORE, in consideration of the premises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. Amendments to the Credit Agreement.
A. Amendment to Article I of the Credit Agreement. Article I
of the Credit Agreement is hereby amended by (i) deleting the phrase "and the
Bridge
<PAGE> 2
Loans" from clause (viii) of the definition of "Excess Cash Flow" set forth in
Article I of the Credit Agreement and (ii) adding at the end of the definition
of "Excess Cash Flow", before the period, the clause ", minus (xi) to the extent
included in the calculation of Net Income for such fiscal period, any gain from
the Asset Purchase".
B. Amendment to Section 8.2(c) of the Credit Agreement.
Section 8.2(c) of the Credit Agreement is hereby amended by adding the phrase
"or reduce the amount, or extend the date, of any permanent reduction in the
Aggregate Revolving Loan Commitment required under Section 2.6," immediately
after the phrase "under Section 2.1 or 2.9," in the second line of clause (c) of
Section 8.2 of the Credit Agreement.
II. Representations and Warranties.
A. Enforceability. Each of Industries and each Borrower
represents and warrants that the execution, delivery and performance by each of
Industries and such Borrower of this Amendment have been duly authorized by all
necessary corporate action and that this Amendment is a legal, valid and binding
obligation of such Borrower, enforceable against each of Industries and such
Borrower in accor dance with its terms, except as the enforcement thereof may be
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law).
B. Credit Agreement Representations. Each of Industries and
each Borrower represents and warrants that each of the representations and
warranties contained in the Credit Agreement is true and correct in all material
respects on and as of the date hereof as if made on the date hereof.
III. Miscellaneous.
A. Effect; Ratification. The amendments set forth herein are
effective solely for the purposes set forth herein and shall be limited
precisely as written, and shall not be deemed to (i) be a consent to any
amendment, waiver or modification of any other term or condition of the Credit
Agreement or of any other Loan Document, (ii) operate as a waiver of any Default
or Unmatured Default under the Credit Agreement or (iii) prejudice any right or
rights that the
2
<PAGE> 3
Agent or the Lenders may now have or may have in the future under or in con
nection with the Credit Agreement or any other Loan Document. Each reference in
the Credit Agreement to "this Agreement", "herein", "hereof", "hereunder" and
words of like import and each reference in the other Loan Documents to the
"Credit Agreement" shall mean the Credit Agreement as amended hereby. This
Amendment shall be construed in connection with and as part of the Credit
Agreement and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Credit Agreement and each other Loan Document,
except as herein amended, are hereby ratified and confirmed and shall remain in
full force and effect.
B. Effectiveness. This Amendment shall immediately become
effective as of the date first written above upon the receipt by the Agent of
duly executed counterparts of this Amendment from the Borrowers, Industries, the
Agent and the Lenders.
C. Loan Documents. This Amendment is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
D. Severability. Any provision contained in this Amendment
that is held to be inoperative, unenforceable or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable or invalid without
affecting the remaining provisions of this Amendment in that jurisdiction or the
operation, enforceability or validity of that provision in any other
jurisdiction.
E. Costs and Expenses. Each Borrower agrees to pay on demand
all costs and expenses of the Agent in connection with the preparation,
execution and delivery of this Amendment, including the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect thereto.
F. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
3
<PAGE> 4
G. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
H. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
SCOTSMAN GROUP INC.
By:/S/ Donald D. Holmes
-----------------------------------------
Print Name:/S/ Donald D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
THE DELFIELD COMPANY
By:/S/ Donald D. Holmes
-----------------------------------------
Print Name:/S/ Donald D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
SCOTSMAN DRINK LIMITED
By:/S/ Donald D. Holmes
-----------------------------------------
Print Name:/S/ Donald D. Holmes
-----------------------------
Title: /S/ Director
--------------------------------
WHITLENGE DRINK EQUIPMENT LIMITED
By:/S/ Donald D. Holmes
-----------------------------------------
<PAGE> 6
By:/S/ Donald D. Holmes
-----------------------------------------
Print Name:/S/ Donald D. Holmes
-----------------------------
Title: /S/ Director
--------------------------------
FRIMONT S.P.A
By: /S/ Richard C. Osborne
------------------------------------------
Print Name: /S/ Richard C. Osborne
------------------------------
Title: Director
-----------------------------------
CASTEL MAC S.P.A.
By: /S/ Richard C. Osborne
------------------------------------------
Print Name: /S/ Richard C. Osborne
------------------------------
Title: Director
-----------------------------------
<PAGE> 7
KYSOR INDUSTRIAL CORPORATION
By:/S/ Donald D. Holmes
-----------------------------------------
Print Name:/S/ Donald D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
SCOTSMAN INDUSTRIES, INC.
By:/S/ Donald D. Holmes
-----------------------------------------
Print Name:/S/ Donald D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
<PAGE> 8
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /S/ Julia A. Bristow
----------------------------------------
Print Name: /S/ Julia A. Bristow
----------------------------
Title: /S/ Managing Director
---------------------------------
<PAGE> 9
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amend ment")
is entered into as of June 30, 1997 among Scotsman Group Inc., a Delaware
corporation, The Delfield Company, a Delaware corporation, Scotsman Drink
Limited, a private company limited by shares registered in England, Whitlenge
Drink Equipment Limited, a private company limited by shares registered in
England, Frimont S.p.A., a societa per azioni incorporated with limited
liability in the Republic of Italy, Castel MAC S.p.A., a societa per azioni
incorporated with limited liability in the Republic of Italy, and Kysor
Industrial Corporation, a Michigan corporation (collectively, the "Borrowers"),
Scotsman Industries, Inc., a Delaware corporation ("Industries"), each of the
financial institutions identified on the signature pages hereof and The First
National Bank of Chicago, individually and as Agent.
R E C I T A L S:
WHEREAS, the Borrowers, Industries, the Agent, and the Lenders
are parties to that certain Credit Agreement dated as of March 12, 1997, as
amended by the First Amendment to Credit Agreement dated as of March 24, 1997
among the Borrowers, Industries and First Chicago, individually as a Lender and
as Agent (the "Credit Agreement"; capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement as amended hereby); and
WHEREAS, the Borrowers, Industries, the Lenders and the Agent
have agreed to amend certain provisions of the Credit Agreement upon the terms
and conditions contained herein;
NOW, THEREFORE, in consideration of the premises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. Amendments to the Credit Agreement.
A. Amendment to Article I of the Credit Agreement. Article I
of the Credit Agreement is hereby amended by adding thereto a new defined term,
in proper alphabetical order, as follows:
"Kysor Subsidiary" means any Person which was a
Subsidiary of Kysor on the Closing Date.
<PAGE> 10
B. Amendment to Section 6.28 of the Credit Agreement. Section
6.28 of the Credit Agreement is hereby amended by adding the phrase "(excluding,
with respect to any such Subsidiary which is a Kysor Subsidiary, goodwill and
other intangible assets allocated to any such Kysor Subsidiary in connection
with the Acquisition)" (i) immediately after the phrase "any Subsidiary with
assets" in clause (B) in the seventeenth line of Section 6.28 of the Credit
Agreement and (ii) immediately after the phrase "assets of all Non-Guarantor
Subsidiaries" in the twentieth line of Section 6.28 of the Credit Agreement.
II. Representations and Warranties.
A. Enforceability. Each of Industries and each Borrower
represents and warrants that the execution, delivery and performance by each of
Industries and such Borrower of this Amendment have been duly authorized by all
necessary corporate action and that this Amendment is a legal, valid and binding
obligation of such Borrower, enforceable against each of Industries and such
Borrower in accordance with its terms, except as the enforcement thereof may be
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law).
B. Credit Agreement Representations. Each of Industries and
each Borrower represents and warrants that each of the representations and
warranties contained in the Credit Agreement is true and correct in all material
respects on and as of the date hereof as if made on the date hereof.
III. Miscellaneous.
A. Effect; Ratification. The amendments set forth herein are
effective solely for the purposes set forth herein and shall be limited
precisely as written, and shall not be deemed to (i) be a consent to any
amendment, waiver or modification of any other term or condition of the Credit
Agreement or of any other Loan Document, (ii) operate as a waiver of any Default
or Unmatured Default under the Credit Agreement or (iii) prejudice any right or
rights that the Agent or the Lenders may now have or may have in the future
under or in connection with the Credit Agreement or any other Loan Document.
Each reference in the Credit Agreement to "this Agreement", "herein", "hereof",
"hereunder" and words of like import and each reference in the other Loan
Documents to the "Credit Agreement" shall mean the Credit Agreement as amended
hereby. This Amendment shall be construed in connection with and as part of the
Credit Agreement and all terms, conditions, representations, warranties,
covenants and agree ments set forth in the Credit Agreement and each other Loan
Document, except as herein amended, are hereby ratified and confirmed and shall
remain in full force and effect.
<PAGE> 11
B. Effectiveness. This Amendment shall immediately become
effective as of the date first written above upon the receipt by the Agent of
duly executed counterparts of this Amendment from the Borrowers, Industries, the
Agent and the Lenders.
C. Loan Documents. This Amendment is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
D. Severability. Any provision contained in this Amendment
that is held to be inoperative, unenforceable or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable or invalid without
affecting the remaining provisions of this Amend ment in that jurisdiction or
the operation, enforceability or validity of that provision in any other
jurisdiction.
E. Costs and Expenses. Each Borrower agrees to pay on demand
all costs and expenses of the Agent in connection with the preparation,
execution and delivery of this Amendment, including the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect thereto.
F. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
G. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
H. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
SCOTSMAN GROUP INC.
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
THE DELFIELD COMPANY
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
SCOTSMAN DRINK LIMITED
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ Director
----------------------------------
<PAGE> 13
WHITLENGE DRINK EQUIPMENT LIMITED
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ Director
----------------------------------
FRIMONT S.P.A
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ Director
----------------------------------
CASTEL MAC S.P.A.
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ Director
----------------------------------
<PAGE> 14
KYSOR INDUSTRIAL CORPORATION
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
SCOTSMAN INDUSTRIES, INC.
By:/S/ D. D. Holmes
-----------------------------------------
Print Name:/S/ D. D. Holmes
-----------------------------
Title:/s/ V.P.
----------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /S/ Julia A. Bristow
----------------------------------------
Print Name: /S/ Julia A. Bristow
----------------------------
Title: Managing Director
---------------------------------
<PAGE> 15
ABN AMRO BANK N.V.
By: /S/ Stephen J. Czech/Thomas F. Comfor
----------------------------------------
Print Name:/S/Stephen J. Czech/
Thomas F.Comfor
-----------------------------
Title: Vice President/Vice President
---------------------------------
BANK OF SCOTLAND
By: /S/ Annie Chin Tat
----------------------------------------
Print Name: /S/ Annie Chin Tat
----------------------------
Title: Vice President
---------------------------------
COMERICA BANK
By: /S/ Gregory N. Block
----------------------------------------
Print Name: /S/ Gregory N. Block
----------------------------
Title: /S/ Vice President
---------------------------------
<PAGE> 16
SOCIETE GENERALE
By: /S/ Joseph A. Philbin
-----------------------------------------
Print Name: /S/ Joseph A. Philbin
-----------------------------
Title: /S/ Vice President
----------------------------------
BANK OF NEW YORK
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
CORESTATES BANK, N.A.
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
<PAGE> 17
FIRST HAWAIIAN BANK
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
THE FUJI BANK, LIMITED
By: /S/ Peter L. Chinnici
-----------------------------------------
Print Name: /S/ Peter L. Chinnici
------------------------------
Title:/S/ Joint General Manager
-----------------------------------
HARRIS TRUST AND SAVINGS BANK
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
<PAGE> 18
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
THE SUMITOMO BANK, LTD., CHICAGO BRANCH
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By: /S/ Monica Treay
-----------------------------------------
Print Name:/S/ Monica Treay
------------------------------
Title:/S/ Assistant Vice President
-----------------------------------
<PAGE> 19
BANK OF IRELAND
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /S/ Tokutaro Sekine
------------------------------------------
Print Name: /S/ Tokutaro Sekine
----------------------------
Title: /S/ General Manager
---------------------------------
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /S/ Dean Balice
------------------------------------------
Print Name: /S/ Dean Balice
----------------------------
Title: /S/ Senior Vice President
Branch Manager
---------------------------------
<PAGE> 20
DAI-ICHI KANGYO BANK, LTD.
By: /S/ Seiichiro Ino
------------------------------------------
Print Name: /S/ Seiichiro Ino
----------------------------
Title: /S/ Vice President
---------------------------------
FIRST AMERICAN NATIONAL BANK
By: /S/ Kathryn A. Brothers
------------------------------------------
Print Name: /S/ Kathryn A. Brothers
----------------------------
Title: Vice President
---------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /S/ Mark A. Thompson
------------------------------------------
Print Name: /S/ Mark A. Thompson
----------------------------
Title: /S/ Vice President and Deputy General
Manager
---------------------------------
<PAGE> 21
LLOYDS BANK, PLC.
By: /S/ Paul D. Briamonte/M.J. Gilligan
----------------------------------------
Print Name: /S/ Paul D. Briamonte/M.J.
Gilligan
----------------------------
Title: /S/ Vice President/Vice President
---------------------------------
MELLON BANK, N.A.
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
NATIONAL CITY BANK
By: /S/ R. Klinger
----------------------------------------
Print Name: /S/ Matthew R. Klinger
----------------------------
Title: /S/ Assistant Vice President
---------------------------------
<PAGE> 22
THE NORTHERN TRUST COMPANY
By: /S/ Anthony Coletta
----------------------------------------
Print Name: /S/ G. Anthony Coletta
----------------------------
Title: /S/ Vice President
---------------------------------
ROYAL BANK OF SCOTLAND, PLC.
By:
-----------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
THE SANWA BANK, LIMITED
By: /S/Gordon R. Holtby
----------------------------------------
Print Name: /S/ Gordon R. Holtby
----------------------------
Title: /S/ Vice President & Manager
---------------------------------
<PAGE> 23
SUNTRUST BANK, ATLANTA
By: /S/ A. Jaketic
----------------------------------------
Print Name: /S/ Margaret A. Jaketic
----------------------------
Title: /S/ VP
---------------------------------
<PAGE> 24
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into as of December 15, 1997 among Scotsman Group Inc., The Delfield
Company, Scotsman Drink Limited, Whitlenge Drink Equipment Limited, Frimont
S.p.A., Castel MAC S.p.A., Kysor Industrial Corporation, Scotsman Industries,
Inc., the Lenders and The First National Bank of Chicago, as Agent.
RECITALS
WHEREAS, Scotsman Group Inc., a Delaware corporation
("Group"), The Delfield Company, a Delaware corporation ("Delfield"), Scotsman
Drink Limited, a private company limited by shares registered in England (
"Drink"), Whitlenge Drink Equipment Limited, a private company limited by shares
registered in England ("Whitlenge"), Frimont S.p.A., a societa per azioni
incorporated with limited liability in the Republic of Italy ("Frimont"), Castel
MAC S.p.A., a societa per azioni incorporated with limited liability in the
Republic of Italy ("Castel"), Kysor Industrial Corporation, a Michigan
corporation ("Kysor"; Group, Delfield, Drink, Whitlenge, Frimont, Castel and
Kysor are collectively referred to herein as the "Borrowers" and each a
"Borrower"), Scotsman Industries, Inc. ("Industries"), certain financial
institutions parties thereto and The First National Bank of Chicago, as Agent
are parties to that certain Credit Agreement, dated as of March 12, 1997, as
amended by that certain First Amendment to Credit Agreement, dated as of March
24, 1997 and that certain Second Amendment to Credit Agreement, dated as of June
30, 1997 (as further amended or modified hereby and as hereafter amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"); and
WHEREAS, the Borrowers and Industries have requested that the
Agent and the lenders thereto amend certain provisions of the Credit Agreement
and grant waivers with re spect to certain provisions of the Credit Agreement,
all as more fully described herein; and
WHEREAS, the Agent and such lenders have agreed to grant such
amendments and waivers upon the terms and conditions set forth herein.
<PAGE> 25
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 4. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned thereto in the Credit
Agreement.
SECTION 5. Amendments to the Credit Agreement. Subject to the terms and
conditions set forth herein, the Credit Agreement is hereby amended as follows:
5.1 Definitions.
(a) Article I of the Credit Agreement is hereby amended by
adding thereto the following new definitions, in proper alphabetical order:
"Consolidated Assets" means at any time the assets of
Industries and its Subsidiaries at such time determined on a
consolidated basis in accordance with Agreement Accounting
Principles.
"Consolidated Senior Indebtedness" on any date, means the sum
of (a) all Indebtedness of Industries and its Subsidiaries
under this Agreement and the other Loan Documents plus (b) all
Senior Debt, in each case on a consolidated basis (without
duplication).
"Senior Leverage Ratio" means, with respect to Industries on a
consolidated basis with its Subsidiaries, at any date, the
ratio of (a) the Consolidated Senior Indebtedness of
Industries and its Subsidiaries at such date to (b) EBITDA for
the period of four (4) consecutive Fiscal Quarters most
recently ended on or prior to such date (except as otherwise
provided in Section 6.25.4).
"Stock Pledge Agreement" means each Stock Pledge Agreement,
effected from time to time and at any time by any of
Industries, any Borrower or any Guarantor or any other
Subsidiary in favor of the Agent for the benefit of the
Lenders, as any of the same may be amended, restated,
supplemented or modi fied from time to time, in each case in
form and substance acceptable to the Agent.
<PAGE> 26
"Subordinated Notes" means the Senior Subordinated Notes due
2007 issued by Group pursuant to the Subordinated Note
Indenture, in a maximum principal amount not to exceed
$125,000,000, provided that such Subordinated Notes shall at
all times contain terms of subordination in respect of the
Obligations on terms substantially similar to those set forth
in the Subordinated Note Indenture in the form approved by the
Lenders on the Effective Date (as defined in the Third
Amendment to Credit Agreement dated as of December 15, 1997
among Group, Delfield, Scotsman Drink, Whitlenge, Frimont,
Castel MAC, Kysor, Industries, the Agent and the Lenders party
thereto).
"Subordinated Note Guaranty" means that certain subordinated
guaranty by Industries to the benefit of the holders of
Subordinated Notes embodied within the Subordinated Note
Indenture, provided that all obligations and liabilities of
Industries under such guaranty shall at all times contain
terms of subordination in respect of the Obligations on terms
substantially similar to those set forth in such Subordinated
Note Indenture in the form approved by the Lenders on the
Effective Date.
"Subordinated Note Indenture" means that certain Indenture
among Group, Industries and Harris Trust and Savings Bank as
trustee, as in effect on, and in the form approved by the
Lenders on, the Effective Date, as the same may be amended,
restated, modified or supplemented from time to time.
(b) The definition of "Applicable Margin" contained
in Article I of the Credit Agreement is hereby amended by deleting the table of
<PAGE> 27
numbers appearing therein in its entirety and replacing such table with the
following new table:
<TABLE>
<CAPTION>
==================================================================================================================
Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Leverage >= 4.5 >= 4.0 >= 3.5 < >= 3.0 < >= 2.5 < >= 2.0 < < 2.0
Ratio < 4.5 4.0 3.5 3.0 2.5
Floating Rate 0.50% 0.375% 0.250% 0.125% 0% 0% 0%
Advances
- ------------------------------------------------------------------------------------------------------------------
Eurocurrency 1.50% 1.375% 1.25% 1.125% 0.875% 0.750% 0.50%
Advances
- ------------------------------------------------------------------------------------------------------------------
Commitment 0.35% 0.35% 0.35% 0.30% 0.25% 0.20% 0.175%
Fee
==================================================================================================================
</TABLE>
(c) The definition of "EBITDA" contained in Article I
of the Credit Agreement is hereby amended by deleting such definition and
restating it in its entirety as follows:
"EBITDA" means, for any period, on a consolidated basis for
Industries and its Subsidiaries, the sum of the amounts for such period
of (a) Net Income of Industries and its Subsidiaries, plus (b)
Consolidated Income Tax Expense, plus (c) Consolidated Interest
Expense, plus (d) depreciation expense, plus (e) amortization expense,
including amortization of goodwill and other intangible assets, plus
(f) other non-cash charges, minus (g) interest income, minus (h) equity
in income of Affiliates of Industries or any of it Subsidiaries (net of
cash dividends received) that are included in the consolidated
financial statements of Industries using the equity method of
accounting (in the case of clauses (b) through (h) above, to the extent
reflected in determining Net Income of Industries and its Subsidiaries
for such period). For purposes of the calculation of EBITDA pursuant to
Sections 6.25.3 and 6.25.4 hereof, EBITDA shall be adjusted for any
period of calculation to give effect to any business or Person acquired
by Industries or any Subsidiary (and which is permitted pursuant to
Section 6.15 hereof) during such period as if such acquisition shall
have occurred on the first day of such period, provided such
adjustments shall be made only in such amounts as shall be readily con
firmed on the basis of financial statements prepared in accordance with
Agreement Accounting Principles."
(d) The definition of "Fixed Charges" contained in
Article I of the Credit Agreement is hereby amended by (a) deleting the comma as
it appears at the end of clause (e) of such definition and (b) deleting the
phrase "minus (f) cash dividends received during such
<PAGE> 28
period by Industries or any of its Subsidiaries" in its entirety as it appears
in the seventh line of such definition.
(e) The definition of "Loan Documents" contained in
Article I of the Credit Agreement is hereby amended by (i) adding the phrase ",
each Stock Pledge Agreement" immediately after the phrase "the Guaranties"
appearing in the first line of such definition and (ii) adding the phrase "and
any Subsidiary party to a Stock Pledge Agreement" immediately after the phrase
"the Guarantors" appearing in the fourth line of such definition.
(f) The definition of "Loan Party" contained in
Article I of the Credit Agreement is hereby amended by adding the phrase "and
each other Subsidiary that executes a Stock Pledge Agreement pursuant to Section
6.32 hereof" immediately after the word "hereof" but before the period in the
third line of such definition.
(g) The definition of "Senior Debt" contained in
Article I of the Credit Agreement is hereby amended by deleting the phrase
"ranks pari passu" as it appears in the second line of such definition and
replacing it with the phrase "is not expressly subordinate."
5.2 Excess Cash Flow. Section 2.9.2 of the Credit Agreement is
hereby amended by deleting the number "3.0" in its entirety as it appears in the
fifth line of such Section and replacing it with the number "4.0."
5.3 Equity Issuances. Section 2.9.3 of the Credit Agreement is
hereby amended by amending and restating such section in its entirety as
follows:
"2.9.3 Equity Issuances. On each date after the Closing Date
on which Industries or any of its Subsidiaries receives any Net Equity
Proceeds, Group shall prepay or shall cause the other Borrowers to
prepay the outstanding Bridge Obligations, the Obligations and Senior
Debt in an amount equal to 50% of any Net Equity Proceeds received by
Industries or any of its Subsidiaries (the "Available Net Equity
Proceeds"): first to prepayment of the Bridge Obligations until all
such Bridge Obligations have been paid in full and second, to
prepayment of the Obligations in accordance with the terms of Section
2.9.5 and to any Senior Debt that remains outstanding (but only to the
extent any such Senior Debt requires a prepayment thereof out of
Available Net Equity Proceeds) on a ratable basis determined according
to the principal amount of the Loans and the Facility Letter of Credit
Obligations and the principal amount (and premium, if any) of such
Senior Debt, in each case outstanding as of such date; provided that
any Available Net Equity Proceeds not applied to prepayment of the
Senior Debt shall be applied to prepayment of the Obligations in
accordance with Section 2.9.5."
<PAGE> 29
5.4 Indebtedness.
(a) Section 6.11 of the Credit Agreement is hereby
amended by deleting the words "the date hereof" in subsection (b), and inserting
the words "December 15, 1997" in substitution of such deletion.
(b) Section 6.11 of the Credit Agreement is hereby
amended by deleting clauses (i) and (ii) of subsection (g) thereof in their
entirety and replacing such clauses with the phrase, "provided, that (i) no
Default or Unmatured Default arising solely as a result of Industries' failure
to comply with Sections 6.25.3 and 6.25.4 of this Agreement has occurred and is
continuing or would occur after giving effect to the incurrence of such
additional Indebtedness and (ii) such Indebtedness shall contain terms and
conditions acceptable to the Required Lenders, provided that such acceptance
(for purposes of this clause (ii)) shall not be required in respect of
Indebtedness of up to $15,000,000 in the aggregate outstanding from time to time
and incurred after the date hereof.
(c) Section 6.11 of the Credit Agreement is hereby
amended by deleting subsection (h) thereof in its entirety and substituting
therefor the following: "(h) Indebtedness incurred pursuant to the Subordinated
Notes and the Subordinated Note Guaranty."
5.5 Investments. Section 6.15(a) is hereby amended by amending
and restating subsection (a) in its entirety as follows: "(a) (i) Investments in
existence on the date hereof in Subsidiaries; (ii) other Investments in
existence on the date hereof and described in Schedule 6.15 hereto; (iii) other
Investments after the date hereof in Shenyang Scotsman - Xinle Refrigeration
Manufacturing Co. Ltd. in an aggregate outstanding amount not to exceed
$2,000,000; and (iv) other Investments after the date hereof in Austral
Refrigeration Pty., Ltd. in an aggregate outstanding amount not to exceed
$25,000,000."
5.6 Liens.
(a) Section 6.16 of the Credit Agreement is hereby
amended by amending subsection (e) thereof in its entirety as follows: "(e)
Liens existing on the date hereof and described on Schedule 6.16 hereto
(provided that the Indebtedness secured by such liens does not at any time
exceed $ 7,000,000 in the aggregate) and Liens arising out of any transaction
contemplated by Section 6.11(e) as long as no additional property becomes
subject to any such replacement Lien;"
(b) Section 6.16 of the Credit Agreement is hereby
amended by adding the phrase, "and each Stock Pledge Agreement" immediately
before the semicolon appearing at the end of subsection (f) thereof.
<PAGE> 30
(c) Section 6.16 of the Credit Agreement is hereby
amended by amending and restating subsection (h) thereof in its entirety as
follows:
"(h) additional Liens securing Indebtedness permitted under
Section 6.11(g) but only to the extent that such additional
Liens secure such Indebtedness in a maximum principal amount
not in excess of $25,000,000."
5.7 Amendment Prohibition. Section 6.20 of the Credit
Agreement is hereby amended by adding the words "the Subordinated Note
Indenture, any Subordinated Notes," after the words "provision of" in the second
line thereof.
5.8 Leverage Ratio. Section 6.25.3 of the Credit Agreement is
hereby amended by deleting the table of numbers appearing therein in its
entirety and replacing such table with the following new table:
<TABLE>
<CAPTION>
============================================================
Period Ratio
- ------------------------------------------------------------
<S> <C>
Fourth Quarter of 1997 5.00:1.0
- ------------------------------------------------------------
First, Second, Third and Fourth 5.00:1.0
Fiscal Quarter of 1998 and First and
Second Fiscal Quarter of 1999
- ------------------------------------------------------------
Third and Fourth Fiscal Quarter of 4.50:1.0
1999, First, Second, Third and Fourth
Fiscal Quarter of 2000 and First and
Second Fiscal Quarter of 2001
- ------------------------------------------------------------
Third Fiscal Quarter of 2001 and each 4.00:1.0
Fiscal Quarter thereafter
============================================================
</TABLE>
5.9 Senior Leverage Ratio. Section 6.25 of the Credit
Agreement is hereby amended by adding the following new subsection 6.25.4:
6.25.4 Senior Leverage Ratio. At all times after December 15,
1997, measured as of the end of each Fiscal Quarter
(commencing on December 28, 1997) for the period of four
Fiscal Quarters then ended, maintain a Senior Leverage Ratio
of not more than the following during each of the following
periods; provided, however, for the period ending on the last
day of the fourth Fiscal Quarter of 1997, EBITDA will be the
product of (A) actual EBITDA for the period from
<PAGE> 31
the first day of the second Fiscal Quarter of 1997 to the last
day of the fourth Fiscal Quarter of 1997 multiplied by (B)
4/3:
<TABLE>
<CAPTION>
============================================================
Period Ratio
- ------------------------------------------------------------
<S> <C>
Fourth Quarter of 1997 4.25:1.0
- ------------------------------------------------------------
First Fiscal Quarter of 1998 through 4.00:1.0
Second Fiscal Quarter of 1999
- ------------------------------------------------------------
Third Fiscal Quarter of 1999 through 3.50:1.0
Second Fiscal Quarter of 2001
- ------------------------------------------------------------
Third Fiscal Quarter of 2001 and each 3.00:1.0
Fiscal Quarter thereafter
============================================================
</TABLE>
5.10 Stock Pledges. The Credit Agreement is hereby amended by
adding the following new Section 6.32:
"6.32 Stock Pledges. Each of Industries and each Borrower
shall, and shall cause each of its Subsidiaries (whether existing,
newly formed or acquired), to effect and maintain Stock Pledge
Agreements, such that at all times the value of the Consolidated Assets
held by entities whose stock is subject to a Stock Pledge Agreement
shall equal at least eighty percent (80%) of the Consolidated Assets of
Industries and its Subsidiaries taken as a whole. Industries and each
Borrower shall cause their respective Subsidiaries to effect additional
Stock Pledge Agreements from time to time as may be necessary to ensure
compliance with the foregoing provisions of this Section 6.32."
5.11 Designated Senior Indebtedness. The Credit Agreement
is hereby amended by adding the following new Section 6.33:
"6.33 Designated Senior Indebtedness. So long as any
Obligations (other than Obligations that expressly survive the
termination of this Agreement) remain outstanding hereunder or under
any other Loan Document, neither Group nor Industries shall provide for
or allow any Person other than the Agent to give a Blockage Notice (as
defined in the Subordinated Note Indenture) or any comparable notice
right from time to time under such Subordinated Note Indenture."
<PAGE> 32
5.12 Defaults.
(a) Section 7.11 of the Credit Agreement is hereby
amended by deleting such section and restating it in its entirety as follows:
"7.11. Any Change of Control shall occur, or any "Change of Control" as defined
in the Subordinated Note Indenture shall occur."
(b) Section 7.13 of the Credit Agreement is hereby
amended by deleting such section and restating it in its entirety as follows:
"7.13 Any Guaranty or the Pledge Agreement or any Stock Pledge
Agreement shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the
invalidity or unenforceability of any Guaranty or the Pledge
Agreement or any Stock Pledge Agreement, or any Guarantor
shall fail to comply with any of the terms or provisions of
any Guaranty to which it is a party, or Group shall fail to
comply with any of the terms or provisions of the Pledge
Agreement or any party to a Stock Pledge Agreement shall fail
to comply with the terms and conditions thereof or any
Guarantor denies that it has any further liability under the
Guaranty to which it is a party, or gives notice to such
effect."
5.13 Amendments. Section 8.2(f) of the Credit Agreement is
hereby amended by adding the words "or terminate any Stock Pledge Agreement
required pursuant to Section 6.32" after the word "thereunder".
5.14 The Agent. Section 10 of the Credit Agreement is hereby
amended by adding the following new Section 10.13:
"10.13 Delivery of Blockage Notice. The Agent shall deliver
a Blockage Notice (as defined in the Subordinated Note Indenture)
only upon the direction of the Required Lenders."
5.15 Schedules to the Credit Agreement. Each of Schedule 1.1
and 6.11 to the Credit Agreement, is hereby amended and restated in its entirety
in the form of Annex 1 and Annex 2 hereto, respectively.
5.16 Exhibit D to the Credit Agreement. Exhibit D to the
Credit Agreement is hereby amended and restated in its entirety in the form of
Exhibit A attached hereto.
SECTION 6. Terminations and Assignments. Each of Industries, each of the
Borrowers and each other signatory hereto hereby agrees and consents to,
notwithstanding the terms and
<PAGE> 33
conditions of Sections 12.1 and 12.3 of the Credit Agreement, (a) (i) the
termination of each of the Lenders listed on Annex 3 hereto (each a "Terminated
Lender") as a "Lender" under and as defined in the Credit Agreement, (ii) the
termination of all rights (except for such rights as expressly survive the
termination thereof) and obligations of each Terminated Lender under the Credit
Agreement and (iii) upon receipt by such Terminated Lender of the aggregate
principal amount of such Terminated Lender's outstanding Revolving Loan
Obligations and Term Loan (together with accrued and unpaid interest on such
principal amount and any other accrued and unpaid Obligations), all as
determined by such Terminated Lender and approved by Group (the "Pay Out
Amount"), the reduction of each such Terminated Lender's Revolving Loan Commit
ment and Term Loan Commitment to zero, (b) the addition of each of the entities
listed on Annex 4 hereto as a "Lender" under and as defined in the Credit
Agreement (each an "Additional Lender") and (c) the reallocation of the
Commitments as set forth in Schedule 1.1 to the Credit Agreement, as amended
hereby. Each of Industries, each of the Borrowers and each Terminated Lender
agrees to execute all such documents reasonably requested by the Agent or any
Terminated Lender to evidence the termination of such Terminated Lender in
accordance with the terms and conditions hereof. Each of Industries and each of
the Borrowers hereby further agrees that, upon the effectiveness of this
Amendment, each of the Additional Lenders shall become a party to the Credit
Agreement and shall have all of the rights, privileg es and obligations of a
"Lender" under and as defined in the Credit Agreement to the same extent as if
it were an original party thereto. By its execution hereof, each Additional
Lender agrees to be bound by and subject to all of the terms and conditions of
the Credit Agreement applicable to a "Lender" under and as defined therein.
SECTION 7. Conditions to Effectiveness of this Amendment. The effectiveness of
this Amendment is subject to the satisfaction of the following conditions
precedent, provided however, that in no event shall this Amendment become
effective if such conditions are not satisfied on or before December 31, 1997:
7.1 Amendment. This Amendment shall have been duly executed
and delivered by each of the parties hereto.
7.2 Stock Pledge Agreement. Industries and its Subsidiaries
listed on Annex 5 hereto shall each have duly executed and delivered to the
Agent a Stock Pledge Agreement, substantially in the form of Exhibit B hereto,
together with the original stock certificates pledged pursuant thereto and
corresponding stock powers, duly executed in blank.
7.3 Notes. Each Borrower shall have duly executed and
delivered to each relevant Lender replacement Revolving Notes and Term Notes or
new Revolving Notes and Term Notes (as applicable), payable to the order of the
applicable Lender, in a principal
<PAGE> 34
amount reflecting such Lender's Revolving Loan Commitment and Term Loan
Commitment as set forth in Schedule 1.1 to the Credit Agreement, as amended
hereby.
7.4 Evidence of Subordinated Note Issuance. The Agent shall
have received evidence, satisfactory to the Agent, of the consummation of the
issuance of the Subordinated Notes.
7.5 Terms of Subordinated Notes and Industries Guaranty. The
Lenders shall have approved, in their sole discretion, the terms and conditions
of the Subordinated Notes, the Subordinated Note Indenture and the Subordinated
Note Guaranty.
7.6 Legal Opinions. The Agent shall have received a legal
opinion, dated the date hereof, from Schiff Hardin & Waite, counsel to
Industries and its Subsidiaries, addressed to the Agent and the Lenders in form
and substance acceptable to the Agent.
7.7 Officer's Certificate. The Agent shall have received (i) a
certificate of an Authorized Officer of Industries certifying as to the matters
set forth in Sections 5.1 and 5.2 of this Amendment and (ii) a certificate of
the Secretary or Assistant Secretary of each Loan Party certifying (as
applicable): (a) copies of its charter and bylaws or equivalent constitutive
documents, (b) resolutions of its board of directors (and shareholders if
required) authorizing this Amendment, any Stock Pledge Agreement and any other
document executed in connection with this Amendment or the transactions
contemplated hereby, (c) the incumbency and signatures of each officer
authorized to execute and deliver this Amendment, any Stock Pledge Agreement or
other agreement executed in connection therewith and (d) its good standing
certificates.
7.8 Amendment Fee. The Agent shall have received all fees
payable pursuant to the terms of that certain fee letter agreement dated October
22, 1997 from the Agent and First Chicago Capital Markets, Inc. to Group.
7.9 Prepayment. The Agent shall have concurrently received
$30,000,000 in immediately available funds to reduce the outstanding principal
amount of the Term Loans (as defined in the Credit Agreement before giving
effect to this Third Amendment) in the inverse order of maturity, together with
all accrued and unpaid interest thereon to and including the date of prepayment.
7.10 Terminated Lender Prepayment. Each Terminated Lender
shall have concurrently received, in immediately available funds, an amount
equal to its Pay Out Amount.
<PAGE> 35
7.11 Additional Matters. The Agent shall have received such
other certificates, opinions, documents and instruments relating to the
transactions contemplated hereby as may have been requested by the Agent or any
Lender, in each case, in form and substance satisfactory to the Agent.
SECTION 8. Representations and Warranties of the Borrower. Each of Industries
and each of the Borrowers represents and warrants to the Agent and the Lenders,
as of the date hereof and as of the Effective Date (as hereinafter defined),
that both before and after giving effect to this Amendment:
8.1 no Default or Unmatured Default (other than any Default or
Unmatured Default waived pursuant to the terms hereof) has occurred and is
continuing or would occur after giving effect to the transactions contemplated
hereby; and
8.2 all of the representations and warranties contained in the
Credit Agreement and in the other Loan Documents (other than those that
expressly speak only as of a different date) are true and correct.
SECTION 9. Representations and Warranties of the Additional Lenders. Each
Additional Lender hereby (a) confirms that it has received a copy of the Credit
Agreement, together with copies of such other Loan Documents and other documents
and information as it has requested and has deemed appropriate to make its own
credit analysis and decision to enter into the Credit Agreement, (b) agrees that
it will, independently and without reliance upon the Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, (c) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Loan
Document as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto and (d) agrees that it will perform
in accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.
SECTION 10. Miscellaneous.
10.1 Effect; Ratification; Effectiveness. The amendments set
forth herein are effective solely for the purposes set forth herein and shall be
limited precisely as written, and shall not be deemed to (i) be a consent to any
amendment, consent or modification of any other term or condition of the Credit
Agreement or of any other instrument or agreement referred to therein; or (ii)
prejudice any right or remedy which the Agent or the Lenders may now have or may
have in the future under or in connection with the Credit Agreement or any other
instrument
<PAGE> 36
or agreement referred to therein. Each reference in the Credit Agreement to
"this Agree ment", "herein", "hereof" and words of like import and each
reference in the other Loan Docu ments to the "Agreement" or the "Credit
Agreement" shall mean the Credit Agreement as amended hereby. This Amendment
shall be construed in connection with and as part of the Credit Agreement and
all terms, conditions, representations, warranties, covenants and agree ments
set forth in the Credit Agreement and each other instrument or agreement
referred to therein, except as herein amended or waived, are hereby ratified and
confirmed and shall remain in full force and effect. This Amendment shall
immediately become effective upon the first date upon which both (i) the Agent
shall have received duly executed counterparts of this Amendment from each party
hereto and (ii) each of the conditions precedent contained in Section 4 hereof
shall have been satisfied (the "Effective Date").
10.2 Loan Documents. This Amendment is a Loan Document
executed pursu ant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be con strued, administered and applied in accordance with the
terms and provisions thereof.
10.3 Costs, Fees and Expenses. Industries agrees to pay all
costs, fees and expenses (including the reasonable fees and expenses of counsel
to the Agent) incurred in connection with the preparation, execution and
delivery of this Amendment as required pursu ant to the Credit Agreement.
10.4 Headings Descriptive. The headings of the several
Sections and Subsections of this Amendment are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision or term
of this Amendment.
10.5 Counterparts. This Amendment may be executed in any
number of counterparts, each such counterpart constituting an original and all
of which when taken togeth er shall constitute one and the same instrument.
10.6 Severability. Any provision contained in this Amendment
that is held to be inoperative, unenforceable or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable or invalid without
affecting the remaining provisions of this Amendment in that jurisdiction or the
operation, enforceability or validity of such provision in any other
jurisdiction.
10.7 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES
RELATING TO CONFLICTS OF LAW.
<PAGE> 37
10.8 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT
OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER
ARISING HEREUNDER OR THEREUNDER.
* * * *
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective duly authorized officers as of the
date first written above.
SCOTSMAN GROUP INC.
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ President
THE DELFIELD COMPANY
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ Vice President
By:
-----------------------------------------
Name:
Its:
SCOTSMAN DRINK LIMITED
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ Director
<PAGE> 39
WHITLENGE DRINK EQUIPMENT LIMITED
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ Director
FRIMONT S.P.A.
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ Director
CASTEL MAC S.P.A.
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ Director
KYSOR INDUSTRIAL CORPORATION
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ President
<PAGE> 40
SCOTSMAN INDUSTRIES, INC.
By: /S/ Richard C. Osborne
-----------------------------------------
Name: /S/ Richard C. Osborne
Its: /S/ President
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: /S/ Jacqueline Hopkins
-----------------------------------------
Name: /S/ Jacqueline Hopkins
Its: /S/ Authorized Agent
ABN AMRO BANK N.V.
By: /S/ David E. Collignon/Stephen J. Czech
-----------------------------------------
Name: /S/ David E. Collignon/Stephen J. Czech
Its: /S/ Vice President/Vice President
BANK OF SCOTLAND
By: /S/ Annie Chin Tat
-----------------------------------------
Name: /S/ Annie Chin Tat
Its: /S/ Vice President
<PAGE> 41
COMERICA BANK
By: /S/ Gregory N. Block
-----------------------------------------
Name: /S/ Gregory N. Block
Its: /S/ Vice President
SOCIETE GENERALE
By: /S/ Eric Sreboat
-----------------------------------------
Name: /S/ Eric Sreboat
Its: /S/ Corporate Banking Manager
BANK OF NEW YORK
By: /S/ John M. Lokay, Jr.
-----------------------------------------
Name: /S/ John M. Lokay, Jr.
Its: /S/ Vice President
CORESTATES BANK, N.A.
By: /S/ Kristen M. Denning
-----------------------------------------
Name: /S/ Kristen M. Denning
Its: /S/ Assistant Vice President
<PAGE> 42
FIRST HAWAIIAN BANK
By: /S/ Charles L. Jenkins
-----------------------------------------
Name: /S/ Charles L. Jenkins
Its: /S/ Vice President, Manager National
Corporate Banking
THE FUJI BANK, LIMITED
By: /S/ Peter L. Chinnici
-----------------------------------------
Name: /S/ Peter L. Chinnici
Its: /S/ Joint General Manager
HARRIS TRUST AND SAVINGS BANK
By: /S/ Patrick J. McDonnell
-----------------------------------------
Name: /S/ Patrick J. McDonnell
Its: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /S/ Nobuo Tominaga
-----------------------------------------
Name: /S/ Nobuo Tominaga
Its: /S/ Chief Manager
<PAGE> 43
THE SUMITOMO BANK, LTD.,
CHICAGO BRANCH
By: /S/ Kenichiro Kobayashi
-----------------------------------------
Name: /S/ Kenichire Kobayashi
Its: /S/ Joint General Manager
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /S/ Hajime Watanabe
-----------------------------------------
Name: /S/ Hajime Watanabe
Its: /S/ Deputy General Manager
CREDIT AGRICOLE INDOSUEZ
By: /S/ David Bouml
-----------------------------------------
Name: /S/ David Bouml
Its: /S/ F.V.P. Head of Corporate Banking
Chicago
By: /S/ Katherine L. Abbott
-----------------------------------------
Name: /S/ Katherine L. Abbott
Its: /S/ First Vice President
DAI-ICHI KANGYO BANK, LTD.
By: /S/ Seiichiro Ino
-----------------------------------------
Name: /S/ Seiichiro Ino
Its: /S/ Vice President
<PAGE> 44
FIRST AMERICAN NATIONAL BANK
By: /S/ Kathryn A. Brothers
-----------------------------------------
Name: /S/ Kathryn A. Brothers
Its: /S/ Vice President
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By: /S/ Mark A. Thompson
-----------------------------------------
Name: /S/ Mark A. Thompson
Its: /S/ Senior Vice President & Team Leader
LLOYDS BANK, PLC.
By: /S/ Illegible/David C. Rodway
-----------------------------------------
Name: /S/ Illegible/David C. Rodway
Its: /S/ Vice President/Assistant Vice
President
MELLON BANK, N.A.
By: /S/ Ryan F. Busch
-----------------------------------------
Name: /S/ Ryan F. Busch
Its: /S/ Assistant Vice President
<PAGE> 45
THE NORTHERN TRUST COMPANY
By: /S/ David Gannon
-----------------------------------------
Name: /S/ David Gannon
Its: /S/ Officer
ROYAL BANK OF SCOTLAND, PLC.
By: /S/ Derek Bonnar
-----------------------------------------
Name: /S/ Derek Bonnar
Its: /S/ Vice President
THE SANWA BANK, LIMITED
By: /S/ Gordon R. Holtby
-----------------------------------------
Name: /S/ Gordon R. Holtby
Its: /S/ Vice President & Manager
SUNTRUST BANK, ATLANTA
By: /S/ Margaret A. Jaketic/Shirley Burne
-----------------------------------------
Name: /S/ Margaret A. Jaketic/Shirley Burne
Its: /S/ Vice President/Vice President
<PAGE> 46
"TERMINATED LENDERS"
The following parties execute this Amendment
as a Lender under the Credit Agreement, and
each acknowledges by its signature below
that it is a Terminated Lender pursuant to
the terms of Section 3 hereof:
UNITED STATES NATIONAL BANK
OF OREGON
By: /S/ Elliot Jaffee
-----------------------------------------
Name: /S/ Elliot Jaffee
Its: /S/ Vice President
BANK OF IRELAND
By: /S/ Paddy Dowling
-----------------------------------------
Name: /S/ Paddy Dowling
Its: /S/ A.V.P.
NATIONAL CITY BANK
By: /S/ Brian Cullina
-----------------------------------------
Name: /S/ Brian J. Cullina
Its: /S/ Vice President
<PAGE> 1
EXHIBIT 10.8
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is
executed as of December 15, 1997 by and between Scotsman Industries, Inc.
("Pledgor") and The First National Bank of Chicago, as Agent.
W I T N E S S E T H:
WHEREAS, Scotsman Group Inc., certain other borrowers named
therein, Scotsman Industries, Inc., the lenders parties thereto (the "Lenders")
and The First National Bank of Chicago, as Agent, have entered into that certain
Credit Agreement, dated as of March 12, 1997, as amended by that certain First
Amendment to Credit Agreement, dated as of March 24, 1997, that certain Second
Amendment to Credit Agreement, dated as of June 30, 1997 and that certain Third
Amendment to Credit Agreement, dated as of December 15, 1997 (the "Third
Amendment")(as amended and as further amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"); and
WHEREAS, the execution and delivery of this Pledge Agreement
by the Pledgor is a condition precedent to the effectiveness of the Third
Amendment.
NOW THEREFORE, in order to induce the Agent and the Lenders to
enter into the Third Amendment, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
2. Pledge and Security Interest. In order to secure the full
and complete payment and performance of the Obligations when due, the Pledgor
hereby pledges and grants to the Agent for the benefit of the Agent and the
Lenders, equally and ratably in proportion to the total Obligations owing at any
time to the Agent and the Lenders, a continuing lien and security interest in
(a) all
<PAGE> 2
of the outstanding shares of capital stock of each Subsidiary of the
Pledgor owned by the Pledgor which is designated on Schedule I hereto,
including, without limitation, the shares listed on Schedule I hereto (the
"Pledged Stock"), (b) any securities, dividends or other distributions and any
other right or property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Stock and any other property substituted or exchanged therefor, and (c) any and
all proceeds (including, without limitation, "Proceeds" as defined in the
Uniform Commercial Code as in effect from time to time in the State of Illinois)
of, and substitutions and replacements for, the foregoing (all of the property
and rights described in the foregoing clauses (a) through (c) being herein
collectively called the "Collateral").
3. Deposit of Certificates for Pledged Stock. The Pledgor
shall deliver to the Agent, for the equal and ratable benefit of the Agent and
the Lenders, concurrently with the execution of this Pledge Agreement, the
certificates representing the Pledged Stock, endorsed in blank or accompanied by
appropriate instruments of transfer or assignments in blank. The Agent shall not
have any duty to assure that all certificates representing the Pledged Stock
have been delivered to it or any obligation whatsoever with respect to the care,
custody or protection of any certificates or instruments which may be delivered
to it except only to exercise the same care in physically safekeeping such
certificates or instruments as it would exercise in the ordinary course of its
own business. Neither the Agent nor any Lender shall be obligated to preserve or
protect any rights with respect to the Pledged Stock or to receive or give any
notice with respect thereto whether or not the Agent or any Lender is deemed to
have knowledge of such matters. Concurrently with the execution and delivery of
this Pledge Agreement and the certificates delivered pursuant to this Section 3,
the Pledgor shall deliver to the Agent a certificate executed by an Authorized
Officer of the Pledgor certifying (a) a copy of its good standing certificate,
issued by the Secretary of State of its jurisdiction of incorporation (as
applicable) and certified by such Secretary not more than 5 days prior to the
Pledgor's execution and delivery of this Pledge Agreement, (b) copies of its
charter and bylaws or other organizational documents, (c) resolutions of its
board of directors authorizing the execution and delivery by the Pledgor of this
Pledge Agreement and the performance of its obligations hereunder and (d) the
incumbency and signatures of the officers of the Pledgor authorized to execute
this Pledge Agreement on behalf of the Pledgor.
2
<PAGE> 3
4. Representations and Warranties. The Pledgor represents and
warrants to the Agent and each Lender as of the date of each pledge and delivery
hereunder that:
(a) Existence and Standing. Each of the Pledgor and
its Subsidiaries is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
(b) Authorization, Validity and Enforceability. The
execution and delivery by the Pledgor of this Pledge Agreement have been duly
authorized by proper corporate proceedings, and this Pledge Agreement
constitutes a legal, valid and binding obligation of the Pledgor and creates a
security interest which is enforceable against the Pledgor in accordance with
its terms in respect of all now owned and hereafter acquired Collateral, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity. All of the shares of the Pledged Stock are duly authorized, validly
issued, fully paid and nonassessable.
(c) Transferability; Title Matters. The Collateral is
free and clear of all liens, options, warrants, puts, calls, or other rights of
third persons, and restrictions, other than (i) those liens arising under this
Pledge Agreement, and (ii) restrictions on transferability imposed by applicable
state and Federal securities laws. The Pledgor agrees to warrant and defend
title to and ownership of the Pledged Stock and the lien created by this Pledge
Agreement against the claims of all Persons and maintain and preserve such lien
at all times during the term of this Pledge Agreement. Upon the delivery to the
Agent of the Pledged Stock, the security interests in the Pledged Stock granted
to the Agent hereunder will constitute first priority perfected security
interests therein subject to no other Liens.
(d) Ownership of Pledged Stock. The Pledgor is the
holder of record and the sole beneficial owner of 100% of the issued and
outstanding voting capital stock of each Subsidiary of the Pledgor identified on
Schedule I hereto. The capital stock of each such Subsidiary of the Pledgor
owned by the Pledgor is identified on Schedule I hereto.
(e) Title and Power to Pledge the Collateral. The
Pledgor has good and marketable title to the Collateral and has all requisite
rights, power, and authority to execute, deliver and comply with the terms of
this Pledge Agreement
3
<PAGE> 4
and to pledge and deliver the Collateral to the Agent pursuant hereto. No
material authorization, consent or approval of, and no notice to or filing with,
any person or government agency is required in connection with the execution,
delivery and performance of this Pledge Agreement which has not been obtained.
(f) Chief Executive Office. The Pledgor's principal
place of business and chief executive office is located at 820 Forest Edge
Drive, Vernon Hills, Illinois 60061 or such other location notified to the Agent
in accordance with Section 5(e) hereof.
5. Covenants. So long as any Obligations remain outstanding,
the Pledgor covenants and agrees with the Agent and the Lenders as follows:
(a) Pledge and Additional Stock. If the Pledgor shall
at any time (i) acquire any additional shares of the capital stock of any class
of the Pledged Stock of any Subsidiary of the Pledgor identified on Schedule I
hereto or any option, warrant or other right with respect thereto, whether such
acquisition shall be by purchase, exchange, reclassification, dividend, or
otherwise or (ii) desire to pledge 100% of the issued and outstanding voting
capital stock of any Subsidiary of the Pledgor not already pledged pursuant to
the terms of this Pledge Agreement, the Pledgor shall, (in the case of clause
(i) only) to the extent doing so would not violate applicable law, in each case
forthwith (and without the necessity for any request or demand by the Agent or
any Lender) pledge and deliver the certificates representing such shares to the
Agent, in the same manner as described in Section 3 hereof and shall promptly
thereafter deliver to the Agent a certificate (which shall, with the consent of
the Agent, be deemed to supplement Schedule I attached hereto) executed by an
Authorized Officer of the Pledgor describing such Pledged Stock and certifying
that the same has been duly pledged with the Agent hereunder. Any such
additional shares shall constitute part of the Pledged Stock. Nothing contained
in this Section 5(a) shall be deemed to permit any stock dividend, issuance of
additional stock, warrants, rights or options, reclassification, readjustment or
other change in the capital structure of any Subsidiary of the Pledgor that is
not expressly permitted in the Credit Agreement.
(b) Applications, Approvals and Consents. The Pledgor
will, at its expense, promptly execute and deliver, or cause the execution and
delivery of, all applications, certificates, instruments, registration
statements, and all other documents and papers that the Agent may reasonably
request in connection with the obtaining of any consent, approval, registration,
qualification, or
4
<PAGE> 5
authorization of any Person necessary or appropriate for the effective exercise
of any rights under this Pledge Agreement. Without limiting the generality of
the foregoing, the Pledgor agrees that in the event the Agent on behalf of
itself and the Lenders shall exercise its right to sell, transfer, or otherwise
dispose of or take any other action in connection with any of the Collateral
pursuant to this Pledge Agreement, the Pledgor shall execute and deliver all
applications, certificates, and other documents that the Agent may reasonably
request and shall otherwise promptly, fully, and diligently cooperate with the
Agent and any other necessary Persons, in making any application for the prior
consent or approval of any Person to the exercise by the Agent or the Lenders of
any of such rights relating to all or any part of the Collateral. Furthermore,
because the Pledgor agrees that the Agent's and the Lenders' remedy at law for
failure of the Pledgor to comply with the provisions of this Section 5(b) would
be inadequate and that such failure would not be adequately compensable in
damages, the Pledgor agrees that the covenants of this Section 5(b) may be
specifically enforced.
(c) Security Interest and Lien. The Pledgor will
preserve, warrant, and defend title to and ownership of the Pledged Stock and
the lien created hereby in the Collateral against the claims of all Persons
whomsoever and maintain and preserve such lien at all times during the term of
this Pledge Agreement; will not at any time sell, assign, transfer or otherwise
dispose of its right, title and interest in and to any of the Collateral except
as permitted under the Credit Agreement; will not at any time, directly or
indirectly, create, assume, or suffer to exist any lien, warrant, put, option,
or other rights of third Persons and restrictions, other than the liens created
by this Pledge Agreement, in and to the Collateral or any part thereof; and will
not do or suffer any matter or thing whereby the lien created by this Pledge
Agreement in and to the Collateral might or could be impaired.
(d) Further Assurances. The Pledgor, at its expense,
shall from time to time execute and deliver to the Agent all such other
assignments, certificates, supplemental documents, and financing statements, and
shall do all other acts or things as the Agent may reasonably request in order
to more fully create, evidence, perfect, continue, and preserve the priority of
the lien herein created or to otherwise obtain the full benefits of this Pledge
Agreement.
(e) Change of Name, Corporate Structure, Chief
Executive Office. The Pledgor shall not change its name, identity or corporate
structure (within the meaning of Section 9-402(7) of any applicable enactment of
the
5
<PAGE> 6
Uniform Commercial Code) or relocate its chief executive office unless it shall
have (i) given the Agent at least 45 days prior written notice thereof and (ii)
delivered to the Agent all financing statements, instruments and other documents
requested by the Agent or the Lenders in connection with such change or
relocation.
6. Defaults under this Pledge Agreement. There shall be a
"default" (hereinafter a "Pledge Agreement Default") under this Pledge Agreement
upon the occurrence of any of the following:
(a) This Pledge Agreement shall fail to remain in
full force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of this Pledge Agreement; or
(b) The Pledgor shall fail to comply with any of the
terms or provisions of this Pledge Agreement or denies that it has any further
liability under this Pledge Agreement, or gives notice to such effect; or
(c) A "Default" under and as defined in the Credit
Agreement occurs and is continuing.
7. Rights of the Pledgor, the Agent and the Lenders.
(a) Exercise of Stockholder Rights.
(1) Unless and until a Pledge Agreement Default shall
occur and be continuing, the Pledgor shall be entitled to receive all cash
dividends or other distributions on the Pledged Stock (if and to the extent such
dividends or distributions are permitted by the terms of the Credit Agreement)
except (A) distributions made in capital stock on the Pledged Stock resulting
from stock dividends on or subdivision, combination, or reclassification of the
outstanding capital stock of any corporation or as a result of any merger,
consolidation, acquisition or other exchange of assets of any corporation; and
(B) all sums paid on any Pledged Stock upon liquidation or dissolution or
reduction of capital, repurchase, retirement, or redemption. All such sums,
dividends, distributions, proceeds, or property described in the immediately
preceding clauses (A) and (B) shall, if received by any Person other than the
Agent, be held in trust for the benefit of the Agent and the Lenders and shall
forthwith be delivered to the Agent for the benefit of the Agent and the Lenders
(accompanied by proper instruments or assignment and/or
6
<PAGE> 7
undated stock powers executed by the Pledgor in accordance with the Agent's
instructions) to be held subject to the terms of this Pledge Agreement. Upon the
occurrence of a Pledge Agreement Default, the Agent, for the benefit of the
Agent and the Lenders, shall be entitled to receive all payments of whatever
kind made upon or with respect to any Collateral. The relative rights of the
Agent and the Lenders to receive such payments shall be in proportion to the
relative amounts of all Obligations owing to the Agent and any Lender and the
aggregate amount of all Obligations then outstanding.
(i) Unless a Pledge Agreement Default has occurred
and is continuing, the Pledgor shall have the sole
and exclusive right to vote and give consents with
respect to all the Collateral and to consent to,
ratify, or waive notice of any and all meetings. Upon
the occurrence and during the continuance of a Pledge
Agreement Default, subject to compliance with
applicable law, the Agent or the Agent's nominee, on
behalf of itself and the Lenders, shall have the
right at the Agent's or such nominee's option and
after it gives notice to the Pledgor (A) to exercise
all voting powers pertaining to the Collateral,
including the right to take action by shareholder
consent and to consent in advance to any vote
proposed to be cast by the Pledgor with respect to
any merger, consolidation, liquidation or
reorganization of any Subsidiary of the Pledgor and,
in connection therewith, to join in and become a
party to any plan of recapitalization,
reorganization, or readjustment (whether voluntary or
involuntary) as shall seem desirable to the Agent, on
behalf of itself and the Lenders, to protect or
further their interests in respect of the Collateral,
(B) to deposit the Collateral under any such plan,
and (C) to make any exchange, substitution,
cancellation, or surrender of the Collateral required
by any such plan and to take such action with respect
to the Collateral as may be required by any such plan
or for the accomplishment thereof; and no such
disposition, exchange, substitution, cancellation, or
surrender shall be deemed to constitute a release of
the Collateral from the lien of this Pledge
Agreement.
7
<PAGE> 8
(b) Right of Sale after Default. Upon the occurrence
and during the continuance of a Pledge Agreement Default, subject to compliance
with applicable law, the Agent, on behalf of itself and the Lenders, may sell,
without recourse to judicial proceedings, with the right to bid for and buy, the
Collateral or any part thereof, upon ten days' notice (which notice is agreed to
be reasonable notice for the purposes hereof) to the Pledgor of the time and
place of sale, for cash, upon credit or for future delivery, at the Agent's
option and in the Agent's complete discretion:
(i) At public sale, including a sale at any broker's
board or exchange;
(ii) At private sale in any commercially reasonable
manner which will not require the Collateral, or any
part thereof, to be registered in accordance with the
Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, or any other law
or regulation. The Agent and each Lender are also
hereby authorized, but not obligated, to take such
actions, give such notices, obtain such consents, and
do such other things as they may deem required or
appropriate in the event of sale or disposition of
any of the Collateral, and the Pledgor agrees that
neither the Agent nor any Lender shall be liable or
accountable to the Pledgor for any discount allowed
by reason of the fact that such Collateral is sold in
compliance with any applicable limitation or
restriction of any governmental regulatory authority
or official. The Pledgor understands that the Agent,
on behalf of itself and the Lenders, may in its
discretion approach a restricted number of potential
purchasers and that a sale under such circumstances
may yield a lower price for the Collateral, or any
portion thereof, than would otherwise be obtainable
if the same were registered and sold in the open
market. Any such private sale shall not by reason
thereof be deemed not to have been made in a
commercially reasonable manner. In the event of any
such sale under the circumstances described in this
Section 7(b)(ii), neither the Agent nor any Lender
shall incur any responsibility or liability for
selling the whole or any part of the Collateral at a
price which the Agent may deem reasonable under the
circumstances, notwithstanding
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<PAGE> 9
the possibility that a substantially higher price
might be realized if any such sale were a public
sale. The Pledgor agrees that in the event the Agent
shall so sell the Collateral, or any portion thereof,
at such private sale or sales, the Agent and the
Lenders shall have the right to rely upon the advice
and opinion of any Person who regularly deals in or
evaluates stock of the type constituting the
Collateral as to the price obtainable in a
commercially reasonable manner upon such a private
sale thereof.
In the case of any sale by the Agent on behalf of itself and
the Lenders of the Collateral on credit or for future delivery, the Collateral
sold may be retained by the Agent until the selling price is paid by the
purchaser, but neither the Agent nor any Lender shall incur liability in case of
failure of the purchaser to take up and pay for the Collateral so sold.
In connection with the sale of any of the Collateral, the
Agent and the Lenders are authorized, but not obligated, to limit prospective
purchasers to the extent deemed necessary or desirable by the Agent and the
Lenders to render such sale exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities laws. In
the event that, in the opinion of the Agent and the Lenders, it is necessary or
advisable to have such securities registered under the provisions of such Act,
or any similar law relating to the registration of securities, the Pledgor
agrees, at its own expense, to (i) execute and deliver all such instruments and
documents, and to do or cause to be done such other acts and things, as may be
necessary or, in the opinion of the Agent, advisable, to register such
securities under the provisions of such Act or any applicable similar law
relating to the registration of securities, and the Pledgor will use its best
efforts to cause the registration statement relating thereto to become effective
and to remain effective for such period as the Agent shall reasonably request,
and to make all amendments thereof and/or to the related prospectus which, in
the opinion of the Agent, are necessary or desirable, all in conformity with the
requirements of such Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto; (ii) use its best efforts to qualify
such securities under state "blue sky" or securities laws, all as reasonably
requested by the Agent; (iii) at the request of the Agent, indemnify and hold
harmless the Lenders, the Agent, any underwriters, employees, officers, agents,
attorneys and accountants (collectively, the "Indemnified Parties") from and
against any loss, liability, claim, damage, and expense (including, without
limitation, reasonable
9
<PAGE> 10
fees of counsel incurred in connection therewith) under such Act or otherwise,
insofar as such loss, liability, claim, damage, or expense arises out of or is
based upon any untrue statement or alleged untrue statement of any material fact
furnished by the Pledgor contained in any registration statement under which
such securities were registered under such Act or other securities laws, any
preliminary prospectus or final prospectus contained therein, or arise out of or
are based upon any omission or alleged omission by the Pledgor to state therein
a material fact required to be stated or necessary to make the statements
therein not misleading, such indemnification to remain operative regardless of
any investigation made by or on behalf of any Indemnified Party; (iv) cause each
such issuer to make available to its security holders, as soon as practicable,
an earnings statement that will satisfy the provisions of Section 11(a) of such
Act; and (v) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
(c) Other Rights after a Default. Upon the occurrence
and during the continuance of a Default, the Agent, on behalf of itself and the
Lenders, may exercise any and all rights available to secured parties under the
Uniform Commercial Code as enacted in the State of Illinois or other applicable
jurisdiction, as amended, in addition to any and all other rights afforded at
law, in equity, or otherwise.
(d) Application of Proceeds. The Agent shall apply
the proceeds of the Collateral, including the proceeds of any sales or other
disposition of the Collateral, or any part thereof, under this Section 7, in the
following order unless a court of competent jurisdiction shall otherwise direct:
(i) FIRST, to payment of all reasonable costs and expenses
of the Agent and the Lenders incurred in connection with the
collection and enforcement of the security interest granted
to the Agent and the Lenders pursuant to this Pledge
Agreement, including all costs and expenses of any sale
pursuant hereto, and of any judicial or private proceedings
in which such sale may be made, and of all other expenses,
liabilities and advances made or incurred by the Agent, the
Lenders and the agents and attorneys of each of them in
connection therewith, together with interest at a rate per
annum equal to the Floating Rate plus two percent (2%) per
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<PAGE> 11
annum (unless the Lenders shall determine otherwise) on such
costs, expenses and liabilities and on all advances made by
the Agent or any Lender from the date any such cost, expense
or liability is due, owing or unpaid or any such advance is
made, in each case until paid in full;
(ii) SECOND, to payment of that portion of the Obligations
constituting accrued and unpaid interest, fees and other
amounts (other than principal), pro rata amongst each Lender
and the Agent in accordance with the proportion which the
accrued interest, fees and other amounts (other than
principal) constituting Obligations owing to each such
Lender or Agent bears to the aggregate amount of accrued
interest, fees and other amounts (other than principal)
constituting Obligations owing to all of the Lenders and the
Agent, together with interest owing thereon until paid in
full;
(iii) THIRD, to payment of the principal of the Obligations
and net termination amounts payable in respect of the Rate
Hedging Obligations owing to the Lenders or any Lender,
together with interest on such unpaid principal and net
termination amounts until paid in full; and
(iv) FOURTH, the balance, if any, after all of the
Obligations have been satisfied, shall be remitted as
required by law.
(e) Governance. All rights and remedies available to
the Agent and the Lenders with respect to the grant, foreclosure and enforcement
of the security interest and lien granted hereby and with respect to any action
permitted hereunder may be exercised solely by the Agent acting with the
concurrence of the Required Lenders.
8. Miscellaneous.
(a) Term. This Pledge Agreement and the lien arising
hereunder (i) shall become effective as of the date hereof upon the execution
hereof, and (ii) shall continue in force until no Obligations to the Agent or
any of the Lenders shall be outstanding and the Commitments shall have been
indefeasibly
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<PAGE> 12
terminated. If no Obligations remain outstanding and the Commitments have been
indefeasibly terminated, the Agent, at the request and sole expense of the
Pledgor, shall execute and deliver such documents and instruments as may be
necessary to evidence such termination and release.
(b) Releases; Partial Releases. Any cash dividends
received by the Pledgor in accordance with the terms of Section 7(a)(i) hereof,
and all distributions received by the Pledgor upon the merger or liquidation of
the Subsidiaries of the Pledgor with or into the Pledgor in accordance with
Section 6.12 of the Credit Agreement, shall be deemed released from the lien of
this Pledge Agreement and shall be held by the Pledgor (or any transferee of the
Pledgor) free and clear of the lien created by this Pledge Agreement. Upon
termination of this Pledge Agreement in accordance with the provisions of
Section 8(a) hereof, the Agent and the Lenders shall, at the Pledgor's request
and expense and subject to the foregoing sentence, execute such releases as the
Pledgor may reasonably request, in form and upon terms acceptable to the Agent
and the Lenders in all respects, and shall deliver, without any representations,
warranties or recourse of any kind whatsoever (other than the representation and
warranty that such property is free and clear of Liens created by the Agent and
the Lenders), all certificates representing the Pledged Stock and other property
held in respect thereof hereunder which is in the Agent's possession, together
with all stock powers or other instruments of transfer reasonably required to
effect delivery to the Pledgor.
(c) Waivers. Except to the extent expressly otherwise
provided herein or in any Loan Document, the Pledgor waives, to the extent
permitted by applicable law, (i) any right to require the Agent or any Lender to
proceed against any other person, to exhaust their rights in any other
collateral, or to pursue any other right which either the Agent or any Lender
may have, (ii) with respect to the Obligations, presentment and demand for
payment, protest, notice of protest and non-payment, and notice of the intention
to accelerate, and (iii) all rights of marshalling in respect of any and all of
the Collateral.
(d) Financing Statement. The Agent, on behalf of
itself and the Lenders, shall be entitled at any time to file this Pledge
Agreement or a carbon, photographic, or other reproduction of this Pledge
Agreement, as a financing statement, but the failure of the Agent to do so shall
not impair the validity or enforceability of this Pledge Agreement.
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<PAGE> 13
(e) Survival of Representations. All representations
and warranties of the Pledgor contained in this Pledge Agreement shall survive
the execution and delivery of this Pledge Agreement. (f)) Taxes and Expenses.
The Pledgor will upon demand pay to the Agent, on behalf of the Lenders, (a) any
taxes (excluding income taxes, franchise taxes or other taxes levied on gross
earnings, profits or the like) payable or ruled payable by any Federal or State
authority in respect of this Pledge Agreement, together with interest and
penalties, if any, and (b) all reasonable expenses, including the reasonable
fees and expenses of counsel for the Agent and each Lender (which may be
employees of the Agent or such Lender) and of any experts and agents that the
Agent or the Lenders may incur in connection with (i) the administration of this
Pledge Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Agent or the Lenders
hereunder, or (iv) the failure of the Pledgor to perform or observe any of the
provisions hereof.
(g) Headings. The title of and section headings in
this Pledge Agreement are for convenience of reference only, and shall not
govern the interpretation of any of the terms and provisions of this Pledge
Agreement.
(h) Agent Appointed Attorney-In-Fact. The Pledgor
hereby irrevocably appoints the Agent as the Pledgor's attorney-in-fact, with
full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Agent's discretion reasonably
exercised, to take any and all action and to execute any and all documents and
instruments that the Agent deems reasonably necessary or advisable to accomplish
the purposes of this Pledge Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the Pledgor
representing any dividend or other distribution in respect of the Pledged Stock
or any part thereof and to give full discharge for the same, when and to the
extent permitted by this Pledge Agreement. All powers, authorizations and
agencies contained in this Pledge Agreement are coupled with an interest and are
irrevocable until this Pledge Agreement is terminated and the security interests
created hereby are released in accordance with the terms hereof.
(i) Entire Agreement. This Pledge Agreement, the
Credit Agreement and the other Loan Documents embody the entire agreement and
understanding
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<PAGE> 14
among the Pledgor, the Agent and the Lenders and supersede all prior oral and
written agreements and understandings among the Pledgor, the Agent and the
Lenders relating to the subject hereof. The terms of this Pledge Agreement shall
govern the Collateral pledged hereunder exclusively. (j)) Amendments. This
Pledge Agreement may be amended only by an instrument in writing executed
jointly by the Pledgor and the Agent, with the consent of the Required Lenders
and supplemented only by documents delivered or to be delivered in accordance
with the express terms hereof.
(k) GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD
TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
(l) CONSENT TO JURISDICTION. THE PLEDGOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT AND THE PLEDGOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST THE PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE PLEDGOR AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS PLEDGE
AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS; PROVIDED, THAT
SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION MAY NOT BE
OBTAINED IN A COURT IN CHICAGO, ILLINOIS.
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<PAGE> 15
(m) WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE
AGENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS PLEDGE AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER.
(n) Parties Bound; Assignment. This Pledge Agreement
shall be binding on the Pledgor and its successors and assigns and shall inure
to the benefit of the Agent and the Lenders and their respective successors and
assigns, except that the Pledgor shall not have the right to assign its rights
or obligations under this Pledge Agreement or any interest herein, without the
prior written consent of the Agent.
(o) Notices. Any notice required or permitted to be
given under this Pledge Agreement shall be in writing and may be, and shall be
deemed, given, if mailed and properly addressed return receipt requested, three
days after the date when deposited in the United States mail, first-class,
postage prepaid, or if by personal delivery, overnight courier, or by telecopy,
when received, addressed to the Pledgor or, to the Agent at the address
indicated below their respective signatures hereto and to the Lenders at the
addresses indicated below their respective signatures to the Credit Agreement.
Each of the Pledgor, the Agent and the Lenders may change the address for
service of notice upon it by a notice in writing to the other parties hereto.
(p) Counterparts. This Pledge Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute this Pledge
Agreement by signing any such counterpart. This Pledge Agreement shall be
effective when it has been executed by the Pledgor and the Agent.
(q) Loan Document. This Pledge Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
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<PAGE> 16
(r) Section Captions. Section captions used in this
Pledge Agreement are for convenience of reference only and shall not affect the
construction of this Pledge Agreement.
(s) Severability. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
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<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Pledge Agreement as
of the date first above written.
SCOTSMAN INDUSTRIES, INC.
/s/ Richard C. Osborne
By: /s/ Richard C. Osborne
------------------------------------
Title: /s/ President
---------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, IL 60061
Attn: Donald D. Holmes
Telephone: (847) 215-4447
Facsimile: (847) 634-8823
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
/s/ Jacqueline Hopkins
By: /s/ Jacqueline Hopkins
------------------------------------
Title: /s/ Authorized Agent
---------------------------------
Address: One First National Plaza
Chicago, IL 60670
Attn: Julia Bristow
Telephone: (312) 732-5927
Facsimile: (312) 732-1117
<PAGE> 18
SCHEDULE I TO STOCK PLEDGE AGREEMENT
LIST OF PLEDGED STOCK
<TABLE>
<CAPTION>
Issuer Type of Certificate Number Percentage
------ ------- ----------- ------ ----------
Pledged Stock Number of Shares Interest
------------- ------ --------- --------
<S> <C> <C> <C> <C>
Scotsman Group Inc. Common R-1 1,000 100%
</TABLE>
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<PAGE> 19
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is executed as of
December 15, 1997 by and between Scotsman Group Inc. ("Pledgor") and The First
National Bank of Chicago, as Agent.
W I T N E S S E T H:
WHEREAS, Scotsman Group Inc., certain other borrowers named therein,
Scotsman Industries, Inc., the lenders parties thereto (the "Lenders") and The
First National Bank of Chicago, as Agent, have entered into that certain Credit
Agreement, dated as of March 12, 1997, as amended by that certain First
Amendment to Credit Agreement, dated as of March 24, 1997, that certain Second
Amendment to Credit Agreement, dated as of June 30, 1997 and that certain Third
Amendment to Credit Agreement, dated as of December 15, 1997 (the "Third
Amendment")(as amended and as further amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"); and
WHEREAS, the execution and delivery of this Pledge Agreement by the Pledgor
is a condition precedent to the effectiveness of the Third Amendment.
NOW THEREFORE, in order to induce the Agent and the Lenders to enter into
the Third Amendment, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
9. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
10. Pledge and Security Interest. In order to secure the full
and complete payment and performance of the Obligations when due, the Pledgor
hereby
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<PAGE> 20
pledges and grants to the Agent for the benefit of the Agent and the Lenders,
equally and ratably in proportion to the total Obligations owing at any time to
the Agent and the Lenders, a continuing lien and security interest in (a) all of
the outstanding shares of capital stock of each Subsidiary of the Pledgor owned
by the Pledgor which is designated on Schedule I hereto, including, without
limitation, the shares listed on Schedule I hereto (the "Pledged Stock"), (b)
any securities, dividends or other distributions and any other right or property
at any time and from time to time receivable or otherwise distributed in respect
of or in exchange for any or all of the Pledged Stock and any other property
substituted or exchanged therefor, and (c) any and all proceeds (including,
without limitation, "Proceeds" as defined in the Uniform Commercial Code as in
effect from time to time in the State of Illinois) of, and substitutions and
replacements for, the foregoing (all of the property and rights described in the
foregoing clauses (a) through (c) being herein collectively called the
"Collateral").
11. Deposit of Certificates for Pledged Stock. The Pledgor
shall deliver to the Agent, for the equal and ratable benefit of the Agent and
the Lenders, concurrently with the execution of this Pledge Agreement, the
certificates representing the Pledged Stock, endorsed in blank or accompanied by
appropriate instruments of transfer or assignments in blank. The Agent shall not
have any duty to assure that all certificates representing the Pledged Stock
have been delivered to it or any obligation whatsoever with respect to the care,
custody or protection of any certificates or instruments which may be delivered
to it except only to exercise the same care in physically safekeeping such
certificates or instruments as it would exercise in the ordinary course of its
own business. Neither the Agent nor any Lender shall be obligated to preserve or
protect any rights with respect to the Pledged Stock or to receive or give any
notice with respect thereto whether or not the Agent or any Lender is deemed to
have knowledge of such matters. Concurrently with the execution and delivery of
this Pledge Agreement and the certificates delivered pursuant to this Section 3,
the Pledgor shall deliver to the Agent a certificate executed by an Authorized
Officer of the Pledgor certifying (a) a copy of its good standing certificate,
issued by the Secretary of State of its jurisdiction of incorporation (as
applicable) and certified by such Secretary not more than 5 days prior to the
Pledgor's execution and delivery of this Pledge Agreement, (b) copies of its
charter and bylaws or other organizational documents, (c) resolutions of its
board of directors authorizing the execution and delivery by the Pledgor of this
Pledge Agreement and the performance of its obligations hereunder and (d) the
incumbency and signatures of the officers of the Pledgor authorized to execute
this Pledge Agreement on behalf of the Pledgor.
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<PAGE> 21
12. Representations and Warranties. The Pledgor represents and
warrants to the Agent and each Lender as of the date of each pledge and delivery
hereunder that:
(a) Existence and Standing. Each of the Pledgor and
its Subsidiaries is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
(b) Authorization, Validity and Enforceability. The
execution and delivery by the Pledgor of this Pledge Agreement have been duly
authorized by proper corporate proceedings, and this Pledge Agreement
constitutes a legal, valid and binding obligation of the Pledgor and creates a
security interest which is enforceable against the Pledgor in accordance with
its terms in respect of all now owned and hereafter acquired Collateral, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity. All of the shares of the Pledged Stock are duly authorized, validly
issued, fully paid and nonassessable.
(c) Transferability; Title Matters. The Collateral is
free and clear of all liens, options, warrants, puts, calls, or other rights of
third persons, and restrictions, other than (i) those liens arising under this
Pledge Agreement, and (ii) restrictions on transferability imposed by applicable
state and Federal securities laws. The Pledgor agrees to warrant and defend
title to and ownership of the Pledged Stock and the lien created by this Pledge
Agreement against the claims of all Persons and maintain and preserve such lien
at all times during the term of this Pledge Agreement. Upon the delivery to the
Agent of the Pledged Stock, the security interests in the Pledged Stock granted
to the Agent hereunder will constitute first priority perfected security
interests therein subject to no other Liens.
(d) Ownership of Pledged Stock. The Pledgor is the
holder of record and the sole beneficial owner of 100% of the issued and
outstanding voting capital stock of each Subsidiary of the Pledgor identified on
Schedule I hereto. The capital stock of each such Subsidiary of the Pledgor
owned by the Pledgor is identified on Schedule I hereto.
(e) Title and Power to Pledge the Collateral. The
Pledgor has good and marketable title to the Collateral and has all requisite
rights, power, and authority to execute, deliver and comply with the terms of
this Pledge Agreement
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<PAGE> 22
and to pledge and deliver the Collateral to the Agent pursuant hereto. No
material authorization, consent or approval of, and no notice to or filing with,
any person or government agency is required in connection with the execution,
delivery and performance of this Pledge Agreement which has not been obtained.
(f) Chief Executive Officer. The Pledgor's principal
place of business and chief executive office is located at 820 Forest Edge
Drive, Vernon Hills, Illinois, 60061 or such other location notified to the
Agent in accordance with Section 5(e) hereof.
13. Covenants. So long as any Obligations remain outstanding,
the Pledgor covenants and agrees with the Agent and the Lenders as follows:
(a) Pledge and Additional Stock. If the Pledgor shall
at any time (i) acquire any additional shares of the capital stock of any class
of the Pledged Stock of any Subsidiary of the Pledgor identified on Schedule I
hereto or any option, warrant or other right with respect thereto, whether such
acquisition shall be by purchase, exchange, reclassification, dividend, or
otherwise or (ii) desire to pledge 100% of the issued and outstanding voting
capital stock of any Subsidiary of the Pledgor not already pledged pursuant to
the terms of this Pledge Agreement, the Pledgor shall, (in the case of clause
(i) only) to the extent doing so would not violate applicable law, in each case
forthwith (and without the necessity for any request or demand by the Agent or
any Lender) pledge and deliver the certificates representing such shares to the
Agent, in the same manner as described in Section 3 hereof and shall promptly
thereafter deliver to the Agent a certificate (which shall, with the consent of
the Agent, be deemed to supplement Schedule I attached hereto) executed by an
Authorized Officer of the Pledgor describing such Pledged Stock and certifying
that the same has been duly pledged with the Agent hereunder. Any such
additional shares shall constitute part of the Pledged Stock. Nothing contained
in this Section 5(a) shall be deemed to permit any stock dividend, issuance of
additional stock, warrants, rights or options, reclassification, readjustment or
other change in the capital structure of any Subsidiary of the Pledgor that is
not expressly permitted in the Credit Agreement.
(b) Applications, Approvals and Consents. The Pledgor
will, at its expense, promptly execute and deliver, or cause the execution and
delivery of, all applications, certificates, instruments, registration
statements, and all other documents and papers that the Agent may reasonably
request in connection with the obtaining of any consent, approval, registration,
qualification, or authorization of any
22
<PAGE> 23
Person necessary or appropriate for the effective exercise of any rights under
this Pledge Agreement. Without limiting the generality of the foregoing, the
Pledgor agrees that in the event the Agent on behalf of itself and the Lenders
shall exercise its right to sell, transfer, or otherwise dispose of or take any
other action in connection with any of the Collateral pursuant to this Pledge
Agreement, the Pledgor shall execute and deliver all applications, certificates,
and other documents that the Agent may reasonably request and shall otherwise
promptly, fully, and diligently cooperate with the Agent and any other necessary
Persons, in making any application for the prior consent or approval of any
Person to the exercise by the Agent or the Lenders of any of such rights
relating to all or any part of the Collateral. Furthermore, because the Pledgor
agrees that the Agent's and the Lenders' remedy at law for failure of the
Pledgor to comply with the provisions of this Section 5(b) would be inadequate
and that such failure would not be adequately compensable in damages, the
Pledgor agrees that the covenants of this Section 5(b) may be specifically
enforced.
(c) Security Interest and Lien. The Pledgor will
preserve, warrant, and defend title to and ownership of the Pledged Stock and
the lien created hereby in the Collateral against the claims of all Persons
whomsoever and maintain and preserve such lien at all times during the term of
this Pledge Agreement; will not at any time sell, assign, transfer or otherwise
dispose of its right, title and interest in and to any of the Collateral except
as permitted under the Credit Agreement; will not at any time, directly or
indirectly, create, assume, or suffer to exist any lien, warrant, put, option,
or other rights of third Persons and restrictions, other than the liens created
by this Pledge Agreement, in and to the Collateral or any part thereof; and will
not do or suffer any matter or thing whereby the lien created by this Pledge
Agreement in and to the Collateral might or could be impaired.
(d) Further Assurances. The Pledgor, at its expense,
shall from time to time execute and deliver to the Agent all such other
assignments, certificates, supplemental documents, and financing statements, and
shall do all other acts or things as the Agent may reasonably request in order
to more fully create, evidence, perfect, continue, and preserve the priority of
the lien herein created or to otherwise obtain the full benefits of this Pledge
Agreement.
(e) Change of Name, Corporate Structure, Chief
Executive Office. The Pledgor shall not change its name, identity or corporate
structure (within the meaning of Section 9-402(7) of any applicable enactment of
the Uniform Commercial Code) or relocate its chief executive office unless it
shall have (i) given
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<PAGE> 24
the Agent at least 45 days prior written notice thereof and (ii) delivered to
the Agent all financing statements, instruments and other documents requested by
the Agent or the Lenders in connection with such change or relocation. f).
14. Defaults under this Pledge Agreement. There shall be a
"default" (hereinafter a "Pledge Agreement Default") under this Pledge Agreement
upon the occurrence of any of the following:
(g) This Pledge Agreement shall fail to remain in
full force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of this Pledge Agreement; or
(h) The Pledgor shall fail to comply with any of the
terms or provisions of this Pledge Agreement or denies that it has any further
liability under this Pledge Agreement, or gives notice to such effect; or
(i) A "Default" under and as defined in the Credit
Agreement occurs and is continuing.
15. Rights of the Pledgor, the Agent and the Lenders.
(a) Exercise of Stockholder Rights.
(i) Unless and until a Pledge Agreement Default shall occur
and be continuing, the Pledgor shall be entitled to receive
all cash dividends or other distributions on the Pledged Stock
(if and to the extent such dividends or distributions are
permitted by the terms of the Credit Agreement) except (A)
distributions made in capital stock on the Pledged Stock
resulting from stock dividends on or subdivision, combination,
or reclassification of the outstanding capital stock of any
corporation or as a result of any merger, consolidation,
acquisition or other exchange of assets of any corporation;
and (B) all sums paid on any Pledged Stock upon liquidation or
dissolution or reduction of capital, repurchase, retirement,
or redemption. All such sums, dividends, distributions,
proceeds, or property described in the immediately preceding
clauses (A) and (B) shall, if received by any Person other
than the Agent, be held in trust for the benefit of the Agent
and the Lenders and shall forthwith be delivered to the Agent
for the benefit of
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<PAGE> 25
the Agent and the Lenders (accompanied by proper instruments
or assignment and/or undated stock powers executed by the
Pledgor in accordance with the Agent's instructions) to be
held subject to the terms of this Pledge Agreement. Upon the
occurrence of a Pledge Agreement Default, the Agent, for the
benefit of the Agent and the Lenders, shall be entitled to
receive all payments of whatever kind made upon or with
respect to any Collateral. The relative rights of the Agent
and the Lenders to receive such payments shall be in
proportion to the relative amounts of all Obligations owing to
the Agent and any Lender and the aggregate amount of all
Obligations then outstanding.
(ii) Unless a Pledge Agreement Default has occurred and is
continuing, the Pledgor shall have the sole and exclusive
right to vote and give consents with respect to all the
Collateral and to consent to, ratify, or waive notice of any
and all meetings. Upon the occurrence and during the
continuance of a Pledge Agreement Default, subject to
compliance with applicable law, the Agent or the Agent's
nominee, on behalf of itself and the Lenders, shall have the
right at the Agent's or such nominee's option and after it
gives notice to the Pledgor (A) to exercise all voting powers
pertaining to the Collateral, including the right to take
action by shareholder consent and to consent in advance to any
vote proposed to be cast by the Pledgor with respect to any
merger, consolidation, liquidation or reorganization of any
Subsidiary of the Pledgor and, in connection therewith, to
join in and become a party to any plan of recapitalization,
reorganization, or readjustment (whether voluntary or
involuntary) as shall seem desirable to the Agent, on behalf
of itself and the Lenders, to protect or further their
interests in respect of the Collateral, (B) to deposit the
Collateral under any such plan, and (C) to make any exchange,
substitution, cancellation, or surrender of the Collateral
required by any such plan and to take such action with respect
to the Collateral as may be required by any such plan or for
the accomplishment thereof; and no such disposition, exchange,
substitution, cancellation, or surrender shall be deemed to
constitute a release of the Collateral from the lien of this
Pledge Agreement.
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<PAGE> 26
(b) Right of Sale after Default. Upon the occurrence
and during the continuance of a Pledge Agreement Default, subject to compliance
with applicable law, the Agent, on behalf of itself and the Lenders, may sell,
without recourse to judicial proceedings, with the right to bid for and buy, the
Collateral or any part thereof, upon ten days' notice (which notice is agreed to
be reasonable notice for the purposes hereof) to the Pledgor of the time and
place of sale, for cash, upon credit or for future delivery, at the Agent's
option and in the Agent's complete discretion:
(i) At public sale, including a sale at any broker's board or
exchange;
(ii) At private sale in any commercially reasonable manner
which will not require the Collateral, or any part thereof, to
be registered in accordance with the Securities Act of 1933,
as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation. The Agent and each
Lender are also hereby authorized, but not obligated, to take
such actions, give such notices, obtain such consents, and do
such other things as they may deem required or appropriate in
the event of sale or disposition of any of the Collateral, and
the Pledgor agrees that neither the Agent nor any Lender shall
be liable or accountable to the Pledgor for any discount
allowed by reason of the fact that such Collateral is sold in
compliance with any applicable limitation or restriction of
any governmental regulatory authority or official. The Pledgor
understands that the Agent, on behalf of itself and the
Lenders, may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances
may yield a lower price for the Collateral, or any portion
thereof, than would otherwise be obtainable if the same were
registered and sold in the open market. Any such private sale
shall not by reason thereof be deemed not to have been made in
a commercially reasonable manner. In the event of any such
sale under the circumstances described in this Section
7(b)(ii), neither the Agent nor any Lender shall incur any
responsibility or liability
26
<PAGE> 27
for selling the whole or any part of the Collateral at a price
which the Agent may deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher
price might be realized if any such sale were a public sale.
The Pledgor agrees that in the event the Agent shall so sell
the Collateral, or any portion thereof, at such private sale
or sales, the Agent and the Lenders shall have the right to
rely upon the advice and opinion of any Person who regularly
deals in or evaluates stock of the type constituting the
Collateral as to the price obtainable in a commercially
reasonable manner upon such a private sale thereof.
In the case of any sale by the Agent on behalf of itself and
the Lenders of the Collateral on credit or for future delivery, the Collateral
sold may be retained by the Agent until the selling price is paid by the
purchaser, but neither the Agent nor any Lender shall incur liability in case of
failure of the purchaser to take up and pay for the Collateral so sold.
In connection with the sale of any of the Collateral, the
Agent and the Lenders are authorized, but not obligated, to limit prospective
purchasers to the extent deemed necessary or desirable by the Agent and the
Lenders to render such sale exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities laws. In
the event that, in the opinion of the Agent and the Lenders, it is necessary or
advisable to have such securities registered under the provisions of such Act,
or any similar law relating to the registration of securities, the Pledgor
agrees, at its own expense, to (i) execute and deliver all such instruments and
documents, and to do or cause to be done such other acts and things, as may be
necessary or, in the opinion of the Agent, advisable, to register such
securities under the provisions of such Act or any applicable similar law
relating to the registration of securities, and the Pledgor will use its best
efforts to cause the registration statement relating thereto to become effective
and to remain effective for such period as the Agent shall reasonably request,
and to make all amendments thereof and/or to the related prospectus which, in
the opinion of the Agent, are necessary or desirable, all in conformity with the
requirements of such Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto; (ii) use its best efforts to qualify
such securities under state "blue sky" or securities laws, all as reasonably
requested by the Agent; (iii) at the request of the Agent, indemnify and hold
harmless the Lenders, the Agent, any underwriters, employees, officers, agents,
attorneys and accountants (collectively, the "Indemnified
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<PAGE> 28
Parties") from and against any loss, liability, claim, damage, and expense
(including, without limitation, reasonable fees of counsel incurred in
connection therewith) under such Act or otherwise, insofar as such loss,
liability, claim, damage, or expense arises out of or is based upon any untrue
statement or alleged untrue statement of any material fact furnished by the
Pledgor contained in any registration statement under which such securities were
registered under such Act or other securities laws, any preliminary prospectus
or final prospectus contained therein, or arise out of or are based upon any
omission or alleged omission by the Pledgor to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, such indemnification to remain operative regardless of any
investigation made by or on behalf of any Indemnified Party; (iv) cause each
such issuer to make available to its security holders, as soon as practicable,
an earnings statement that will satisfy the provisions of Section 11(a) of such
Act; and (v) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
(c) Other Rights after a Default. Upon the occurrence
and during the continuance of a Default, the Agent, on behalf of itself and the
Lenders, may exercise any and all rights available to secured parties under the
Uniform Commercial Code as enacted in the State of Illinois or other applicable
jurisdiction, as amended, in addition to any and all other rights afforded at
law, in equity, or otherwise.
(d) Application of Proceeds. The Agent shall apply
the proceeds of the Collateral, including the proceeds of any sales or other
disposition of the Collateral, or any part thereof, under this Section 7, in the
following order unless a court of competent jurisdiction shall otherwise direct:
(i) FIRST, to payment of all reasonable costs and expenses of
the Agent and the Lenders incurred in connection with the
collection and enforcement of the security interest granted to
the Agent and the Lenders pursuant to this Pledge Agreement,
including all costs and expenses of any sale pursuant hereto,
and of any judicial or private proceedings in which such sale
may be made, and of all other expenses, liabilities and
advances made or incurred by the Agent, the Lenders and the
agents and attorneys of each of them in connection therewith,
together with interest at a rate per annum equal to the
Floating
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<PAGE> 29
Rate plus two percent (2%) per annum (unless the Lenders shall
determine otherwise) on such costs, expenses and liabilities
and on all advances made by the Agent or any Lender from the
date any such cost, expense or liability is due, owing or
unpaid or any such advance is made, in each case until paid in
full;
(ii) SECOND, to payment of that portion of the Obligations
constituting accrued and unpaid interest, fees and other
amounts (other than principal), pro rata amongst each Lender
and the Agent in accordance with the proportion which the
accrued interest, fees and other amounts (other than
principal) constituting Obligations owing to each such Lender
or Agent bears to the aggregate amount of accrued interest,
fees and other amounts (other than principal) constituting
Obligations owing to all of the Lenders and the Agent,
together with interest owing thereon until paid in full;
(iii) THIRD, to payment of the principal of the Obligations
and net termination amounts payable in respect of the Rate
Hedging Obligations owing to the Lenders or any Lender,
together with interest on such unpaid principal and net
termination amounts until paid in full; and
(iv) FOURTH, the balance, if any, after all of the Obligations
have been satisfied, shall be remitted as required by law.
(e) Governance. All rights and remedies available to
the Agent and the Lenders with respect to the grant, foreclosure and enforcement
of the security interest and lien granted hereby and with respect to any action
permitted hereunder may be exercised solely by the Agent acting with the
concurrence of the Required Lenders.
16. Miscellaneous.
(a) Term. This Pledge Agreement and the lien arising
hereunder (i) shall become effective as of the date hereof upon the execution
hereof, and (ii) shall continue in force until no Obligations to the Agent or
any of the Lenders shall be outstanding and the Commitments shall have been
indefeasibly terminated.
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<PAGE> 30
If no Obligations remain outstanding and the Commitments have been indefeasibly
terminated, the Agent, at the request and sole expense of the Pledgor, shall
execute and deliver such documents and instruments as may be necessary to
evidence such termination and release.
(b) Releases; Partial Releases. Any cash dividends
received by the Pledgor in accordance with the terms of Section 7(a)(i) hereof,
and all distributions received by the Pledgor upon the merger or liquidation of
the Subsidiaries of the Pledgor with or into the Pledgor in accordance with
Section 6.12 of the Credit Agreement, shall be deemed released from the lien of
this Pledge Agreement and shall be held by the Pledgor (or any transferee of the
Pledgor) free and clear of the lien created by this Pledge Agreement. Upon
termination of this Pledge Agreement in accordance with the provisions of
Section 8(a) hereof, the Agent and the Lenders shall, at the Pledgor's request
and expense and subject to the foregoing sentence, execute such releases as the
Pledgor may reasonably request, in form and upon terms acceptable to the Agent
and the Lenders in all respects, and shall deliver, without any representations,
warranties or recourse of any kind whatsoever (other than the representation and
warranty that such property is free and clear of Liens created by the Agent and
the Lenders), all certificates representing the Pledged Stock and other property
held in respect thereof hereunder which is in the Agent's possession, together
with all stock powers or other instruments of transfer reasonably required to
effect delivery to the Pledgor.
(c) Waivers. Except to the extent expressly otherwise
provided herein or in any Loan Document, the Pledgor waives, to the extent
permitted by applicable law, (i) any right to require the Agent or any Lender to
proceed against any other person, to exhaust their rights in any other
collateral, or to pursue any other right which either the Agent or any Lender
may have, (ii) with respect to the Obligations, presentment and demand for
payment, protest, notice of protest and non-payment, and notice of the intention
to accelerate, and (iii) all rights of marshalling in respect of any and all of
the Collateral.
(d) Financing Statement. The Agent, on behalf of
itself and the Lenders, shall be entitled at any time to file this Pledge
Agreement or a carbon, photographic, or other reproduction of this Pledge
Agreement, as a financing statement, but the failure of the Agent to do so shall
not impair the validity or enforceability of this Pledge Agreement.
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<PAGE> 31
(e) Survival of Representations. All representations
and warranties of the Pledgor contained in this Pledge Agreement shall survive
the execution and delivery of this Pledge Agreement.
(f) Taxes and Expenses. The Pledgor will upon demand
pay to the Agent, on behalf of the Lenders, (a) any taxes (excluding income
taxes, franchise taxes or other taxes levied on gross earnings, profits or the
like) payable or ruled payable by any Federal or State authority in respect of
this Pledge Agreement, together with interest and penalties, if any, and (b) all
reasonable expenses, including the reasonable fees and expenses of counsel for
the Agent and each Lender (which may be employees of the Agent or such Lender)
and of any experts and agents that the Agent or the Lenders may incur in
connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent or the Lenders hereunder, or (iv) the failure of
the Pledgor to perform or observe any of the provisions hereof.
(g) Headings. The title of and section headings in
this Pledge Agreement are for convenience of reference only, and shall not
govern the interpretation of any of the terms and provisions of this Pledge
Agreement.
(h) Agent Appointed Attorney-In-Fact. The Pledgor
hereby irrevocably appoints the Agent as the Pledgor's attorney-in-fact, with
full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Agent's discretion reasonably
exercised, to take any and all action and to execute any and all documents and
instruments that the Agent deems reasonably necessary or advisable to accomplish
the purposes of this Pledge Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the Pledgor
representing any dividend or other distribution in respect of the Pledged Stock
or any part thereof and to give full discharge for the same, when and to the
extent permitted by this Pledge Agreement. All powers, authorizations and
agencies contained in this Pledge Agreement are coupled with an interest and are
irrevocable until this Pledge Agreement is terminated and the security interests
created hereby are released in accordance with the terms hereof.
(i) Entire Agreement. This Pledge Agreement, the
Credit Agreement and the other Loan Documents embody the entire agreement and
understanding among the Pledgor, the Agent and the Lenders and supersede all
prior oral and written agreements and understandings among the Pledgor, the
Agent and the
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<PAGE> 32
Lenders relating to the subject hereof. The terms of this Pledge Agreement shall
govern the Collateral pledged hereunder exclusively.
(j) Amendments. This Pledge Agreement may be amended
only by an instrument in writing executed jointly by the Pledgor and the Agent,
with the consent of the Required Lenders and supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.
(k) GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD
TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
(l) CONSENT TO JURISDICTION. THE PLEDGOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT AND THE PLEDGOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST THE PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE PLEDGOR AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS PLEDGE
AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS; PROVIDED, THAT
SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION MAY NOT BE
OBTAINED IN A COURT IN CHICAGO, ILLINOIS.
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<PAGE> 33
(m) WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE
AGENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS PLEDGE AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER.
(n) Parties Bound; Assignment. This Pledge Agreement
shall be binding on the Pledgor and its successors and assigns and shall inure
to the benefit of the Agent and the Lenders and their respective successors and
assigns, except that the Pledgor shall not have the right to assign its rights
or obligations under this Pledge Agreement or any interest herein, without the
prior written consent of the Agent.
(o) Notices. Any notice required or permitted to be
given under this Pledge Agreement shall be in writing and may be, and shall be
deemed, given, if mailed and properly addressed return receipt requested, three
days after the date when deposited in the United States mail, first-class,
postage prepaid, or if by personal delivery, overnight courier, or by telecopy,
when received, addressed to the Pledgor or, to the Agent at the address
indicated below their respective signatures hereto and to the Lenders at the
addresses indicated below their respective signatures to the Credit Agreement.
Each of the Pledgor, the Agent and the Lenders may change the address for
service of notice upon it by a notice in writing to the other parties hereto.
(p) Counterparts. This Pledge Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute this Pledge
Agreement by signing any such counterpart. This Pledge Agreement shall be
effective when it has been executed by the Pledgor and the Agent.
(q) Loan Document. This Pledge Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
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<PAGE> 34
(r) Section Captions. Section captions used in this
Pledge Agreement are for convenience of reference only and shall not affect the
construction of this Pledge Agreement.
(s) Severability. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
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<PAGE> 35
IN WITNESS WHEREOF, the undersigned have executed this Pledge Agreement
as of the date first above written.
SCOTSMAN GROUP INC.
/s/ Richard C. Osborne
By: /s/ Richard C. Osborne
------------------------------------
Title: /s/ Vice President
---------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, IL 60061
Attn: Donald D. Holmes
Telephone: (847) 215-4447
Facsimile: (847) 634-8823
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
/s/ Jacqueline Hopkins
By: /s/ Jacqueline Hopkins
------------------------------------
Title: /s/ Authorized Agent
---------------------------------
Address: One First National Plaza
Chicago, IL 60670
Attn: Julia Bristow
Telephone: (312) 732-5927
Facsimile: (312) 732-1117
<PAGE> 36
SCHEDULE I TO STOCK PLEDGE AGREEMENT
LIST OF PLEDGED STOCK
<TABLE>
<CAPTION>
Issuer Type of Certificate Number Percentage
------ ------- ----------- ------ ----------
Pledged Stock Number of Shares Interest
------------- ------ --------- --------
<S> <C> <C> <C> <C>
DFC Holding Corporation Common R-1 100 100%
Booth, Inc. Common R-1 1000 100%
Kysor Industrial Corporation Common 1 100 100%
</TABLE>
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<PAGE> 37
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is executed as of
December 15, 1997 by and between DFC Holding Corporation ("Pledgor") and The
First National Bank of Chicago, as Agent.
W I T N E S S E T H:
WHEREAS, Scotsman Group Inc., certain other borrowers named therein,
Scotsman Industries, Inc., the lenders parties thereto (the "Lenders") and The
First National Bank of Chicago, as Agent, have entered into that certain Credit
Agreement, dated as of March 12, 1997, as amended by that certain First
Amendment to Credit Agreement, dated as of March 24, 1997, that certain Second
Amendment to Credit Agreement, dated as of June 30, 1997 and that certain Third
Amendment to Credit Agreement, dated as of December 15, 1997 (the "Third
Amendment")(as amended and as further amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"); and
WHEREAS, the execution and delivery of this Pledge Agreement by the
Pledgor is a condition precedent to the effectiveness of the Third Amendment.
NOW THEREFORE, in order to induce the Agent and the Lenders to enter
into the Third Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
17. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
18. Pledge and Security Interest. In order to secure the full
and complete payment and performance of the Obligations when due, the Pledgor
hereby
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<PAGE> 38
pledges and grants to the Agent for the benefit of the Agent and the Lenders,
equally and ratably in proportion to the total Obligations owing at any time to
the Agent and the Lenders, a continuing lien and security interest in (a) all of
the outstanding shares of capital stock of each Subsidiary of the Pledgor owned
by the Pledgor which is designated on Schedule I hereto, including, without
limitation, the shares listed on Schedule I hereto (the "Pledged Stock"), (b)
any securities, dividends or other distributions and any other right or property
at any time and from time to time receivable or otherwise distributed in respect
of or in exchange for any or all of the Pledged Stock and any other property
substituted or exchanged therefor, and (c) any and all proceeds (including,
without limitation, "Proceeds" as defined in the Uniform Commercial Code as in
effect from time to time in the State of Illinois) of, and substitutions and
replacements for, the foregoing (all of the property and rights described in the
foregoing clauses (a) through (c) being herein collectively called the
"Collateral").
19. Deposit of Certificates for Pledged Stock. The Pledgor
shall deliver to the Agent, for the equal and ratable benefit of the Agent and
the Lenders, concurrently with the execution of this Pledge Agreement, the
certificates representing the Pledged Stock, endorsed in blank or accompanied by
appropriate instruments of transfer or assignments in blank. The Agent shall not
have any duty to assure that all certificates representing the Pledged Stock
have been delivered to it or any obligation whatsoever with respect to the care,
custody or protection of any certificates or instruments which may be delivered
to it except only to exercise the same care in physically safekeeping such
certificates or instruments as it would exercise in the ordinary course of its
own business. Neither the Agent nor any Lender shall be obligated to preserve or
protect any rights with respect to the Pledged Stock or to receive or give any
notice with respect thereto whether or not the Agent or any Lender is deemed to
have knowledge of such matters. Concurrently with the execution and delivery of
this Pledge Agreement and the certificates delivered pursuant to this Section 3,
the Pledgor shall deliver to the Agent a certificate executed by an Authorized
Officer of the Pledgor certifying (a) a copy of its good standing certificate,
issued by the Secretary of State of its jurisdiction of incorporation (as
applicable) and certified by such Secretary not more than 5 days prior to the
Pledgor's execution and delivery of this Pledge Agreement, (b) copies of its
charter and bylaws or other organizational documents, (c) resolutions of its
board of directors authorizing the execution and delivery by the Pledgor of this
Pledge Agreement and the performance of its obligations hereunder and (d) the
incumbency and signatures of the officers of the Pledgor authorized to execute
this Pledge Agreement on behalf of the Pledgor.
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<PAGE> 39
20. Representations and Warranties. The Pledgor represents and
warrants to the Agent and each Lender as of the date of each pledge and delivery
hereunder that:
(a) Existence and Standing. Each of the Pledgor and
its Subsidiaries is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
(b) Authorization, Validity and Enforceability. The
execution and delivery by the Pledgor of this Pledge Agreement have been duly
authorized by proper corporate proceedings, and this Pledge Agreement
constitutes a legal, valid and binding obligation of the Pledgor and creates a
security interest which is enforceable against the Pledgor in accordance with
its terms in respect of all now owned and hereafter acquired Collateral, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity. All of the shares of the Pledged Stock are duly authorized, validly
issued, fully paid and nonassessable.
(c) Transferability; Title Matters. The Collateral is
free and clear of all liens, options, warrants, puts, calls, or other rights of
third persons, and restrictions, other than (i) those liens arising under this
Pledge Agreement, and (ii) restrictions on transferability imposed by applicable
state and Federal securities laws. The Pledgor agrees to warrant and defend
title to and ownership of the Pledged Stock and the lien created by this Pledge
Agreement against the claims of all Persons and maintain and preserve such lien
at all times during the term of this Pledge Agreement. Upon the delivery to the
Agent of the Pledged Stock, the security interests in the Pledged Stock granted
to the Agent hereunder will constitute first priority perfected security
interests therein subject to no other Liens.
(d) Ownership of Pledged Stock. The Pledgor is the
holder of record and the sole beneficial owner of 100% of the issued and
outstanding voting capital stock of each Subsidiary of the Pledgor identified on
Schedule I hereto. The capital stock of each such Subsidiary of the Pledgor
owned by the Pledgor is identified on Schedule I hereto.
(e) Title and Power to Pledge the Collateral. The
Pledgor has good and marketable title to the Collateral and has all requisite
rights, power, and authority to execute, deliver and comply with the terms of
this Pledge Agreement
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<PAGE> 40
and to pledge and deliver the Collateral to the Agent pursuant hereto. No
material authorization, consent or approval of, and no notice to or filing with,
any person or government agency is required in connection with the execution,
delivery and performance of this Pledge Agreement which has not been obtained.
(f) Chief Executive Office. The Pledgor's principal
place of business and chief executive office is located at 980 S. Isabella Road,
Mt. Pleasant, Michigan 48858 or such other location notified to the Agent in
accordance with Section 5(e) hereof.
21. Covenants. So long as any Obligations remain outstanding,
the Pledgor covenants and agrees with the Agent and the Lenders as follows:
(a) Pledge and Additional Stock. If the Pledgor shall
at any time (i) acquire any additional shares of the capital stock of any class
of the Pledged Stock of any Subsidiary of the Pledgor identified on Schedule I
hereto or any option, warrant or other right with respect thereto, whether such
acquisition shall be by purchase, exchange, reclassification, dividend, or
otherwise or (ii) desire to pledge 100% of the issued and outstanding voting
capital stock of any Subsidiary of the Pledgor not already pledged pursuant to
the terms of this Pledge Agreement, the Pledgor shall, (in the case of clause
(i) only) to the extent doing so would not violate applicable law, in each case
forthwith (and without the necessity for any request or demand by the Agent or
any Lender) pledge and deliver the certificates representing such shares to the
Agent, in the same manner as described in Section 3 hereof and shall promptly
thereafter deliver to the Agent a certificate (which shall, with the consent of
the Agent, be deemed to supplement Schedule I attached hereto) executed by an
Authorized Officer of the Pledgor describing such Pledged Stock and certifying
that the same has been duly pledged with the Agent hereunder. Any such
additional shares shall constitute part of the Pledged Stock. Nothing contained
in this Section 5(a) shall be deemed to permit any stock dividend, issuance of
additional stock, warrants, rights or options, reclassification, readjustment or
other change in the capital structure of any Subsidiary of the Pledgor that is
not expressly permitted in the Credit Agreement.
(b) Applications, Approvals and Consents. The Pledgor
will, at its expense, promptly execute and deliver, or cause the execution and
delivery of, all applications, certificates, instruments, registration
statements, and all other documents and papers that the Agent may reasonably
request in connection with the obtaining of any consent, approval, registration,
qualification, or
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<PAGE> 41
authorization of any Person necessary or appropriate for the effective exercise
of any rights under this Pledge Agreement. Without limiting the generality of
the foregoing, the Pledgor agrees that in the event the Agent on behalf of
itself and the Lenders shall exercise its right to sell, transfer, or otherwise
dispose of or take any other action in connection with any of the Collateral
pursuant to this Pledge Agreement, the Pledgor shall execute and deliver all
applications, certificates, and other documents that the Agent may reasonably
request and shall otherwise promptly, fully, and diligently cooperate with the
Agent and any other necessary Persons, in making any application for the prior
consent or approval of any Person to the exercise by the Agent or the Lenders of
any of such rights relating to all or any part of the Collateral. Furthermore,
because the Pledgor agrees that the Agent's and the Lenders' remedy at law for
failure of the Pledgor to comply with the provisions of this Section 5(b) would
be inadequate and that such failure would not be adequately compensable in
damages, the Pledgor agrees that the covenants of this Section 5(b) may be
specifically enforced.
(c) Security Interest and Lien. The Pledgor will
preserve, warrant, and defend title to and ownership of the Pledged Stock and
the lien created hereby in the Collateral against the claims of all Persons
whomsoever and maintain and preserve such lien at all times during the term of
this Pledge Agreement; will not at any time sell, assign, transfer or otherwise
dispose of its right, title and interest in and to any of the Collateral except
as permitted under the Credit Agreement; will not at any time, directly or
indirectly, create, assume, or suffer to exist any lien, warrant, put, option,
or other rights of third Persons and restrictions, other than the liens created
by this Pledge Agreement, in and to the Collateral or any part thereof; and will
not do or suffer any matter or thing whereby the lien created by this Pledge
Agreement in and to the Collateral might or could be impaired.
(d) Further Assurances. The Pledgor, at its expense,
shall from time to time execute and deliver to the Agent all such other
assignments, certificates, supplemental documents, and financing statements, and
shall do all other acts or things as the Agent may reasonably request in order
to more fully create, evidence, perfect, continue, and preserve the priority of
the lien herein created or to otherwise obtain the full benefits of this Pledge
Agreement.
(e) Change of Name, Corporate Structure, Chief
Executive Office. The Pledgor shall not change its name, identity or corporate
structure (within the meaning of Section 9-402(7) of any applicable enactment of
the
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<PAGE> 42
Uniform Commercial Code) or relocate its chief executive office unless it shall
have (i) given the Agent at least 45 days prior written notice thereof and (ii)
delivered to the Agent all financing statements, instruments and other documents
requested by the Agent or the Lenders in connection with such change or
relocation.
22. Defaults under this Pledge Agreement. There shall be a
"default" (hereinafter a "Pledge Agreement Default") under this Pledge Agreement
upon the occurrence of any of the following:
(a) This Pledge Agreement shall fail to remain in
full force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of this Pledge Agreement; or
(b) The Pledgor shall fail to comply with any of the
terms or provisions of this Pledge Agreement or denies that it has any further
liability under this Pledge Agreement, or gives notice to such effect; or
(c) A "Default" under and as defined in the Credit
Agreement occurs and is continuing.
23. Rights of the Pledgor, the Agent and the Lenders.
(a) Exercise of Stockholder Rights.
(i) Unless and until a Pledge Agreement Default shall occur
and be continuing, the Pledgor shall be entitled to receive
all cash dividends or other distributions on the Pledged Stock
(if and to the extent such dividends or distributions are
permitted by the terms of the Credit Agreement) except (A)
distributions made in capital stock on the Pledged Stock
resulting from stock dividends on or subdivision, combination,
or reclassification of the outstanding capital stock of any
corporation or as a result of any merger, consolidation,
acquisition or other exchange of assets of any corporation;
and (B) all sums paid on any Pledged Stock upon liquidation or
dissolution or reduction of capital, repurchase, retirement,
or redemption. All such sums, dividends, distributions,
proceeds, or property described in the immediately preceding
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<PAGE> 43
clauses (A) and (B) shall, if received by any Person other
than the Agent, be held in trust for the benefit of the Agent
and the Lenders and shall forthwith be delivered to the Agent
for the benefit of the Agent and the Lenders (accompanied by
proper instruments or assignment and/or undated stock powers
executed by the Pledgor in accordance with the Agent's
instructions) to be held subject to the terms of this Pledge
Agreement. Upon the occurrence of a Pledge Agreement Default,
the Agent, for the benefit of the Agent and the Lenders, shall
be entitled to receive all payments of whatever kind made upon
or with respect to any Collateral. The relative rights of the
Agent and the Lenders to receive such payments shall be in
proportion to the relative amounts of all Obligations owing to
the Agent and any Lender and the aggregate amount of all
Obligations then outstanding.
(ii) Unless a Pledge Agreement Default has occurred and is
continuing, the Pledgor shall have the sole and exclusive
right to vote and give consents with respect to all the
Collateral and to consent to, ratify, or waive notice of any
and all meetings. Upon the occurrence and during the
continuance of a Pledge Agreement Default, subject to
compliance with applicable law, the Agent or the Agent's
nominee, on behalf of itself and the Lenders, shall have the
right at the Agent's or such nominee's option and after it
gives notice to the Pledgor (A) to exercise all voting powers
pertaining to the Collateral, including the right to take
action by shareholder consent and to consent in advance to any
vote proposed to be cast by the Pledgor with respect to any
merger, consolidation, liquidation or reorganization of any
Subsidiary of the Pledgor and, in connection therewith, to
join in and become a party to any plan of recapitalization,
reorganization, or readjustment (whether voluntary or
involuntary) as shall seem desirable to the Agent, on behalf
of itself and the Lenders, to protect or further their
interests in respect of the Collateral, (B) to deposit the
Collateral under any such plan, and (C) to make any exchange,
substitution, cancellation, or surrender of the Collateral
required by any such plan and to take such action with respect
to the
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<PAGE> 44
Collateral as may be required by any such plan or for the
accomplishment thereof; and no such disposition, exchange,
substitution, cancellation, or surrender shall be deemed to
constitute a release of the Collateral from the lien of this
Pledge Agreement.
(b) Right of Sale after Default. Upon the occurrence
and during the continuance of a Pledge Agreement Default, subject to compliance
with applicable law, the Agent, on behalf of itself and the Lenders, may sell,
without recourse to judicial proceedings, with the right to bid for and buy, the
Collateral or any part thereof, upon ten days' notice (which notice is agreed to
be reasonable notice for the purposes hereof) to the Pledgor of the time and
place of sale, for cash, upon credit or for future delivery, at the Agent's
option and in the Agent's complete discretion:
(i) At public sale, including a sale at any broker's board or
exchange;
(ii) At private sale in any commercially reasonable manner
which will not require the Collateral, or any part thereof, to
be registered in accordance with the Securities Act of 1933,
as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation. The Agent and each
Lender are also hereby authorized, but not obligated, to take
such actions, give such notices, obtain such consents, and do
such other things as they may deem required or appropriate in
the event of sale or disposition of any of the Collateral, and
the Pledgor agrees that neither the Agent nor any Lender shall
be liable or accountable to the Pledgor for any discount
allowed by reason of the fact that such Collateral is sold in
compliance with any applicable limitation or restriction of
any governmental regulatory authority or official. The Pledgor
understands that the Agent, on behalf of itself and the
Lenders, may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances
may yield a lower price for the Collateral, or any portion
thereof, than would otherwise be obtainable if the same were
registered and sold in the open market. Any such private sale
shall not by reason thereof be deemed not
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<PAGE> 45
to have been made in a commercially reasonable manner. In the
event of any such sale under the circumstances described in
this Section 7(b)(ii), neither the Agent nor any Lender shall
incur any responsibility or liability for selling the whole or
any part of the Collateral at a price which the Agent may deem
reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be
realized if any such sale were a public sale. The Pledgor
agrees that in the event the Agent shall so sell the
Collateral, or any portion thereof, at such private sale or
sales, the Agent and the Lenders shall have the right to rely
upon the advice and opinion of any Person who regularly deals
in or evaluates stock of the type constituting the Collateral
as to the price obtainable in a commercially reasonable manner
upon such a private sale thereof.
In the case of any sale by the Agent on behalf of itself and
the Lenders of the Collateral on credit or for future delivery, the Collateral
sold may be retained by the Agent until the selling price is paid by the
purchaser, but neither the Agent nor any Lender shall incur liability in case of
failure of the purchaser to take up and pay for the Collateral so sold.
In connection with the sale of any of the Collateral, the
Agent and the Lenders are authorized, but not obligated, to limit prospective
purchasers to the extent deemed necessary or desirable by the Agent and the
Lenders to render such sale exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities laws. In
the event that, in the opinion of the Agent and the Lenders, it is necessary or
advisable to have such securities registered under the provisions of such Act,
or any similar law relating to the registration of securities, the Pledgor
agrees, at its own expense, to (i) execute and deliver all such instruments and
documents, and to do or cause to be done such other acts and things, as may be
necessary or, in the opinion of the Agent, advisable, to register such
securities under the provisions of such Act or any applicable similar law
relating to the registration of securities, and the Pledgor will use its best
efforts to cause the registration statement relating thereto to become effective
and to remain effective for such period as the Agent shall reasonably request,
and to make all amendments thereof and/or to the related prospectus which, in
the opinion of the Agent, are necessary or desirable, all in conformity with the
requirements of such Act and the rules and regulations of the Securities and
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<PAGE> 46
Exchange Commission applicable thereto; (ii) use its best efforts to qualify
such securities under state "blue sky" or securities laws, all as reasonably
requested by the Agent; (iii) at the request of the Agent, indemnify and hold
harmless the Lenders, the Agent, any underwriters, employees, officers, agents,
attorneys and accountants (collectively, the "Indemnified Parties") from and
against any loss, liability, claim, damage, and expense (including, without
limitation, reasonable fees of counsel incurred in connection therewith) under
such Act or otherwise, insofar as such loss, liability, claim, damage, or
expense arises out of or is based upon any untrue statement or alleged untrue
statement of any material fact furnished by the Pledgor contained in any
registration statement under which such securities were registered under such
Act or other securities laws, any preliminary prospectus or final prospectus
contained therein, or arise out of or are based upon any omission or alleged
omission by the Pledgor to state therein a material fact required to be stated
or necessary to make the statements therein not misleading, such indemnification
to remain operative regardless of any investigation made by or on behalf of any
Indemnified Party; (iv) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of such Act; and (v) do or cause to be done all such
other acts and things as may be necessary to make such sale of the Collateral or
any part thereof valid and binding and in compliance with applicable law.
(c) Other Rights after a Default. Upon the occurrence
and during the continuance of a Default, the Agent, on behalf of itself and the
Lenders, may exercise any and all rights available to secured parties under the
Uniform Commercial Code as enacted in the State of Illinois or other applicable
jurisdiction, as amended, in addition to any and all other rights afforded at
law, in equity, or otherwise.
(d) Application of Proceeds. The Agent shall apply
the proceeds of the Collateral, including the proceeds of any sales or other
disposition of the Collateral, or any part thereof, under this Section 7, in the
following order unless a court of competent jurisdiction shall otherwise direct:
(i) FIRST, to payment of all reasonable costs and expenses of
the Agent and the Lenders incurred in connection with the
collection and enforcement of the security interest granted to
the Agent and the Lenders pursuant to this Pledge Agreement,
including all costs and expenses of any sale
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<PAGE> 47
pursuant hereto, and of any judicial or private proceedings in
which such sale may be made, and of all other expenses,
liabilities and advances made or incurred by the Agent, the
Lenders and the agents and attorneys of each of them in
connection therewith, together with interest at a rate per
annum equal to the Floating Rate plus two percent (2%) per
annum (unless the Lenders shall determine otherwise) on such
costs, expenses and liabilities and on all advances made by
the Agent or any Lender from the date any such cost, expense
or liability is due, owing or unpaid or any such advance is
made, in each case until paid in full;
(ii) SECOND, to payment of that portion of the Obligations
constituting accrued and unpaid interest, fees and other
amounts (other than principal), pro rata amongst each Lender
and the Agent in accordance with the proportion which the
accrued interest, fees and other amounts (other than
principal) constituting Obligations owing to each such Lender
or Agent bears to the aggregate amount of accrued interest,
fees and other amounts (other than principal) constituting
Obligations owing to all of the Lenders and the Agent,
together with interest owing thereon until paid in full;
(iii) THIRD, to payment of the principal of the Obligations
and net termination amounts payable in respect of the Rate
Hedging Obligations owing to the Lenders or any Lender,
together with interest on such unpaid principal and net
termination amounts until paid in full; and
(iv) FOURTH, the balance, if any, after all of the Obligations
have been satisfied, shall be remitted as required by law.
(e) Governance. All rights and remedies available to
the Agent and the Lenders with respect to the grant, foreclosure and enforcement
of the security interest and lien granted hereby and with respect to any action
permitted hereunder may be exercised solely by the Agent acting with the
concurrence of the Required Lenders.
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<PAGE> 48
24. Miscellaneous.
(a) Term. This Pledge Agreement and the lien arising
hereunder (i) shall become effective as of the date hereof upon the execution
hereof, and (ii) shall continue in force until no Obligations to the Agent or
any of the Lenders shall be outstanding and the Commitments shall have been
indefeasibly terminated. If no Obligations remain outstanding and the
Commitments have been indefeasibly terminated, the Agent, at the request and
sole expense of the Pledgor, shall execute and deliver such documents and
instruments as may be necessary to evidence such termination and release.
(b) Releases; Partial Releases. Any cash dividends
received by the Pledgor in accordance with the terms of Section 7(a)(i) hereof,
and all distributions received by the Pledgor upon the merger or liquidation of
the Subsidiaries of the Pledgor with or into the Pledgor in accordance with
Section 6.12 of the Credit Agreement, shall be deemed released from the lien of
this Pledge Agreement and shall be held by the Pledgor (or any transferee of the
Pledgor) free and clear of the lien created by this Pledge Agreement. Upon
termination of this Pledge Agreement in accordance with the provisions of
Section 8(a) hereof, the Agent and the Lenders shall, at the Pledgor's request
and expense and subject to the foregoing sentence, execute such releases as the
Pledgor may reasonably request, in form and upon terms acceptable to the Agent
and the Lenders in all respects, and shall deliver, without any representations,
warranties or recourse of any kind whatsoever (other than the representation and
warranty that such property is free and clear of Liens created by the Agent and
the Lenders), all certificates representing the Pledged Stock and other property
held in respect thereof hereunder which is in the Agent's possession, together
with all stock powers or other instruments of transfer reasonably required to
effect delivery to the Pledgor.
(c) Waivers. Except to the extent expressly otherwise
provided herein or in any Loan Document, the Pledgor waives, to the extent
permitted by applicable law, (i) any right to require the Agent or any Lender to
proceed against any other person, to exhaust their rights in any other
collateral, or to pursue any other right which either the Agent or any Lender
may have, (ii) with respect to the Obligations, presentment and demand for
payment, protest, notice of protest and non-payment, and notice of the intention
to accelerate, and (iii) all rights of marshalling in respect of any and all of
the Collateral.
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<PAGE> 49
(d) Financing Statement. The Agent, on behalf of
itself and the Lenders, shall be entitled at any time to file this Pledge
Agreement or a carbon, photographic, or other reproduction of this Pledge
Agreement, as a financing statement, but the failure of the Agent to do so shall
not impair the validity or enforceability of this Pledge Agreement. (e))
Survival of Representations. All representations and warranties of the Pledgor
contained in this Pledge Agreement shall survive the execution and delivery of
this Pledge Agreement.
(f) Taxes and Expenses. The Pledgor will upon demand
pay to the Agent, on behalf of the Lenders, (a) any taxes (excluding income
taxes, franchise taxes or other taxes levied on gross earnings, profits or the
like) payable or ruled payable by any Federal or State authority in respect of
this Pledge Agreement, together with interest and penalties, if any, and (b) all
reasonable expenses, including the reasonable fees and expenses of counsel for
the Agent and each Lender (which may be employees of the Agent or such Lender)
and of any experts and agents that the Agent or the Lenders may incur in
connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent or the Lenders hereunder, or (iv) the failure of
the Pledgor to perform or observe any of the provisions hereof.
(g) Headings. The title of and section headings in
this Pledge Agreement are for convenience of reference only, and shall not
govern the interpretation of any of the terms and provisions of this Pledge
Agreement.
(h) Agent Appointed Attorney-In-Fact. The Pledgor
hereby irrevocably appoints the Agent as the Pledgor's attorney-in-fact, with
full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Agent's discretion reasonably
exercised, to take any and all action and to execute any and all documents and
instruments that the Agent deems reasonably necessary or advisable to accomplish
the purposes of this Pledge Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the Pledgor
representing any dividend or other distribution in respect of the Pledged Stock
or any part thereof and to give full discharge for the same, when and to the
extent permitted by this Pledge Agreement. All powers, authorizations and
agencies contained in this Pledge
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<PAGE> 50
Agreement are coupled with an interest and are irrevocable until this Pledge
Agreement is terminated and the security interests created hereby are released
in accordance with the terms hereof.
(i) Entire Agreement. This Pledge Agreement, the
Credit Agreement and the other Loan Documents embody the entire agreement and
understanding among the Pledgor, the Agent and the Lenders and supersede all
prior oral and written agreements and understandings among the Pledgor, the
Agent and the Lenders relating to the subject hereof. The terms of this Pledge
Agreement shall govern the Collateral pledged hereunder exclusively.
(j) Amendments. This Pledge Agreement may be amended
only by an instrument in writing executed jointly by the Pledgor and the Agent,
with the consent of the Required Lenders and supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.
(k) GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD
TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
(l) CONSENT TO JURISDICTION. THE PLEDGOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT AND THE PLEDGOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST THE PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE PLEDGOR AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY
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OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS PLEDGE AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS; PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF
JURISDICTION MAY NOT BE OBTAINED IN A COURT IN CHICAGO, ILLINOIS.
(m) WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE
AGENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS PLEDGE AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER.
(n) Parties Bound; Assignment. This Pledge Agreement
shall be binding on the Pledgor and its successors and assigns and shall inure
to the benefit of the Agent and the Lenders and their respective successors and
assigns, except that the Pledgor shall not have the right to assign its rights
or obligations under this Pledge Agreement or any interest herein, without the
prior written consent of the Agent.
(o) Notices. Any notice required or permitted to be
given under this Pledge Agreement shall be in writing and may be, and shall be
deemed, given, if mailed and properly addressed return receipt requested, three
days after the date when deposited in the United States mail, first-class,
postage prepaid, or if by personal delivery, overnight courier, or by telecopy,
when received, addressed to the Pledgor or, to the Agent at the address
indicated below their respective signatures hereto and to the Lenders at the
addresses indicated below their respective signatures to the Credit Agreement.
Each of the Pledgor, the Agent and the Lenders may change the address for
service of notice upon it by a notice in writing to the other parties hereto.
(p) Counterparts. This Pledge Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute this Pledge
Agreement by signing any such counterpart. This Pledge Agreement shall be
effective when it has been executed by the Pledgor and the Agent.
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(q) Loan Document. This Pledge Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
(r) Section Captions. Section captions used in this
Pledge Agreement are for convenience of reference only and shall not affect the
construction of this Pledge Agreement.
(s) Severability. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
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<PAGE> 53
IN WITNESS WHEREOF, the undersigned have executed this Pledge Agreement
as of the date first above written.
DFC HOLDING CORPORATION
/s/ Richard C. Osborne
By: /s/ Richard C. Osborne
------------------------------------
Title: /s/ Vice President
---------------------------------
Address: 980 S. Isabella Road
Mt. Pleasant, MI 48858
with a copy to:
775 Corporate Woods Parkway
Vernon Hills, IL 60061
Attn: Donald D. Holmes
Telephone: (847) 215-4447
Facsimile: (847) 634-8823
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
/s/ Jacqueline Hopkins
By: /s/ Jacqueline Hopkins
------------------------------------
Title: /s/ Authorized Agent
---------------------------------
Address: One First National Plaza
Chicago, IL 60670
Attn: Julia Bristow
Telephone: (312) 732-5927
Facsimile: (312) 732-1117
<PAGE> 54
SCHEDULE I TO STOCK PLEDGE AGREEMENT
LIST OF PLEDGED STOCK
<TABLE>
<CAPTION>
Issuer Type of Certificate Number Percentage
------ ------- ----------- ------ ----------
Pledged Stock Number of Shares Interest
------------- ------ --------- --------
<S> <C> <C> <C> <C>
The Delfield Company Common 2 100 100%
</TABLE>
54
<PAGE> 1
EXHIBIT 10.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTSMAN GROUP INC.,
as Issuer
SCOTSMAN INDUSTRIES, INC.
as Guarantor
and
HARRIS TRUST AND SAVINGS BANK
as Trustee
INDENTURE
Dated as of December 17, 1997
8 5/8% Senior Subordinated Notes due 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Sections Indenture Sections
<TABLE>
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
Section 313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16; 12.02
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15; 12.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
Section 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04; 12.02
Section 316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to
be a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.03 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
The Notes
SECTION 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.02 Global Note Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.03 Execution, Authentication and Denominations . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.04 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.05 Payment Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.07 Book-Entry Provisions for Global Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12 CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.13 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE III
Redemption
SECTION 3.01 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.02 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.03 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.04 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.05 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.06 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.07 Payment of Notes Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.08 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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ARTICLE IV
<TABLE>
<S> <C> <C>
Covenants
SECTION 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.03 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.04 Limitation on Senior Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.05 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.06 Limitation on Restrictions on Distributions from Restricted Subsidiaries . . . . . . . . . . 39
SECTION 4.07 Limitation on the Sale or Issuance of Capital Stock and Indebtedness of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.08 Limitation on Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.09 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.10 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.11 Limitation on Sale/Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.12 Repurchase of Notes upon a Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.13 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.14 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.15 Notices of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.16 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.17 SEC Reports and Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.18 Waivers of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
Successor Corporation
SECTION 5.01 When Guarantor or Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.02 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
Default and Remedies
SECTION 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.07 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.12 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.13 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.14 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
Trustee
SECTION 7.01 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.02 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.03 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.04 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.05 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.06 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.07 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.08 Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.09 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.10 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII
Discharge of Indenture
SECTION 8.01 Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.02 Defeasance and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.03 Defeasance of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.04 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.05 Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.06 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.07 Parent Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
Amendments, Supplements and Waivers
SECTION 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.02 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.03 Renovation and Effect of Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.04 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.05 Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.06 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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ARTICLE X
<TABLE>
<S> <C> <C>
Subordination of Notes
SECTION 10.01 Notes Subordinated to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.02 No Payment on Notes in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 10.03 Payment over Proceeds upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 10.04 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.05 Obligations of Company Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.06 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.07 Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . 69
SECTION 10.08 Trustee's Relation to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.09 Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.10 Holders Authorize Trustee to Effectuate Subordination of Notes . . . . . . . . . . . . . . . 70
SECTION 10.11 Not to Prevent Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.12 Trustee's Compensation Not Prejudiced . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.13 No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.14 Payments May Be Paid Prior to Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.15 Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.16 Acceleration of Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.17 Consent of Designated Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XI
Parent Guarantee
SECTION 11.01 Parent Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.02 Parent Guarantee Subordinated to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.03 No Payment under Parent Guarantee in Certain Circumstances . . . . . . . . . . . . . . . . . 73
SECTION 11.04 Payment over Proceeds upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.05 Obligations of Guarantor Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.06 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.07 Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . 78
SECTION 11.08 Trustee's Relation to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.09 Subordination Rights Not Impaired by Acts or Omissions of the Guarantor or Holders of
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.10 Holders Authorize Trustee to Effectuate Subordination of Parent Guarantee . . . . . . . . . 79
SECTION 11.11 Not to Prevent Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.12 Trustee's Compensation Not Prejudiced . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 11.13 No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.14 Payments May Be Paid Prior to Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.15 Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.16 Limitation of Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.17 Release of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.18 Consent of Designated Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XII
Miscellaneous
SECTION 12.01 Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 12.03 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.04 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.05 Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 12.06 Rules by Trustee, Paying Agent or Registrar . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.07 Payment Date Other Than a Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.09 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.10 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 12.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 12.13 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 12.14 Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>
EXHIBIT A - FORM OF NOTE
v
<PAGE> 8
INDENTURE, dated as of December 17, 1997, between SCOTSMAN GROUP INC.,
a Delaware corporation, as Issuer (the "Company"), SCOTSMAN INDUSTRIES, INC, a
Delaware corporation, as Guarantor (the "Guarantor") and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, as Trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTOR
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $100,000,000 aggregate principal
amount of the Company's 8 5/8% Senior Subordinated Notes due 2007 (the "Notes")
issuable as provided in this Indenture. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done, and the Company has done all things necessary to make the Notes,
when executed by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, the valid obligations of the Company
as hereinafter provided.
The Guarantor has duly authorized the execution and delivery of this
Indenture and its guarantee of the Notes (the "Parent Guarantee"). All things
necessary to make this Indenture a valid agreement of the Company, in
accordance with its terms, have been done, and the Guarantor has done all
things necessary to make the Parent Guarantee, when executed by the Guarantor,
the valid obligation of the Guarantor as hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Acceleration Notice" has the meaning specified in Section 6.02.
1
<PAGE> 9
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Guarantor and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person (other than net income
(or loss) attributable to a Restricted Subsidiary) in which any Person (other
than the Guarantor or any of its Restricted Subsidiaries) has an ownership
interest and the net income (or loss) of any Unrestricted Subsidiary, except,
in each case, to the extent of the amount of dividends or other distributions
actually paid to the Guarantor or any of its Restricted Subsidiaries by such
other Person or such Unrestricted Subsidiary during such period; (ii) solely
for the purposes of calculating the amount of Restricted Payments that may be
made pursuant to clause (3)(A) of paragraph (a) of Section 4.05 (and in such
case, except to the extent includable pursuant to clause (i) above), the net
income (or loss) of any Person accrued prior to the date it becomes a
Restricted Subsidiary or is merged into or consolidated with the Guarantor or
any of its Restricted Subsidiaries or all or substantially all of the property
and assets of such Person are acquired by the Guarantor or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to the
paragraph (a) of Section 4.05, any amount paid or accrued as dividends on
Preferred Stock of the Guarantor or any Restricted Subsidiary that is owned by
Persons other than the Guarantor and any of its Restricted Subsidiaries; and
(vi) all extraordinary gains and extraordinary losses.
"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 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. For
purposes of Section 4.05, Section 4.08 and Section 4.09 only, "Affiliate" shall
also mean any beneficial owner of Capital Stock representing 10% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of the
Guarantor or of rights or warrants to purchase such Capital Stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Agent" means any Registrar, Paying Agent or authenticating agent.
"Agent Members" has the meaning provided in Section 2.07(a).
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"Asset Acquisition" means (i) an Investment by the Guarantor or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Guarantor or any of its Restricted Subsidiaries; provided, however,
that such Person's primary business is related, ancillary or complementary to
the businesses of the Guarantor and its Restricted Subsidiaries on the date of
such Investment or (ii) an acquisition by the Guarantor or any of its
Restricted Subsidiaries of the property and assets of any Person other than the
Guarantor or any of its Restricted Subsidiaries that constitute substantially
all of a division or line of business of such Person; provided, however, that
the property and assets acquired are related, ancillary or complementary to the
businesses of the Guarantor and its Restricted Subsidiaries on the date of such
acquisition.
"Asset Disposition" means the sale or other disposition by the
Guarantor or any of its Restricted Subsidiaries (other than to the Guarantor or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (ii) all or substantially all of the
assets that constitute a division or line of business of the Guarantor or any
of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or Sale- Leaseback Transaction) in one
transaction or a series of related transactions by the Guarantor or any of its
Restricted Subsidiaries to any Person other than the Guarantor or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, except any such disposition of director's qualifying
shares or shares of Capital Stock of foreign Restricted Subsidiaries to foreign
nationals to the extent required by law, (ii) all or substantially all of the
property and assets of an operating unit or business of the Guarantor or any of
its Restricted Subsidiaries, or (iii) any other property and assets of the
Guarantor or any of its Restricted Subsidiaries outside the ordinary course of
business of the Guarantor or such Restricted Subsidiary and, in each case, that
is not governed by the provisions of Section 4.09, Section 4.11 and Article
Five of the Guarantor, the Company or such Restricted Subsidiary; provided,
however, that "Asset Sale" shall not include (v) sales or other dispositions of
inventory, receivables and other current assets, (w) sales or other
dispositions of damaged, worn-out or other obsolete property in the ordinary
course of business so long as such property is not necessary for the proper
conduct of the business of the Guarantor and its Restricted Subsidiaries, (x)
exchanges of property of the Guarantor or any of its Restricted Subsidiaries
for property of any other Person which is related, ancillary or complimentary
to the business of the Guarantor and its Restricted Subsidiaries at the time of
such exchange and where the Board of Directors of the Guarantor or such
Restricted Subsidiary has determined in good faith that such exchange is fair
and reasonable, (y) creation or assumption of Liens permitted under Section
4.10 or any foreclosure thereof, or (z) sales or other dispositions of property
or assets with an aggregate Fair Market Value not in excess of $5 million in
any fiscal year.
"Attributable Debt" means, in respect of a Sale/Leaseback Transaction
as at the time of determination, the present value (discounted at the interest
rate implicit in the Sale/Leaseback
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<PAGE> 11
Transaction, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means (A) that certain Credit Agreement, dated
as of March 12, 1997, by and among the Guarantor, the Company and The First
National Bank of Chicago (or any successor thereto or replacement thereof), as
agent and as a lender, and certain other institutions, as lenders, and certain
other parties thereto, providing for up to $450 million of Indebtedness;
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, restated,
modified, renewed, refunded, replaced or refinanced, in whole or in part, from
time to time by one or more other agreements, instruments and documents entered
into with such Persons and/or other Persons, and (B) with respect to the
Guarantor, the Company and any Restricted Subsidiary any other debt facilities
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters or credit; including in each case any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, restated, modified, renewed, refunded,
replaced or refinanced, in whole or in part, from time to time by one or more
other agreements, instruments and documents entered into with such Persons
and/or other Persons.
"Board of Directors" means the Board of Directors of the Guarantor or
the Company, as the case may be, or any committee thereof duly authorized to
act on behalf of such Board.
"Board Resolution" means a copy of a resolution, certified by the
Secretary of the Guarantor or the Company, as the case may be, 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.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP and the Stated Maturity thereof shall be
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the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in equity (however designated) of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
"beneficial owner" (within the meaning of Rules 13d-3 and 13d-5 under
the Exchange Act, except that for purposes of this clause (i) such
person or group shall be deemed to have "beneficial ownership" of all
shares that such person or group has the right to acquire, whether
such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Guarantor; provided, however, that a
person shall not be deemed to be the beneficial owner of, or to own
beneficially, (i) any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates until such tendered securities are accepted for
purchase or exchange thereunder, or (ii) any securities if such
beneficial ownership (A) arises solely as a result of a revocable
proxy delivered in response to a proxy or consent solicitation made
pursuant to applicable law, and (B) is not also then reportable on
Schedule 13D (or any successor schedule) under the Exchange Act;
(ii) during any period of two consecutive years from and
after the Issue Date, individuals who at the beginning of such period
constituted the Board of Directors of the Guarantor (together with any
new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Guarantor was
approved by a vote of a majority of the directors of the Guarantor
then still in office who were either directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office;
(iii) the merger or consolidation of the Guarantor with or
into another Person (other than the Company or another Wholly Owned
Subsidiary), or the sale of all or substantially all the assets of the
Guarantor to another Person, and, in the case of any such merger or
consolidation, the securities of the Guarantor that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the Guarantor are
changed into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of
the surviving
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<PAGE> 13
corporation that represent, immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of
the surviving corporation; or
(iv) the Guarantor ceases for any reason to be the
beneficial owner, directly or indirectly, of all Voting Stock of the
Company, except as a result of the merger of the Guarantor with and
into the Company or of the merger of the Company with and into the
Guarantor; provided that the pledge of such Voting Stock (without the
transfer of voting rights attributable thereto) shall not be deemed to
transfer the beneficial ownership thereof.
"Closing Date" means the date on which up to $100,000,000 aggregate
principal amount of the Notes are originally issued under this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Comerica Agreement" means that certain promissory note, dated as of
March 12, 1997, by the Company to Comerica Bank, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, restated, modified, renewed,
refunded, replaced or refinanced, in whole or in part from time to time by one
or more other agreements, instruments and documents entered into with such
Person and/or other Persons.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the Issue Date, including, without limitation, all series and
classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to Article Five of this Indenture and thereafter
means the successor.
"Company Order" means a written request or order signed in the name of
the Company (i) by its Chairman, a Vice Chairman, its President or a Vice
President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary and delivered to the Trustee; provided, however, that
such written request or order may be signed by any two of the Persons listed in
clause (i) above in lieu of being signed by one of such Persons listed in such
clause (i) and one of the officers listed in clause (ii) above.
"Consolidated Coverage Ratio" means, on any date of determination, the
ratio of (i) the aggregate amount of Consolidated EBITDA for the then most
recent four fiscal quarters prior to such date for which reports have been
filed with the SEC pursuant to Section 4.17 (the "Four Quarter Period") to (ii)
Consolidated Interest Expense for such Four Quarter Period. In making the
foregoing computation, (A) pro forma effect shall be given to any Indebtedness
Incurred or
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<PAGE> 14
repaid during the period (the "Reference Period") commencing on the first day
of the Four Quarter Period and ending on such date (other than Indebtedness
Incurred or repaid under a revolving credit or similar arrangement to the
extent of the commitment thereunder (or under any predecessor revolving credit
or similar arrangement) in effect on the last day of such Four Quarter Period
adjusted, however, to give pro forma effect to repayments resulting from the
reduction in such commitment or Indebtedness Incurred in excess of such
commitment, in each case after the end of such Four Quarter Period and on or
before such date), in each case as if such Indebtedness had been Incurred or
repaid the first day of such Reference Period; (B) Consolidated Interest
Expense attributable to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on such date (taking into account
any Interest Rate Agreement applicable to such Indebtedness if such Interest
Rate Agreement has a remaining term in excess of 12 months or, if shorter, at
least equal to the remaining term of such Indebtedness) had been the applicable
rate for the entire Reference Period; (C) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions (including giving pro forma effect to
the application of proceeds of any Asset Disposition) that occur during such
Reference Period as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; and (D) pro forma effect shall be given
to asset dispositions and asset acquisitions (including giving pro forma effect
to the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted Subsidiary or has been merged with or
into the Guarantor or any Restricted Subsidiary during such Reference Period
and that would have constituted Asset Dispositions or Asset Acquisitions had
such transactions occurred when such Person was a Restricted Subsidiary as if
such asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (C) or (D) of this sentence requires that pro
forma effect be given to an asset acquisition or asset disposition, such pro
forma computation shall be based upon the four full fiscal quarters immediately
preceding such date of the Person, or division or line of business of the
Person, that is acquired or disposed for which financial information is
available; and provided further that to the extent that clause (C) or (D) of
this sentence requires that pro forma effect be given to an asset acquisition,
such pro forma computation shall exclude any expense (net of any expense
increase) which, in the good faith estimate of management, will (in accordance
with GAAP and the rules, regulations and guidelines of the SEC) be eliminated
as a result of such acquisition.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, (iii) income taxes, to the extent such amount
was deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and non-
recurring gains or losses or sales of assets), (iv) depreciation expense, to
the extent such amount was deducted in calculating Adjusted Consolidated Net
Income, (v) amortization expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, and (vi) all other non-
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<PAGE> 15
cash items reducing Adjusted Consolidated Net Income (other than items that
will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income (other than items that will require cash payments and
for which an accrual or reserve is, or is required by GAAP to be, made), all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient of
(1) the number of shares of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by the Guarantor or any of
its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of such
period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount (without duplication) of (x) interest in respect of Indebtedness of the
Guarantor and its Restricted Subsidiaries (including amortization of original
issue discount on any Indebtedness and the interest portion of any deferred
payment obligation, calculated in accordance with the effective interest method
of accounting; all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financings and other
financings to the extent attributable to such period; the net costs associated
with Interest Rate Agreements); and (y) the interest component of Capital Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by the
Guarantor and its Restricted Subsidiaries during such period, all as determined
on a consolidated basis in conformity with GAAP; excluding, however, (i) any
amount of such interest of any Restricted Subsidiary if all or a portion of the
net income of such Restricted Subsidiary is excluded in the calculation of
Adjusted Consolidated Net Income pursuant to the proviso to the definition
thereof (but only in the same proportion as the net income of such Restricted
Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income
pursuant to the proviso to the definition thereof), and (ii) any amount of such
interest expense of any Restricted Subsidiary that is not a Wholly Owned
Restricted Subsidiary if all or a portion of the Adjusted Consolidated Net
Income of such Restricted Subsidiary is excluded in the calculation of
Consolidated EBITDA pursuant to the proviso to the definition thereof.
"Consolidated Net Worth" means, as of any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Guarantor and its Restricted
Subsidiaries (which shall be as of a date not more than 135 days prior to the
date of such computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Disqualified Stock or any
equity security convertible into or exchangeable for Indebtedness and the cost
of treasury stock, each item to be determined in conformity with GAAP
(excluding the effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 52).
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"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 311 West Monroe Street, 12th Floor, Chicago, IL 60606 Attn:
Indenture Trust Division.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors 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.
"Designated Senior Indebtedness" in respect of the Guarantor or the
Company, as the case may be, means (i) Indebtedness and all other Obligations
of the Guarantor or the Company, as the case may be, under the Credit
Agreement, dated as of March 12, 1997, described in the definition of "Bank
Credit Agreement," (including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith) in each
case as amended, restated, modified, renewed, refunded, replaced or refinanced,
in whole or in part, and (ii) any other Senior Indebtedness of the Company or
the Guarantor, as the case may be, which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $10
million and is specifically designated by the Company or the Guarantor, as the
case may be, in the instrument evidencing or governing such Senior Indebtedness
as "Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock to the extent that by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable) or upon the happening
of any event, it (i) matures or is mandatorily redeemable pursuant to a sinking
fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable, in whole or in part,
at the option of the holder thereof, in each case described in the immediately
preceding clauses (i) , (ii) or (iii), on or prior to the Stated Maturity of
the Notes; provided, however, that (x) any class of Capital Stock of such
Person that, by its terms, authorizes such Person to satisfy in full its
obligations with respect to the payment of dividends or upon maturity,
redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or
otherwise by the delivery of Capital Stock that is not Disqualified Stock, and
that is not convertible, puttable or exchangeable for Disqualified Stock or
Indebtedness, shall not be deemed to be Disqualified Stock so long as such
Person satisfies its
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<PAGE> 17
obligations with respect thereto solely by the delivery of Capital Stock that
is not Disqualified Stock and (y) any Capital Stock of a Subsidiary of such
Person that would otherwise constitute Disqualified Stock shall not be deemed
to be Disqualified Stock so long as such Capital Stock is held by such Person;
and provided further, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" (however designated)
occurring prior to the first anniversary of the Stated Maturity of the Notes
shall not constitute Disqualified Stock if (x) the "asset sale" or "change of
control" provisions applicable to such Capital Stock are not more favorable to
the holders of such Capital Stock than the provisions in Section 4.09 and
Section 4.12 and (y) any such requirement only becomes operative after
compliance with such corresponding terms applicable to the Notes, including the
purchase of any Notes tendered pursuant thereto.
"Equity Offering" means a primary offering, whether public or private,
of shares of common stock of the Guarantor.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.09.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to
buy, as determined in good faith by (i) senior management of the Guarantor if
the aggregate amount of the transaction with respect to which Fair Market Value
is being determined does not exceed $10 million in value or (ii) the Board of
Directors of the Guarantor, whose determination shall be conclusive and
evidenced by a Board Resolution, if the aggregate amount of the transaction
with respect to which Fair Market Value is being determined exceeds $10 million
in value.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Issue Date, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and other computations contained or referred to in this Indenture
shall be computed in conformity with GAAP applied on a consistent basis, except
that computations made for
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<PAGE> 18
purposes of determining compliance with the terms of the covenants and with
other provisions of this Indenture shall be made without giving effect to (i)
the amortization of any expenses incurred in connection with the offering of
the Notes and (ii) except as otherwise provided, the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16
and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means, without duplication, any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Indebtedness
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such Person or (ii) entered into
for the purpose of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means the party named as such in this Indenture until a
successor replaces it pursuant to Article Five of this Indenture and thereafter
means the successor.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of
principal of a non-interest bearing or other discount security and the accrual
of interest shall not be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
with respect to (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) the amount
of all Capital Lease Obligations of such Person and all Attributable Debt in
respect of Sale/Leaseback Transactions entered into by such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property (which purchase price is due more
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than six months after the date of taking delivery of title to such property),
including all obligations of such Person for the deferred purchase price of
property under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in clauses (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary
of such Person the liquidation preference with respect to, any Preferred Stock
(but excluding, in each case, any accrued and unpaid dividends); (vi) all
obligations of the type referred to in clauses (i) through (v) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other
Persons secured by any Lien on any property or asset of such first-mentioned
Person (whether or not such obligation is assumed by such first-mentioned
Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured;
and (viii) to the extent not otherwise included in this definition, the amount
of Hedging Obligations of such Person. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability,
assuming the contingency giving rise to the obligation were to have occurred on
such date, of any Guarantees outstanding at such date. Notwithstanding the
foregoing, none of the following shall constitute Indebtedness: (i)
indebtedness arising from agreements providing for indemnification or
adjustment of purchase price or from guarantees securing any obligations of the
Guarantor or any of its Subsidiaries pursuant to such agreements, incurred or
assumed in connection with the disposition of any business, assets or
Subsidiary of the Guarantor, other than guarantees or similar credit support by
the Guarantor or any of its Subsidiaries of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition; (ii) any trade accounts payable and
other accrued current liabilities incurred in the ordinary course of business
as the deferred purchase price of property; (iii) obligations arising from
guarantees to suppliers, lessors, licensees, contractors, franchisees or
customers incurred in the ordinary course of business; (iv) obligations (other
than Guarantees of indebtedness for borrowed money) in respect of Indebtedness
of other Persons arising in connection with (A) the sale or discount of
accounts receivable, (B) trade acceptances and (C) endorsements of instruments
for deposit in the ordinary course of business; (v) obligations in respect of
performance bonds provided by the Guarantor or its Subsidiaries in the ordinary
course of business and refinancing thereof; (vi) obligations arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business,
provided, however, that such obligation is extinguished
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within two Business Days of its incurrence; and (vii) obligations in respect of
any obligations under workers' compensation laws and similar legislation;
provided that Indebtedness of the Guarantor or its Restricted Subsidiaries that
is Guaranteed by the Guarantor or any of the Restricted Subsidiaries shall only
be counted once in the calculation of the amount of Indebtedness of the
Guarantor and its Restricted Subsidiaries.
"Indenture" means this Indenture as originally executed or as it may
be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Interest Payment Date" means each semiannual interest payment date on
June 15 and December 15 of each year, commencing June 15, 1998.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement
designed to protect the Guarantor or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" in any Person means (without duplication) any direct or
indirect advance, loan or other extension of credit (including, without
limitation, by way of Guarantee or similar arrangement; (but excluding (x)
advances to customers in the ordinary course of business that are, in
conformity with GAAP, recorded as accounts receivable on the balance sheet of
the Guarantor or its Restricted Subsidiaries and (y) Guarantees of Indebtedness
of the Guarantor or any Restricted Subsidiaries permitted under Section 4.03))
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the Fair Market Value of the Capital Stock (or any other
Investment) held by the Guarantor or any of its Restricted Subsidiaries, of (or
in) any Person that has ceased to be a Restricted Subsidiary. For purposes of
the definition of "Unrestricted Subsidiary" and Section 4.05, (i) "Investment"
shall include the Fair Market Value of the assets (net of liabilities (other
than liabilities to the Company or any of its Restricted Subsidiaries)) of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary, (ii) the Fair Market Value of the assets (net of
liabilities (other than liabilities to the Guarantor or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments, and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer.
"Issue Date" means the date on which the Notes are originally issued.
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<PAGE> 21
"Legal Holiday" means any Saturday, Sunday or other day on which
commercial banks in The City of New York, or in the city of the Corporate Trust
Office of the Trustee, are authorized by law to close.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, or, in the case of a Subsidiary not organized under the laws of the
United States or the District of Columbia, fixed charge or floating charge of
any kind (including any conditional sale or other title retention agreement or
lease in the nature thereof).
"Moody's" means Moody's Investor's Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Guarantor or any
Restricted Subsidiary) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes (whether or not such taxes will actually be paid or are payable) as a
result of such Asset Sale, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (x) is
secured by a Lien on the property or assets sold or (y) is required to be paid
as a result of such sale, and (iv) appropriate amounts to be provided by the
Guarantor or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post- employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Guarantor or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commission and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Notes" means any of the securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture.
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"Obligations" means all payment obligations of every nature whether
for principal, reimbursements, interest, fees, expenses, indemnities or
otherwise under the documentation governing such Indebtedness.
"Offer to Purchase" means an offer to purchase Notes by the Company
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant of this Indenture pursuant to which the offer is
being made and that all Notes validly tendered will be accepted for payment on
a pro rata basis; (ii) the purchase price and the date of purchase (which shall
be a Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered
will continue to accrue interest pursuant to its terms; (iv) that, unless the
Company defaults in the payment of the purchase price, any Note accepted for
payment pursuant to the Offer to Purchase shall cease to accrue interest on and
after the Payment Date; (v) that Holders electing to have a Note purchased
pursuant to the Offer to Purchase will be required to surrender the Note,
together with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Note duly completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
immediately preceding the Payment Date; (vi) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the third Business Day immediately preceding the Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall
be in a principal amount of $1,000 or integral multiples thereof. On the
Payment Date, the Company shall (i) accept for payment on a pro rata basis
Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted for payment an amount equal to the purchase price,
and the Trustee shall promptly authenticate and mail to such Holders a new Note
equal in principal amount to any unpurchased portion of the Note surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. The Company will
publicly announce the results of an Offer to Purchase as soon as practicable
after the Payment Date. The Trustee shall act as the Paying Agent for an Offer
to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that the Company is required
to repurchase Notes pursuant to an Offer to Purchase and the Company may modify
any of the foregoing provisions to the extent it is advised by independent
counsel that such modification is necessary or appropriate to ensure such
compliance.
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"Officer" means, with respect to the Company or the Guarantor, as the
case may be, (i) the Chairman of the Board, the President, any Vice President,
the Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer,
or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers so
long as at least one Officer is an Officer listed in clause (i) of the
definition thereof. Each Officers' Certificate(other than certificates
provided pursuant to TIA Section 314(a)(4)) shall include the statements
provided for in TIA Section 314(e) to the extent required by TIA.
"Opinion of Counsel" means a written opinion signed by legal counsel
who is reasonably acceptable to the Trustee. Such counsel may be an employee
of or counsel to the Company or the Guarantor, as the case may be, or the
Trustee. Each such Opinion of Counsel shall include the statements provided
for in TIA Section 314(e) to the extent required by TIA. Opinions of Counsel
required to be delivered may have qualifications customary for opinions of the
type required.
"Parent Guarantee" means the Guarantee granted by the Guarantor, as
defined in the second paragraph of the recitals hereof.
"Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Guarantor
or the Company or a Subsidiary of the Guarantor or the Company or an Affiliate
of any of them. The term "Paying Agent" includes any additional Paying Agent.
"Payment Blockage Period" has the meaning provided in Section 10.02.
"Permitted Investment" means (i) an Investment in the Guarantor or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the
Guarantor or a Restricted Subsidiary; provided that such Person's primary
business is related, ancillary or complementary to the business of the
Guarantor and its Restricted Subsidiaries on the date of such Investment; (ii)
a Temporary Cash Investment; (iii) commission, payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses in accordance with GAAP; (iv) loans,
transactions and arrangements or advances to directors, officers, employees and
agents made in the ordinary course of business in accordance with the past
practice of the Guarantor or its Restricted Subsidiaries and that do not in the
aggregate, in the case of loans or advances, exceed $3 million at any time
outstanding, provided that with respect to any transaction or arrangement which
is reasonably expected to involve more than $1 million, such transaction or
arrangement shall be approved by a majority of the members of the Board of
Directors of the Company or the Guarantor, as the case may be, having no
personal stake in such transaction or arrangement; (v) Investments existing on
the Issue Date and any extension, renewal or other modification thereof
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<PAGE> 24
(but not an increase in the amount thereof, other than as a result of the
accrual or accretion of interest or original issue discount pursuant to the
original terms of such Investment); (vi) Investments in any Person received in
any dissolution, winding up, liquidation or reorganization of such Person in
satisfaction of claims against such Person; (vii) Investments received as
consideration from Asset Sales or Asset Dispositions permitted under Section
4.09, (viii) stock, obligations or securities received in satisfaction of
judgments or in settlements; (ix) Investments in Austral Refrigeration Pty.
Ltd. ("Austral Investments"); (x) exchanges of property permitted pursuant to
clause (x) of the definition of "Asset Sales"; and (xi) other Investments in
any Persons made with an intention to control at a subsequent time such Persons
(as evidenced by a resolution of the Board of Directors of the Guarantor or the
Company, as the case may be, to such effect) in an aggregate amount outstanding
at any time not to exceed $10 million plus the net reduction in such other
Investments and in Austral Investments after the Issue Date; provided, that the
Investment in Austral Refrigeration Pty. Ltd. and any such Person shall be
deemed reduced to zero for purposes of this definition only, among other
things, at such time as Austral Refrigeration Pty. Ltd. or such other Person
becomes a Restricted Subsidiary.
"Permitted Liens" means, with respect to any Person, (a) liens
incurred or deposits by such Person under worker's compensation laws,
unemployment insurance laws or similar laws, rules, regulations or other
governmental requirements, or good faith liens incurred or deposits made in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of cash or United
States government bonds to secure surety or appeal bonds to which such Person
is a party, or deposits as security for contested taxes or import duties or for
the payment of rent, in each case Incurred in the ordinary course of business;
(b) Liens imposed by law, such as landlord's, carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (c) Liens for
property taxes not yet subject to penalties for nonpayment or which are being
contested in good faith and by appropriate proceedings; (d) Liens in favor of
issuers of surety bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
provided, however, that such letters of credit do not constitute Indebtedness;
(e) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real property or leases, subleases or other Liens
incidental to the conduct of the business of such Person or to the ownership of
its properties which were not Incurred in connection with Indebtedness and
which do not in the aggregate materially impair their use in the operation of
the business of such Person; (f) Liens securing Indebtedness Incurred to
finance the construction, purchase or lease of, or repairs, improvements or
additions to, property of such Person (including Liens securing Indebtedness of
the pollution control or revenue bond type); provided, however, that the Lien
may not extend to any other property owned by such Person or any of its
Subsidiaries at the time the Lien is
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Incurred, and the Indebtedness secured by the Lien may not be Incurred more
than 180 days after the later of the acquisition, completion of construction,
repair, improvement, addition or commencement of full operation of the property
subject to the Lien; (g) Liens to secure Indebtedness permitted under the
provisions described in clauses (a), (b)(i), (b)(iv), (b)(vii), (b)(viii) and
(b)(x) of Section 4.03; (h) Liens existing on the Issue Date; (i) Liens on
property or shares of Capital Stock of another Person at the time such other
Person becomes a Subsidiary of such Person; provided, however, that such Liens
are not created, incurred or assumed in connection with, or in contemplation
of, such other Person becoming such a Subsidiary; provided further, however,
that such Lien may not extend to any other property owned by such Person or any
of its Subsidiaries; (j) Liens on property at the time such Person or any of
its Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such
Person; provided, however, that such Liens are not created, incurred or assumed
in connection with, or in contemplation of, such acquisition; provided further,
however, that the Liens may not extend to any other property owned by such
Person or any of its Subsidiaries; (k) Liens securing Indebtedness or other
obligations of a Subsidiary of such Person owing to such Person or a wholly
owned Subsidiary of such Person (or, in the case of the Company, to a Wholly
Owned Subsidiary); (l) Liens securing Hedging Obligations so long as such
Hedging Obligations relate to Indebtedness that is, and is permitted to be
under the Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (m) Liens arising in the ordinary course of business in
favor of the United States, any state thereof, any foreign country or any
department, agency, instrumentality or political subdivision of any such
jurisdiction, to secure partial, progress, advance or other payments pursuant
to any contract or statute or regulation; (n) Liens to secure any Refinancing
(or successive Refinancing) as a whole, or in part, of any Indebtedness secured
by any Lien referred to in the foregoing clause (f), (h), (i) and (j),
provided, however, that (x) such new Lien shall be limited to all or part of
the same property that secured the original Lien (plus improvements to or on
such property) and (y) the Indebtedness secured by such Lien at such time is
not increased to any amount greater than the sum of (A) the outstanding
principal amount or, if greater, committed amount of the Indebtedness described
under clause (f), (h), (i) or (j) at the time the original Lien became a
Permitted Lien or the Issue Date, whichever is greater, and (B) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement; (o) judgment and
attachment Liens not giving rise to an Event of Default or Liens created by or
existing from any litigation or legal proceeding that are currently being
contested in good faith by appropriate proceedings and for which adequate
reserves have been made; (p) Liens in favor of collecting or payor banks having
a right of setoff, revocation, refund or chargeback with respect to money or
instruments of the Company or any Subsidiary on deposit with or in possession
of such bank; and (q) Liens to secure Sale/Leaseback Transactions that are
permitted pursuant to Section 4.11.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock issuer, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
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"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" means, as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal", with respect to any Note, means the principal of the Note
plus the premium, if any, payable on the Note which is due or overdue or is to
become due at the relevant time.
"Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which such Note is to be redeemed pursuant to this
Indenture.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, decease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Guarantor or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with the Indenture including Indebtedness
that Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced or the Notes (whichever is
earlier), (ii) the portion of such Refinancing Indebtedness that has a Stated
Maturity that is earlier than the Stated Maturity of the Notes has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being Refinanced and (iii)
such Refinancing Indebtedness has an aggregate principal amount (or if Incurred
with original issue discount, an aggregate issue price) that is equal to or
less than the aggregate principal amount (or if Incurred with original issue
discount, the aggregate accreted value) then outstanding or committed (plus
fees and expenses, including any premium and defeasance costs) under the
Indebtedness being Refinanced; provided further, however, that Refinancing
Indebtedness shall not include Indebtedness of the Guarantor or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
"Registrar" has the meaning provided in Section 2.04.
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"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of April 24, 1994 among the Guarantor and certain former
shareholders of certain Restricted Subsidiaries.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the June 1 or December 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company or the Guarantor, as the
case may be.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice chairman of the board of directors, the chairman or
any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than (x) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock), (y) dividends or distributions payable solely to the Guarantor or a
Restricted Subsidiary, and (z) pro rata dividends or other distributions made
by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders
(or owners of an equivalent interest in the case of a Subsidiary that is an
entity other than a corporation) ), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Guarantor held
by any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Guarantor (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Guarantor that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
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"Restricted Subsidiary" means the Company and any other Subsidiary of
the Guarantor that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Issuer,
Inc., and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Guarantor or a Restricted
Subsidiary transfers such property to a Person and the Guarantor or a
Restricted Subsidiary leases it from such Person; provided that the Fair Market
Value of such property (as reasonably determined by the Board of Directors
acting in good faith) is $10 million or more.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company or the
Guarantor, as the case may be, secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning provided in Section 2.04.
"Senior Indebtedness" means, with respect to any Person, any
Indebtedness of such Person and all other Obligations with respect to such
Indebtedness (including interest, whether or not allowed, on such Indebtedness
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person), including, without limitation, all
Obligations of such Person under the Bank Credit Agreement, the Comerica
Agreement and Hedging Obligations, in each case, whether outstanding on the
Issue Date or thereafter Incurred, unless such Indebtedness, by its terms or
the terms of any instrument creating or evidencing such Indebtedness, is pari
passu with, or subordinated in right of payment to, the Notes; provided,
however, that Senior Indebtedness shall not include (1) any obligation of such
Person to any Subsidiary, director, officer or employee of such Person, (2) any
liability for federal, state, local or other taxes owed or owing by such
Person, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (4) any Indebtedness of such Person (and any
accrued and unpaid interest in respect thereof) which is expressly subordinated
in right of payment in any respect to any other Indebtedness or other
obligation of such Person, (5) that portion of any Indebtedness (other than
under the Bank Credit Agreement) which at the time of Incurrence is Incurred in
violation of the Indenture, and (6) any Indebtedness of such Person that, when
Incurred and without regard to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to such Person.
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"Senior Subordinated Indebtedness" means, with respect to the Company
or the Guarantor, as the case may be, the Notes, with respect to the Company,
and the Parent Guarantee, with respect to the Guarantor, and any other
Indebtedness of the Company or the Guarantor, as the case may be, that
specifically provides that such Indebtedness is to rank pari passu with the
Notes or such Parent Guarantee, as the case may be, in right of payment and is
not subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company or the Guarantor, as the case may be, which is not
Senior Indebtedness of the Company or the Guarantor, as the case may be.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Guarantor within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Guarantor or
the Company (whether outstanding on the Issue Date or thereafter Incurred), as
the case may be, which is subordinate or junior in right of payment to the
Notes or the Parent Guarantee, as the case may be, pursuant to a written
agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof, or in the case of a Subsidiary not organized under the laws of a state
of the United States or the District of Columbia, any foreign government or any
agency thereof, or obligations guaranteed or insured by the United States of
America or any agency thereof, or in the case of a Subsidiary not organized
under the laws of a state of the United States or the District of Columbia, any
foreign government or any agency thereof, (ii) investments in time deposit
accounts, certificates of deposit and money-market deposits maturing within 365
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$100 million (or the foreign
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currency equivalent thereof) and has outstanding debt which is rated "A" (or
such similar equivalent rating) or higher by Moody's, S&P or at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money market fund sponsored by a registered
broker dealer or mutual fund distributor, provided that a foreign Subsidiary of
the Guarantor may also make deposits with any central bank of the jurisdiction
in which such Subsidiary is organized, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described in
clause (i) above or (v) below entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 270 days after the date of acquisition, issued by
a Person (other than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of
which any investment therein is made of "P-2" (or higher) according to Moody's
or "A-2" (or higher) according to S&P, (v) investments in securities with
maturities of twelve months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing authority thereof, and
rated at least "A" by S&P or Moody's and (vi) interests in any investment
company which invests solely in instruments of the type described in clauses
(i) through (v).
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S. Code Sections 77aaa- 77bbb), as in effect on the date this
Indenture was executed, except as provided in Section 9.06.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor
other than the Company that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors of the Guarantor in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Guarantor may designate any Subsidiary of the
Guarantor (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or owns or holds any Lien on any property
of, the Guarantor or any other Subsidiary of the Guarantor that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under Section 4.05. The Board of Directors of the Guarantor
may designate any Unrestricted
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Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Guarantor could Incur $1.00 of
additional Indebtedness under Section 4.03(a) and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors of
the Guarantor shall be evidenced by the Guarantor to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and shares held
by other Persons to the extent such shares are required by applicable law to be
held by a Person other than the Guarantor or a Restricted Subsidiary) is owned
by the Guarantor or one or more Wholly Owned Subsidiaries.
SECTION 1.02 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any obligor
on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of the
SEC and not otherwise defined herein have the meanings assigned to them
therein.
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SECTION 1.03 Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section
or other subdivision.
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP
set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE II
The Notes
SECTION 2.01 Form and Dating. The Notes and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A. The Notes may have notations, legends or endorsements required
by law, stock exchange agreements to which the Company is subject or usage.
The Company shall approve the form of the Notes and any notation, legend or
endorsement on the Notes. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the form of the Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
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Notes offered and sold in global form ("Global Notes") shall be
substantially in the form of Exhibit A attached hereto (including the bracketed
text). Notes issued in physical form ("Physical Notes") shall be substantially
in the form of Exhibit A attached hereto (but without including the bracketed
text). Each Global Note shall be deposited with the Trustee, as custodian for
the Depositary, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of the Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depository or its nominee, as hereinafter
provided.
The definitive Notes shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.02 Global Note Legends. Each Global Note shall bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
SCOTSMAN GROUP INC. 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 IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON 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.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
INDENTURE.
SECTION 2.03 Execution, Authentication and Denominations. The Notes
shall be executed by an Officer of the Company listed in clause (i) of the
definition of Officer herein and attested by its Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer. The signature of any of
these Officers on the Notes may be by facsimile or manual signature in the name
and on behalf of the Company.
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If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the
Note shall be valid nonetheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee or an authenticating agent shall upon receipt of a Company
Order authenticate for original issue Notes in the aggregate principal amount
of up to $100,000,000. The Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company in connection with such
authentication and delivery of Notes. Such Company Order shall specify the
amount of Notes to be authenticated and the date on which the original issue of
Notes is to be authenticated. The aggregate principal amount of Notes
outstanding at any time may not exceed the amount set forth above except for
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Section 2.06, 2.08 or
2.10.
The Trustee may appoint an authenticating agent to authenticate Notes.
An authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the
Company.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 in principal amount and any integral
multiple of $1,000 in excess thereof.
SECTION 2.04 Registrar and Paying Agent. The Company shall maintain
an office or agency where Notes may be presented for registration of transfer
or for exchange (the "Registrar"), an office or agency where Notes may be
presented for payment (the "Paying Agent") and an office or agency where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served, which shall be in the Borough of Manhattan, The City
of New York. The Company shall cause the Registrar to keep a register of the
Notes and of their transfer and exchange (the "Security Register"). The
Company may have one or more co-Registrars and one or more additional Paying
Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain
a Registrar, Paying Agent and/or agent for service of notices and
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demands, the Trustee shall act as such Registrar, Payment Agent and/or agent
for service of notices and demands. The Company may remove any Agent upon
written notice to such Agent and the Trustee; provided that no such removal
shall become effective until (i) the acceptance of an appointment by a
successor Agent to such Agent as evidenced by an appropriate agency agreement
entered into by the Company and such successor Agent and delivered to the
Trustee or (ii) notification to the Trustee that the Trustee shall serve as
such Agent until the appointment of a successor Agent in accordance with clause
(i) of this proviso. The Company, any Subsidiary of the Company, or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar,
and/or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. If, at any
time, the Trustee is not the Registrar, the Registrar shall make available to
the Trustee on or before each Interest Payment Date and at such other times as
the Trustee may reasonably request, the names and addresses of the Holders as
they appear in the Security Register.
SECTION 2.05 Payment Agent to Hold Money in Trust. Not later than
each due date of the principal, premium, if any, and interest on any Notes, the
Company shall deposit with the Paying Agent by 11:00 a.m., New York time, in
immediately available funds, money sufficient to pay such principal, premium,
if any, and interest so becoming due. The Company shall require each Paying
Agent other than the Trustee to agree in writing that such Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all money held by
the Paying Agent for the payment of principal of, premium, if any, and interest
on the Notes (whether such money has been paid to it by the Company or any
other obligor on the Notes), and such Paying Agent shall promptly notify the
Trustee of any default by the Company (or any other obligor on the Notes) in
making any such payment. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee and account for any funds disbursed,
and the Trustee may at any time during the continuance of any payment default,
upon written request to a Paying Agent, require such Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed. Upon
doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee. If the Company or any Subsidiary of the Company or
any Affiliate of any of them acts as Paying Agent, it will, on or before each
due date of any principal of, premium, if any, or interest on the Notes,
segregate and hold in a separate trust fund for the benefit of the Holders a
sum of money sufficient to pay such principal, premium, if any, or interest so
becoming due until such sum of money shall be paid to such Holders or otherwise
disposed of as provided in this Indenture, and will promptly notify the Trustee
of its action or failure to act.
SECTION 2.06 Transfer and Exchange. The Notes are issuable only in
registered form. A Holder may transfer a Note by written application to the
Registrar stating the name of the proposed transferee and otherwise complying
with the terms of this Indenture. No such transfer shall be effected until,
and such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Registrar in the Security
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee, and any
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Agent of the Company shall treat the Person in whose name the Note is
registered as the owner thereof for all purposes whether or not the Note shall
be overdue, and neither the Company, the Trustee, nor any such Agent shall be
affected by notice to the contrary. Furthermore, any Holder of a Global Note
shall, by acceptance of such Global Note, agree that transfers of beneficial
interests in such Global Note may be effected only through a book entry system
maintained by the Holder of such Global Note (or its agent) and that ownership
of a beneficial interest in the Note shall be required to be reflected in a
book entry. When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Notes of other authorized denominations, the Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at the
Registrar's request. No service charge shall be made to a Holder or its
transferee for any registration of transfer or exchange or redemption of the
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge
payable upon exchanges pursuant to Section 2.10, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
SECTION 2.07 Book-Entry Provisions for Global Notes. (a) A Global
Note initially shall (i) be registered in the name of the Depositary for such
Global Note or the nominee of such Depositary, (ii) be delivered to the Trustee
as custodian for such Depositary and (iii) bear legends as set forth in Section
2.02.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any Agent of the Company or
the Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of
such Global Note in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in a Global Note
may be transferred in accordance with the rules and
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procedures of the Depositary. In addition, Physical Notes shall be transferred
to all beneficial owners in exchange for their beneficial interests in the
Global Note, if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the Global Note and a successor depositary
is not appointed by the Company within 90 days of such notice or (ii) an Event
of Default has occurred and is continuing and the Registrar has received a
request to the foregoing effect from the Depositary.
(c) Any beneficial interest in a Global Note that is transferred
to a Person who takes delivery in the form of an interest in another Global
Note will, upon transfer, cease to be an interest in such Global Note and
become an interest in the other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a Global Note to beneficial owners pursuant to paragraph (b) of
this Section, the Registrar shall reflect on its books and records the date and
a decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Notes of like tenor and amount.
(e) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) of this Section, the Global Note
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Note an equal aggregate principal amount of Physical
Notes of authorized denominations.
(f) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Section 2.07. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.08 Replacement Notes. If a mutilated Note is surrendered
to the Trustee or if the Holder claims that the Note has been lost, destroyed
or wrongfully taken, the Company shall issue and the Trustee shall authenticate
a replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding. If required by the Trustee or the Company, an
indemnity bond must be furnished that is sufficient in the judgment of both the
Trustee and the Company to protect the Company, the Trustee or any Agent from
any loss that
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any of them may suffer if a Note is replaced. The Company may charge such
Holder for its expenses and the expenses of the Trustee in replacing a Note.
In case any such mutilated, lost, destroyed or wrongfully taken Note has become
or is about to become due and payable, the Company in its discretion may pay
such Note instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
SECTION 2.09 Outstanding Notes. Notes outstanding at any time are
all Notes that have been authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section 2.09 as not outstanding.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay Notes payable on
that date, then on and after that date such Notes cease to be outstanding and
interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of
its Affiliates holds such Note, provided, however, that, in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or
any Subsidiary 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 Notes which the Trustee knows to be
so owned shall be so disregarded. Notes 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
Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Subsidiary of the Company or of such other obligor..
SECTION 2.10 Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the temporary Notes, as
evidenced by their execution of such temporary Notes. If temporary Notes are
issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the
temporary Notes at the office or agency of the Company
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designated for such purpose pursuant to Section 4.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall be entitled to the
same benefits under this Indenture as definitive Notes.
SECTION 2.11 Cancellation. The Company at any time may deliver to
the Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation and shall destroy them in
accordance with its normal procedure. The Company may not issue new Notes to
replace Notes it has paid in full or delivered to the Trustee for cancellation.
SECTION 2.12 CUSIP Numbers. The Company in issuing the Notes may
use "CUSIP" and "CINS" numbers (if then generally in use), and the Trustee
shall use CUSIP numbers or CINS numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes.
SECTION 2.13 Defaulted Interest. If the Company defaults in a
payment of interest on the Notes, it shall pay, or shall deposit with the
Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.13 with respect
to the payment of any defaulted interest, shall mean the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest,
whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to
the Trustee a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest to be paid.
ARTICLE II
Redemption
SECTION 3.01 Right of Redemption. (a) The Notes may be redeemed at
the election of the Company, in whole or in part, at any time and from time to
time on or after December 15, 2002 and prior to maturity, upon not less than 30
nor more than 60 days' prior notice mailed by
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first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date) if redeemed during the 12-month period commencing on
December 15 of the years set forth below:
Redemption
Year Price
2002 . . . . . . . . 104.3125%
2003 . . . . . . . . 102.15625%
2004 and thereafter 100.0%
In addition, at any time and from time to time prior to December 15,
2000, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Notes with the proceeds of one or more Equity
Offerings, at a redemption price (expressed as a percentage of principal
amount) of 108 5/8% plus accrued and unpaid interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that either (i) at least $65 million in aggregate principal amount of the Notes
must remain outstanding after each such redemption or (ii) such redemption must
retire the Notes in their entirety and, in any case, that such redemption
occurs within 60 days following the closing of any such Equity Offering.
SECTION 3.02 Notices to Trustee. If the Company elects to redeem
Notes pursuant to Section 3.01, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.02
in an Officers' Certificate at least 45 days before the Redemption Date (unless
a shorter period shall be satisfactory to the Trustee).
SECTION 3.03 Selection of Notes to Be Redeemed. If less than all of
the Notes are to be redeemed at any time, the Trustee shall select the Notes to
be redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem fair and
appropriate.
The Trustee shall make the selection from the Notes outstanding and
not previously called for redemption. Notes in denominations of $1,000 in
principal amount may only be redeemed in whole. The Trustee may select for
redemption portions (equal to $1,000 in principal amount or any integral
multiple thereof) of Notes that have denominations larger than $1,000 in
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principal amount. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Company and the Registrar promptly in writing of the Notes or
portions of Notes to be called for redemption.
SECTION 3.04 Notice of Redemption. At least 30 days but not more
than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first class mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right
of the Holders is to receive payment of the Redemption Price plus
accrued and unpaid interest to the Redemption Date upon surrender of
the Notes to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal amount
or any integral multiple thereof) of such Note to be redeemed and
that, on and after the Redemption Date, upon surrender of such Note, a
new Note or Notes in principal amount equal to the unredeemed portion
thereof will be reissued;
(vii) that, if any Note contains a CUSIP or CINS number as
provided in Section 2.12, no representation is being made as to the
correctness of the CUSIP or CINS number either as printed on the Notes
or as contained in the notice of redemption and that reliance may be
placed only on the other identification numbers printed on the Notes;
and
(viii) the aggregate principal amount of Notes being
redeemed.
At the Company's request the Trustee shall give the notice of
redemption in the name and at the expense of the Company. Concurrently with
the giving of such notice by the Company to the Holders, the Company shall
deliver to the Trustee an Officers' Certificate stating that such notice has
been given.
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SECTION 3.05 Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to
the Paying Agent, such Notes shall be paid at the Redemption Price, plus
accrued and unpaid interest to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of Notes held by Holder to whom such notice was properly
given.
SECTION 3.06 Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.05) by 1:00 p.m., New York time, in immediately available
funds, money sufficient to pay the Redemption Price of and accrued and unpaid
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.07 Payment of Notes Called for Redemption. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued and unpaid interest to such Redemption Date, and on and after such date
(unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued and unpaid interest to the Redemption Date, in
which case the principal, until paid, shall bear interest from the Redemption
Date at the rate prescribed in the Notes), such Notes shall cease to accrue
interest. Upon surrender of any Note for redemption in accordance with a
notice of redemption, such Note shall be paid and redeemed by the Company at
the Redemption Price, together with accrued and unpaid interest to the
Redemption Date; provided that installments of interest whose Stated Maturity
is on or prior to the Redemption Date shall be payable to the Holders
registered as such at the close of business on the relevant Regular Record
Date.
SECTION 3.08 Notes Redeemed in Part. Upon surrender of any Note
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Note equal in principal amount of
the unredeemed portion of such surrendered Note.
ARTICLE IV
Covenants
SECTION 4.01 Payment of Notes. The Company shall pay the principal
of, premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this
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Indenture. An installment of principal, premium, if any, or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company, or any Affiliate of any of them) holds on
that date money in immediately available funds designated for and sufficient to
pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.05.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent and
conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal, premium, if any,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum specified in the Notes.
SECTION 4.02 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company
in respect of the Notes 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 such office or agency. If 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 address of the Trustee set forth in
Section 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York 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.
The Company hereby initially designates the office of an affiliate of
the Trustee, located in the Borough of Manhattan, The City of New York, as such
office of the Company in accordance with Section 2.04.
SECTION 4.03 Limitation on Indebtedness. (a) The Guarantor shall
not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness (other than the Notes and Indebtedness existing
on the Issue Date); provided, however, that the Guarantor or a Restricted
Subsidiary (in the case of such Restricted Subsidiary other than the Company to
the extent permitted under Section 4.07) may Incur such Indebtedness if, on the
date of such Incurrence and after giving effect thereto, the Consolidated
Coverage Ratio equals or exceeds (x)
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for the period from the Issue Date and ending on the third anniversary thereof,
2.0:1.0 and (y) thereafter, 2.25:1.
(b) Notwithstanding the foregoing paragraph (a), the Guarantor and
any Restricted Subsidiary (in the case of such Restricted Subsidiary other than
the Company to the extent permitted under Section 4.07) may Incur the following
Indebtedness:
(i) (x) Indebtedness Incurred pursuant to the Bank Credit
Agreement, so long as the aggregate principal amount of all
Indebtedness outstanding under the Bank Credit Agreement does not, at
any time, exceed the aggregate amount of borrowing availability from
time to time allowed under the Bank Credit Agreement that determine
availability on the basis of a borrowing base or other asset-based
calculation, if available and (y) other Indebtedness up to $150
million in aggregate principal amount outstanding at any time;
provided, however, that in no event shall the aggregate principal
amount of such indebtedness exceed $450 million as of the date of such
Incurrence minus the aggregate amount of Indebtedness permanently
repaid as provided under Section 4.09;
(ii) Indebtedness owed to and held by the Guarantor or a
Wholly Owned Restricted Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock which results in
any such Wholly Owned Restricted Subsidiary ceasing to be a Wholly
Owned Restricted Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Guarantor or another Wholly Owned
Restricted Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Indebtedness by the issuer thereof;
(iii) the Notes;
(iv) Indebtedness Incurred pursuant to the Comerica
Agreement, so long as the aggregate principal amount of all
Indebtedness outstanding thereunder does not exceed $15 million at any
time;
(v) Indebtedness outstanding on the Issue Date (other
than Indebtedness described in clause (i), (ii), (iii) or (iv) of this
Section 4.03);
(vi) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (iii) or (v)
above or clause (ix) below, or this clause (vi);
(vii) Indebtedness consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the
Guarantor and its Restricted Subsidiaries pursuant to the Indenture;
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(viii) Indebtedness under Currency Agreements entered into
in the ordinary course of business for the purpose of limiting risks
that arise in the ordinary course of business of the Guarantor and its
Restricted Subsidiaries;
(ix) Indebtedness Incurred to finance capital expenditures
in an aggregate principal amount not to exceed $20 million in any
fiscal year; and
(x) Indebtedness in an aggregate principal amount which,
together with the principal amount of all other Indebtedness of the
Guarantor and its Restricted Subsidiaries outstanding on the date of
such Incurrence (other than Indebtedness permitted by clauses (i)
through (ix) above or paragraph (a)), does not exceed $40 million.
(c) Notwithstanding the foregoing, the Guarantor and the Company
shall not Incur any Indebtedness pursuant to the foregoing paragraph (b) if the
proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to the
Notes or the Parent Guarantee, as the case may be, at least to the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Guarantor, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses
and (ii) an item of Indebtedness may be divided and classified in more than one
of the types of Indebtedness described above.
SECTION 4.04 Limitation on Senior Subordinated Indebtedness. The
Company or the Guarantor, as the case may be, will not Incur any Indebtedness
that is expressly made subordinate in right of payment to any Senior
Indebtedness of the Company or the Guarantor, as the case may be, unless such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the Notes, with respect to
the Company, or the Parent Guarantee with respect to the Guarantor; provided
that the foregoing limitation shall not apply to distinctions between
categories of Senior Indebtedness of the Company or the Guarantor that exist by
reason of any Liens or Guarantees arising or created in respect of some but not
all of such Senior Indebtedness.
SECTION 4.05 Limitation on Restricted Payments. (a) The Guarantor
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Guarantor or such
Restricted Subsidiary makes such Restricted Payment:
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(1) a Default shall have occurred and be continuing (or
would result therefrom);
(2) the Guarantor is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of Section 4.03; or
(3) the aggregate amount of such Restricted Payment and
all other Restricted Payments since the Issue Date would exceed the
sum of:
(A) 50% of the Adjusted Consolidated Net Income
accrued during the period (treated as one accounting period)
from the beginning of the fiscal quarter immediately following
the fiscal quarter during which the Notes are originally
issued to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment
(or, in case such Adjusted Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by
the Guarantor or the Company from the issuance or sale of its
Capital Stock (other than Disqualified Stock) subsequent to
the Issue Date (other than an issuance or sale to a Subsidiary
of the Guarantor and other than an issuance or sale to an
employee stock ownership plan or to a trust established by the
Guarantor or any of its Subsidiaries for the benefit of their
employees);
(C) the aggregate Net Cash Proceeds received by
the Guarantor or the Company from the issue or sale subsequent
to the Issue Date of its Capital Stock (other than
Disqualified Stock) to an employee stock ownership plan;
provided, however, that if such employee stock ownership plan
incurs any Indebtedness with respect thereto, such aggregate
amount shall be limited to an amount equal to any increase in
the Consolidated Net Worth of the Guarantor resulting from
principal repayments made by such employee stock ownership
plan with respect to such Indebtedness;
(D) the amount by which Indebtedness of the
Guarantor or any Restricted Subsidiary is reduced on the
Guarantor's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Guarantor) subsequent to
the Issue Date, of any Indebtedness of the Guarantor or any
Restricted Subsidiary convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Guarantor (less
the amount of any cash, or the fair value of any other
property, distributed by the Guarantor or any Restricted
Subsidiary upon such conversion or exchange); and
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(E) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances or
other transfers of assets, in each case to the Guarantor or
any Restricted Subsidiary from or with respect to Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the
Guarantor's equity interest in such Subsidiary) of the Fair
Market Value of the net assets of an Unrestricted Subsidiary
at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, however, that the foregoing
sum shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and
treated as a Restricted Payment) by the Guarantor or any
Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations of the Guarantor or a Restricted Subsidiary
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Guarantor (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Guarantor); provided, however, that (A) such
purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such
sale shall be excluded from the calculation of amounts under clause
(3)(B) of paragraph (a) above (but only to the extent that such Net
Cash Proceeds were used to purchase or redeem such Capital Stock as
provided in this clause (i));
(ii) any purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of Subordinated Obligations
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Refinancing Indebtedness which is permitted to be
Incurred pursuant to clause (b)(vi) of Section 4.03; provided,
however, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this covenant; provided, however, that at the time
of payment of such dividend, no other Default shall have occurred and
be continuing (or result therefrom); and provided further, however,
that such dividends shall be included in the calculation of the amount
of Restricted Payments;
(iv) dividends paid from the Net Cash Proceeds received by
the Guarantor from the issue or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an issue
or sale to a Subsidiary of the Guarantor and other than an issue or
sale to an employee stock ownership plan or to a trust established by
the
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Guarantor or any of its Subsidiaries for the benefit of their
employees) in an aggregate amount not to exceed 6% of such Net Cash
Proceeds in any calendar year; provided, however, that such dividends
shall be included in the calculation of the amount of Restricted
Payments;
(v) the repurchase of shares of, or options to purchase
shares of, common stock or stock equivalents of the Guarantor or any
of its Subsidiaries from employees, former employees, directors or
former directors of the Guarantor or any of its Subsidiaries (or
permitted transferees of such employees, former employees, directors
or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors of the Guarantor or the Company,
under which such individuals purchase or sell or are granted the
option to purchase or sell, shares of such common stock or stock
equivalents; provided, however, that the aggregate amount of such
repurchases shall not exceed $1 million in any calendar year and $5
million in the aggregate; provided further, however, that such
repurchases shall be excluded in the calculation of the amount of
Restricted Payments; or
(vi) other Restricted Payments in an aggregate amount not
to exceed $10 million; provided, however, that such Restricted
Payments shall be excluded in the calculation of the amount of
Restricted Payments.
SECTION 4.06 Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Guarantor shall not, and shall not permit any
Restricted Subsidiary other than the Company to, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction
on the ability of any Restricted Subsidiary other than the Company; (a) to pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness owed to the Company or another Restricted Subsidiary, (b) to make
any loans or advances to the Company or another Restricted Subsidiary or (c) to
transfer any of its property or assets to the Company or another Restricted
Subsidiary, except: (i) any encumbrance or restriction pursuant to an agreement
in effect at or entered into on the Issue Date; (ii) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company) and outstanding
on such date; (iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or (ii) of
this Section 4.06 or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are no
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less favorable to the Noteholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such agreements; (iv) any
such encumbrance or restriction consisting of customary nonassignment provisions
related to intellectual property and in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease or the property
leased thereunder; (v) in the case of clause (c) above, restrictions contained
in security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements or mortgages; (vi) any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered into
for the sale or disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary pending the closing of such sale or
disposition; and (vii) any encumbrance or restriction pursuant to an agreement
relating to Indebtedness permitted by clause (iii) of paragraph (b) of Section
4.07.
SECTION 4.07 Limitation on the Sale or Issuance of Capital Stock and
Indebtedness of Restricted Subsidiaries. (a) The Guarantor will not sell, and
will not permit any Restricted Subsidiary other than the Company, directly or
indirectly, to issue or sell, any shares of Capital Stock of such Restricted
Subsidiary (including options, warrants or other rights to purchase shares of
such Capital Stock), except (i) to the Guarantor, the Company or a Wholly Owned
Restricted Subsidiary other than the Company; (ii) issuances of director's
qualifying shares or sales to foreign nationals of shares of Capital Stock of
foreign Restricted Subsidiaries, to the extent required by applicable law; and
(iii) as Asset Sales and Asset Dispositions permitted under Section 4.09.
(b) The Guarantor will not permit any Restricted Subsidiary other than
the Company, directly or indirectly, to Incur any Indebtedness except (i)
Indebtedness of such Restricted Subsidiary existing on the Issue Date or the
time such Restricted Subsidiary was acquired by the Guarantor (other than
Indebtedness Incurred in connection with or anticipation of such acquisition);
(ii) Indebtedness permitted pursuant to clause (i), (ii), (iv), (v), (vi) (to
the extent that such Refinancing Indebtedness Refinances any Indebtedness of
such Restricted Subsidiary), (vii), (viii) or (ix) of paragraph (b) of Section
4.03; and (iii) other Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of all Restricted Subsidiaries other than
the Company outstanding on the date of such Incurrence (other than Indebtedness
permitted by clause (i) or (ii) of this paragraph (b)), does not exceed the
greater of (A) $50 million or (B) an amount equal to 1.5 times the aggregate
amount of Consolidated EBITDA for the then most recent four fiscal quarters
prior to the date of such Incurrence for which reports have been filed with the
SEC pursuant to Section 4.17.
(c) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Guarantor, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of
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the above clauses and (ii) an item of Indebtedness may be divided and classified
in more than one of the types of Indebtedness described above.
SECTION 4.08 Limitation on Affiliate Transactions. (a) The Guarantor
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Guarantor (an "Affiliate Transaction") unless
the terms thereof (1) are no less favorable to the Guarantor or such Restricted
Subsidiary than those that could reasonably be expected to be obtained at the
time of such transaction in arm's-length dealings with a Person who is not such
an Affiliate, (2) if such Affiliate Transaction involves an amount in excess of
$10 million, is set forth in writing and has been approved by a majority of the
members of the Board of Directors of the Guarantor or the Company, as the case
may be, having no personal stake in such Affiliate Transaction or (3) if such
Affiliate Transaction involves an amount in excess of $20 million, has been
determined by a nationally recognized investment banking firm or other qualified
independent appraiser to be fair, from a financial standpoint, to the Guarantor
and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) transactions between or among the Guarantor and/or its Restricted
Subsidiaries; (ii) Restricted Payments, Permitted Investments and other
transactions and payments that are permitted by Section 4.05; (iii) loans,
transactions and arrangements or advances to officers, directors, employees and
agents in the ordinary course of business in an aggregate principal amount not
to exceed, in the case of loans or advances, $3 million outstanding at any one
time, provided that with respect to any transaction or arrangement which is
reasonably expected to involve more than $1 million, such transaction or
arrangement shall be approved by a majority of the members of the Board of
Directors of the Guarantor having no personal stake in such transaction or
arrangement; (iv) compensation, indemnification and other benefits paid or made
available (x) pursuant to employment and consultant agreements, (y) for and in
connection with services actually rendered and generally comparable to those
paid or made by entities engaged in the same or similar business (including,
reimbursement for advancement of out-of-pocket expenses and directors' and
officers' liability insurance), or (z) indemnification under the Guarantor's and
any Subsidiary's charter, by-laws or other organizational documents; (v)
transactions, expenses and payments pursuant to the Registration Rights
Agreement; (vi) transactions between and among the Guarantor and its
Subsidiaries or between or among Subsidiaries of the Guarantor, provided that
any ownership interest in any such Subsidiary which is not beneficially owned
directly or indirectly by the Guarantor or any of its Subsidiaries is not
beneficially owned by an Affiliate of the Guarantor other than by virtue of the
direct or indirect ownership interest in such Subsidiary held (in the aggregate)
by the Guarantor and/or one or more of its Subsidiaries; (vii) transactions
between or among the Guarantor and its Affiliates not involving in excess of $1
million during any fiscal year; and (viii) any acquisition by the Guarantor of
Capital Stock (other than Disqualified Stock) of the Guarantor or any Subsidiary
thereof and any capital contribution by the Guarantor to any Restricted
Subsidiary.
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SECTION 4.09 Limitation on Asset Sales. The Guarantor will not, and
will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by the Guarantor or such Restricted Subsidiary is
at least equal to the Fair Market Value of the assets sold or disposed of, and
(ii) at least 75% of the consideration received consists of cash or Temporary
Cash Investments; provided, that the amount of any liabilities of the Guarantor
or any Subsidiary that are assumed by the transferee in such Asset Sale shall be
deemed to be cash or cash equivalents, as the case may be, for purposes of this
clause (ii), provided further that this clause (ii) shall not apply to any sale
or other disposition of assets as a result of a foreclosure (or a secured party
taking ownership of such assets in lieu thereof) or any involuntary proceeding
in which the Guarantor and its Restricted Subsidiaries cannot, directly or
indirectly, determine the type of proceeds received from such sale or other
disposition. In the event and to the extent that the Net Cash Proceeds received
by the Guarantor or any of its Restricted Subsidiaries from one or more Asset
Sales occurring on or after the Issue Date in any period of 12 consecutive
months exceed $20 million, then the Guarantor shall or shall cause the relevant
Restricted Subsidiary to (i) (A) within twelve months after the date Net Cash
Proceeds so received exceed $20 million, apply an amount equal to such excess
Net Cash Proceeds to permanently repay Senior Indebtedness of the Guarantor or
Indebtedness of any Restricted Subsidiary (and to the extent that such Senior
Indebtedness or Indebtedness, as the case may be, was Incurred under a revolving
credit or similar arrangement, the permanent reduction or cancellation of the
commitment thereunder), in each case owing to a Person other than the Guarantor
or any of its Restricted Subsidiaries or (B)(x) within twelve months after the
date Net Cash Proceeds so received exceed $20 million, invest an equal amount,
or the amount not so applied pursuant to clause (A) or (y) within eighteen
months after the Net Cash Proceeds so received exceed $20 million, enter into a
definitive agreement committing to invest an equal amount, or the amount not
applied pursuant to clause (A) or (B)(x) not later than 24 months after the date
Net Cash Proceeds so received exceeded $20 million, in each case in property or
assets (other than current assets) of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Guarantor and its Restricted Subsidiaries
existing on the date of such investment and (ii) apply (no later than the end of
the 12-month period referred to in clause (i) (A)or the 24-month period referred
to in clause (i)(B)(y)), as applicable, such excess Net Cash Proceeds (to the
extent not applied or committed to be applied pursuant to clause (i)) as
provided in the following paragraph of this Section 4.09. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such 12-month period or 24-month period, as the case may be, of
the preceding sentence and not applied (or committed to be applied) as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.09 totals at least $20 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate a similar offer to
purchase from the Holders and the holders of any Senior
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Indebtedness or any other Indebtedness ranking pari passu with the Notes which
by its terms requires the Company to make a similar offer to purchase, on a pro
rata basis, an aggregate principal amount of Notes, Senior Indebtedness or such
other Indebtedness (if any) equal to the Excess Proceeds on such date, at a
purchase price equal to 100% of the principal amount of the Notes, Senior
Indebtedness or such other Indebtedness (if any), plus, in each case, accrued
interest (if any) to the date of purchase.
SECTION 4.10 Limitation on Liens. The Guarantor shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit
to exist any Lien (other than Permitted Liens) of any nature whatsoever on any
of its properties (including Capital Stock of a Restricted Subsidiary), whether
owned at the Issue Date or thereafter acquired, to secure any Indebtedness of
the Guarantor or the Company, without effectively providing that the Notes or,
in the case of a Lien on the assets or property of the Guarantor, the Parent
Guarantee, as the case may be, shall be secured equally and ratably with (or
prior to) the obligations so secured for so long as such obligations are so
secured.
SECTION 4.11 Limitation on Sale/Leaseback Transactions. The Guarantor
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) the Guarantor
or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an
amount equal to the Attributable Debt with respect to such Sale/Leaseback
Transaction pursuant to Section 4.03 and (B) create a Lien on such property
securing such Attributable Debt without equally and ratably securing the Notes
pursuant to Section 4.10, (ii) the net proceeds received by the Guarantor or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the Fair Market Value of such property and (iii) the Guarantor or
the Company, as the case may be, applies the proceeds of such transaction in
compliance with Section 4.09.
SECTION 4.12 Repurchase of Notes upon a Change of Control. The Company
must commence, within 30 days of the occurrence of a Change of Control, and
within 60 days thereof consummate, an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest (if any) to the date of purchase.
SECTION 4.13 Existence. Subject to the other provisions of this
Indenture including Articles Four and Five of this Indenture, the Guarantor will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate or other legal existence and the corporate or other
legal existence of each of the Restricted Subsidiaries in accordance with the
respective organizational documents of the Guarantor and each such Restricted
Subsidiary and, as the same may be amended from time to time, the rights
(charter and statutory) and corporate franchises of the Guarantor and each
Restricted Subsidiary; provided that the Guarantor shall not be required to
preserve any right, or franchise, or existence, if the Board of Directors of the
Guarantor or the Company determines that preservation thereof is no longer
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desirable in the conduct of the business of the Guarantor and its Restricted
Subsidiaries taken as a whole; and provided further that any Restricted
Subsidiary may consolidate with, merge into, or sell, convey, transfer, lease or
otherwise dispose of all or part of its property and assets to the Guarantor,
the Company or any Wholly Owned Restricted Subsidiary.
SECTION 4.14 Payment of Taxes and Other Claims. The Guarantor will pay
or discharge and shall cause each of its Subsidiaries to pay or discharge, or
cause to be paid or discharged, before the same shall become delinquent (i) all
material taxes, assessments and governmental charges levied or imposed upon the
Guarantor or any such Subsidiary and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid would by law become a Lien upon the
property of the Guarantor or any such Subsidiary except (i) as contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been established or (ii) where the failure to effect such payment is not
adverse in any material respect to the Holders.
SECTION 4.15 Notices of Defaults. In the event that the Guarantor or
the Company becomes aware of any Default or Event of Default, the Guarantor or
the Company, as the case may be, promptly after it becomes aware thereof, will
give written notice thereof to the Trustee.
SECTION 4.16 Compliance Certificates. The Company and the Guarantor
shall deliver to the Trustee each year, within 120 days after the last day of
the Company's immediately preceding fiscal year, an Officers' Certificate
stating that in the course of the performance by the signers of their duties as
Officers of the Company or the Guarantor, as the case may be, they would
normally have knowledge of any Default or Event of Default and whether or not
the signers know of any Default or Event of Default that occurred during such
fiscal year. For purposes of this Section 4.16, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If they do know of such a Default or Event of
Default, the certificate shall describe any such Default or Event of Default and
its status.
SECTION 4.17 SEC Reports and Reports to Holders. Whether or not the
Guarantor is required to file reports with the SEC, for so long as any Notes are
outstanding, the Guarantor shall file with the SEC all such reports and other
information as it would be required to file with the SEC by Sections 13(a) or
15(d) under the Exchange Act, if it were subject thereto. The Guarantor shall
supply the Trustee with copies of such reports and other information and shall
supply to the Trustee for forwarding to each Holder, without cost to such
Holder, copies of such annual and quarterly reports containing financial
statements.
SECTION 4.18 Waivers of Stay, Extension or Usury Laws. Each of the
Guarantor and the Company covenants (to the extent that it may lawfully do so)
that it will not at any time voluntarily insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or
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forgive the Guarantor or the Company, as the case may be, from paying all or any
portion of the principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
that would excuse compliance with the covenants or excuse the performance of its
obligations under this Indenture; and (to the extent that it may lawfully do so)
each of the Guarantor and Company hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE V
Successor Corporation
SECTION 5.01 When Guarantor or Company May Merge, Etc. Each of the
Guarantor and the Company, as the case may be, will not consolidate with, merge
with or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (computed on a consolidated basis)
in one transaction or a series of related transactions to, any Person or permit
any Person to merge with or into the Guarantor or the Company, as the case may
be, unless:
(i) the Guarantor or the Company, as the case may be, shall be
the continuing Person, or the Person (if other than the Guarantor or
the Company) formed by such consolidation or into which the Guarantor
or the Company is merged or that acquired or leased such property and
assets of the Guarantor or the Company shall be a corporation organized
and validly existing under the laws of the United States of America or
any jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Notes or all of the obligation
of the Guarantor on the Parent Guarantee, as the case may be, and under
this Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis, the Guarantor or the Company, as the case may be, or
any Person becoming the successor obligor of the Notes or the Parent
Guarantee shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Guarantor or the Company, as the case
may be, immediately prior to such transaction;
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(iv) immediately after giving effect to such transaction on a
pro forma basis the Guarantor, the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, could Incur at
least $1.00 of Indebtedness under the first paragraph of Section
4.03(a) without violating the terms thereof; and
(v) the Guarantor or the Company, as the case may be, delivers
to the Trustee an Officer's Certificate (attaching the arithmetic
computations to demonstrate compliance with clauses (iii) and (iv)) and
Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this
provision and that all conditions precedent provided for herein
relating to such transaction have been complied with;
provided, however, that (x) clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Guarantor or the
Company, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state of incorporation of
the Guarantor or the Company; and provided further, however, that any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations and (y) clauses (iii) and (iv) above do not apply to any transaction
between the Guarantor or Company and any Wholly Owned Restricted Subsidiary or
between the Guarantor and the Company.
SECTION 5.02 Successor Substituted. Upon any consolidation or merger,
or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Guarantor or the Company in
accordance with Section 5.01 of this Indenture, the successor Person formed by
such consolidation or into which the Guarantor or the Company is merged or to
which such sale, conveyance, transfer, lease or other disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Guarantor or the Company under this Indenture with the same effect as if
such successor Person had been named as the Guarantor or the Company herein and
the Guarantor or the Company, as the case may be, shall be relieved of all
obligations under the Indenture and under the Parent Guarantee or the Notes, as
the case may be..
ARTICLE VI
Default and Remedies
SECTION 6.01 Events of Default. An "Event of Default" shall occur with
respect to the Notes if:
(a) the Company defaults in the payment of the principal of
(or premium, if any, on) any Note when the same becomes due and payable
at maturity, upon
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acceleration, redemption or otherwise, whether or not such payment is
prohibited by Article Ten;
(b) the Company defaults in the payment of interest on any
Note when the same becomes due and payable, and such default continues
for a period of 30 days, whether or not such payment is prohibited by
Article Ten;
(c) the Company or the Guarantor, as the case may be, defaults
in the performance of or breaches the provisions of Section 5.01 and
such default or breach continues for a period of 30 consecutive days
after written notice to the Company and the Guarantor, as the case may
be, by the Trustee or the Holders of 25% or more in aggregate principal
amount of the Notes;
(d) the Company or the Guarantor, as the case may be, defaults
in the performance of or breaches the provisions of Section 4.03,
Section 4.05, Section 4.06, Section 4.07, Section 4.08, Section 4.09
(other than a failure to purchase the Notes), Section 4.10, Section
4.11, Section 4.12 (other than a failure to purchase the Notes) and
Section 4.17 and such default or breach continues for a period of 30
consecutive days after written notice to the Company and the Guarantor
by the Trustee or the Holders of 25% or more in aggregate principal
amount of the Notes
(e) the Company or the Guarantor, as the case may be, defaults
in the performance of or breaches any other covenant or agreement of
the Company or the Guarantor, as the case may be, in this Indenture or
under the Notes or the Parent Guarantee (other than a default specified
in clause (a), (b), (c) or (d) above) and such default or breach
continues for a period of 60 consecutive days after written notice to
the Company and the Guarantor, as the case may be, by the Trustee or
the Holders of 25% or more in aggregate principal amount of the Notes;
(f) there occurs with respect to any issue or issues of
Indebtedness of the Company or the Guarantor having an outstanding
principal amount of $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable prior
to its Stated Maturity and such Indebtedness has not been discharged in
full or such acceleration has not been rescinded or annulled within any
applicable grace period and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such
defaulted payment shall not have been made, waived or extended within
any applicable grace period;
(g) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all
such final judgments or orders
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against all such Persons (treating self-insurance as not so covered)
shall be rendered against the Company, the Guarantor or any Restricted
Subsidiary and shall remain outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within
10 days after notice to the Company and the Guarantor by the Trustee or
the Holders of 25% or more in aggregate principal amount of the Notes;
(h) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company, the Guarantor
or any Significant Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company,
the Guarantor or any Significant Subsidiary or for all or substantially
all of the property and assets of the Company, the Guarantor or any
Significant Subsidiary or (C) the winding up or liquidation of the
affairs of the Company, the Guarantor or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days;
(i) the Company, the Guarantor or any Significant Subsidiary
(A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents
to the entry of an order for relief in an involuntary case under any
such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company, the Guarantor or any Significant
Subsidiary or for all or substantially all of the property and assets
of the Company, the Guarantor or any Significant Subsidiary or (C)
effects any general assignment for the benefit of creditors; or
(j) the Parent Guarantee ceases to be in full force and effect
(other than in accordance with the terms of the Parent Guarantee) or
the Guarantor denies or disaffirms its obligations under the Parent
Guarantee if such default continues for a period of 10 days after
notice thereof to the Company and the Guarantor by the Trustee or the
Holders of 25% or more in aggregate principal amount of the Notes.
SECTION 6.02 Acceleration. If an Event of Default (other than an Event
of Default specified in clause (h) or (i) of Section 6.01 that occurs with
respect to the Company) occurs and is continuing under this Indenture, the
Trustee by written notice to the Company and the Guarantor, or the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding by written
notice to the Company, the Guarantor and the Trustee (the "Acceleration
Notice"), may, declare the principal of, premium, if any, and accrued interest
on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal of, premium, if any, and accrued interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (f) of Section 6.01 has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (f) shall be remedied or
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cured by the Company or the Guarantor or waived by the holders of the relevant
Indebtedness within 30 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in clause (h) or (i) of Section 6.01
occurs with respect to the Company, the principal of, premium, if any, and
accrued interest on the Notes then outstanding shall ipso facto became and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in principal amount of the
outstanding Notes by written notice to the Trustee may rescind any such
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
SECTION 6.03 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding.
SECTION 6.04 Waiver of Past Defaults. Subject to Section 6.02, the
Holders of at least a majority in principal amount of the outstanding Notes, by
notice to the Trustee, may waive an existing Default or Event of Default and its
consequences, except a Default in (i) the payment of principal of, premium, if
any, or interest on any Note as specified in clause (a) or (b) of Section 6.01
or (ii) in respect of a covenant or provision of this Indenture, which under
Section 9.02 cannot be modified or amended without the consent of the Holder of
each outstanding Note 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 Event of Default or impair any right
consequent thereto.
SECTION 6.05 Control by Majority. The Holders of at least a majority in
aggregate principal amount of the outstanding Notes may 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; provided that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction, it being understood that
(subject to Section 7.01) the Trustee shall have no duty or obligation to
ascertain whether or not such actions or forebearances are unduly prejudicial to
such holders; and provided further that the Trustee may take any other action it
deems proper that is not inconsistent with any such direction received from
Holders of Notes pursuant to this Section 6.05.
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SECTION 6.06 Limitation on Suits. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy,
unless:
(i) such Holder has previously given to the Trustee
written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of outstanding Notes shall have made written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to comply with such request;
and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes have not given the
Trustee a direction that is inconsistent with such written request.
For purposes of Section 6.05 of this Indenture and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on such Holder's Note
on or after the respective due dates expressed on such Note, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08 Collection Suit by Trustee. If an Event of Default in
payment of principal, premium, if any, or interest specified in clause (a) or
(b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment
in its own name and as trustee of an express trust against the Company or any
other obligor of the Notes for the whole amount of principal, premium, if any,
and accrued interest remaining unpaid, together with interest on overdue
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principal, premium, if any, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the rate
specified in the Notes, and 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.
SECTION 6.09 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 (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.06) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.06. Nothing herein contained shall be
deemed to empower 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 Notes 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 6.10 Priorities. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.06;
Second: to the holders of Senior Indebtedness, as and to the
extent required by Article Ten;
Third: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Notes 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 Notes for principal, premium, if any,
and interest, respectively; and
Fourth: to the Company or any other obligors of the Notes,
as their interests may appear.
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The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs. 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, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than
25% in principal amount of the outstanding Notes.
SECTION 6.12 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 Guarantor,
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 Guarantor, the Company, Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.13 Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.08, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.14 Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder 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 Six 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.
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ARTICLE VII
Trustee
SECTION 7.01 Rights of Trustee. (a) Except during the continuance
of an Event of Default,
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and certificates
or opinions furnished to it and conforming to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, in its own negligent
failure to act, or its own willful misconduct, except that:
(i) 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; and
(ii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith and which does
not constitute negligence and which it believes to be authorized or
within its rights or powers conferred upon it by this Indenture.
(d) Subject to TIA Sections 315(a) through (d):
(i) the Trustee may rely upon any document believed by it to
be genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document;
(ii) before the Trustee acts or refrain from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 12.04. The Trustee
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shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion;
(iii) 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, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(iv) the Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or
within its rights or powers; provided that the Trustee's conduct does
not constitute negligence or bad faith;
(v) no provision of the Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it;
(vi) 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;
(vii) the Trustee may consult with counsel and the advice of
such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(viii) 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,
during normal business hours and upon reasonable advance notice to the
Company, to examine the books, records and premises of the Company,
personally or by agent or attorney;
(ix) the Trustee may execute any of the trusts or powers
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;
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(x) the Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder; and
(xi) the Trustee shall not be deemed to have notice of the
occurrence of a Change of Control or of events which would require an
Offer to Purchase until such time as the Trustee receives notice
thereof from the Company as required in Sections 4.09 and 4.12,
respectively.
SECTION 7.02 Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.03 Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.04 Notice of Default. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
90 days after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
SECTION 7.05 Reports by Trustee to Holders. Within 60 days after each
May 15, beginning with May 15, 1998, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
SECTION 7.06 Compensation and Indemnity. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services.
The compensation of the Trustee shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of--pocket expenses and advances incurred or made
by it. Such expenses shall include the reasonable compensation and expenses of
the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
willful misconduct, on its part in
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connection with the acceptance or administration of this Indenture and its
duties under this Indenture and the Notes, including the reasonable costs and
expenses of defending itself against or investigating any claim or liability and
of complying with any process served upon it or any of its officers in
connection with the exercise or performance of any of its powers or duties under
this Indenture and the Notes. The Trustee shall notify the Company promptly of
any claim asserted against the Trustee for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay reasonable fees
and expenses of such counsel. The Company need not pay for any settlements made
without its consent; provided that such consent shall not be unreasonably
withheld. The Company need not reimburse any expense or indemnify or hold
harmless against any loss or liability incurred by the Trustee through
negligence or willful misconduct.
The Trustee shall have a claim prior to the Notes on all money or
property held or collected by the Trustee, in its capacity as Trustee, for any
amount owing it pursuant to this Section 7.06, except money or property held in
trust to pay principal of, premium, if any, and interest on particular Notes.
If the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in clause (h) or (i) of Section 6.01, the
expenses and the compensation for the services will be intended to constitute
expenses of administration under Title 11 of the United States Bankruptcy Code
or any applicable federal or state law for the relief of debtors.
The provisions of this Section 7.06 shall survive the termination of
this Indenture.
SECTION 7.07 Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.07.
The Trustee may resign by so notifying the Company in writing at least
30 days prior to the date of the proposed resignation. The Holders of a majority
in principal amount of the outstanding Notes may remove the Trustee by so
notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.09;
(ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the
Trustee or its property; or
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(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance pursuant to this
Section 7.07 within 30 days after the retiring Trustee resigns or is removed,
the retiring Trustee, the Company or the Holders of a majority in principal
amount of the outstanding Notes may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.06, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If the Trustee fails to comply with Section 7.09, any Holder who
satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
The Company shall give written notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders and the Representatives. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section
7.07, the Company's obligation under Section 7.06 shall continue for the benefit
of the retiring Trustee.
SECTION 7.08 Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.09 Eligibility. Any Trustee serving hereunder shall (a)
satisfy the requirements of TIA Section 310(a)(1) and (b) have a reported
capital and surplus aggregating at least $50,000,000.
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SECTION 7.10 Money Held in Trust. Money held in trust by the Trustee
need not be segregated from other funds except to the extent required by law and
except for money held in trust under Article Eight of this Indenture.
ARTICLE VIII
Discharge of Indenture
SECTION 8.01 Termination of Company's Obligations. Except as otherwise
provided in this Section 8.01, the Company may terminate its obligations under
the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes
that are paid pursuant to Section 4.01 or Notes for whose payment money
or securities have theretofore been held in trust and thereafter repaid
to the Company, as provided in Section 8.05) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by
it hereunder; or
(ii) (A) the Notes have become due and payable, mature within
one year or all of them are to be called for redemption within one year
under arrangements satisfactory to the Trustee for giving the notice of
redemption, (B) the Company irrevocably deposits in trust with the
Trustee during such one-year period, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the Trustee, as
trust funds solely for the benefit of the Holders for that purpose,
money or U.S. Government Obligations sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Notes to maturity or
redemption, as the case may be all other sums payable by it hereunder,
(C) no Default or Event of Default with respect to the Notes shall have
occurred and be continuing on the date of such deposit, (D) such
deposit will not result in a breach or violation of, or constitute a
default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound and (E) the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations
under Section 7.06 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.13, 4.01, 4.02, 7.06, 7.07, 8.04, 8.05, 8.06 and Article Ten (with respect to
payments in respect of the Notes other than with the assets held in trust with
the Trustee as described in the foregoing clause (ii)) shall survive until the
Notes are no longer
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outstanding. Thereafter, only the Company's obligations in Sections 7.06, 8.04,
8.05 and 8.06 shall survive. After any such irrevocable deposit, the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under the Notes and this Indenture except for those surviving
obligations specified above.
SECTION 8.02 Defeasance and Discharge of Indenture. The Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (i) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same, except
as to (A) rights of registration of transfer and exchange, (B) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Notes, (C) rights of
Holders to receive payments of principal thereof and interest thereon, (D) the
Company's obligations under Section 4.02, (E) the rights, obligations and
immunities of the Trustee hereunder and (F) the rights of the Holders as
beneficiaries of this Indenture with respect to the property so deposited with
the Trustee payable to all or any of them; provided that the following
conditions shall have been satisfied:
(i) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.09) and conveyed all right, title and interest for the benefit of the
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of the Holders as
security for payment of the principal of, premium, if any, and
interest, if any, on the Notes, and dedicated solely to, the benefit of
the Holders, in and to (1) money in an amount, (2) U.S. Government
Obligations that, through the payment of interest, premium, if any, and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to in this clause (i), money in an amount or (3) a combination
thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and accrued interest on the outstanding
Notes at the Stated Maturity of such principal or interest; provided
that the Trustee shall have been irrevocably instructed to apply such
money or the proceeds of such U.S. Government Obligations to the
payment of such principal, premium, if any, and interest with respect
to the Notes;
(ii) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound and
is permitted by Article Ten;
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(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(iv) the Company shall have delivered to the Trustee (1)
either (x) a ruling directed to the Trustee received from the Internal
Revenue Service to the effect that the Holders 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 8.02 and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such option had
not been exercised or (y) an Opinion of Counsel to the same effect as
the ruling described in clause (x) above based upon and accompanied by
a ruling to that effect published by the Internal Revenue Service,
unless there has been a change in the applicable federal income tax law
since the date of this Indenture such that a ruling from the Internal
Revenue Service is no longer required and (2) an Opinion of Counsel to
the effect that the creation of the defeasance trust does not violate
the Investment Company Act of 1940; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day period
referred to in the first paragraph of this Section 8.02, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day period with respect to this Section 8.02, the Company's obligations
in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.13, 4.01, 4.02, 7.06,
7.07, 8.04, 8.05, 8.06 and Article Ten (with respect to payments in respect of
the Notes other than with the assets held in trust as described in this Section
8.02) shall survive until the Notes are no longer outstanding. Thereafter, only
the Company's obligations in Sections 7.06, 8.05 and 8.06 shall survive. If and
when a ruling from the Internal Revenue Service or an Opinion of Counsel
referred to in clause (iv)(1) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of the
Company's obligations under Section 4.01, then the Company's obligations under
such Section 4.01 shall cease upon delivery to the Trustee of such ruling or
Opinion of Counsel and compliance with the other conditions precedent provided
for herein relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
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SECTION 8.03 Defeasance of Certain Obligations. The Company may omit to
comply with any term, provision or condition set forth in clauses (iii) and (iv)
of Section 5.01 and Sections 4.03 through 4.17, and clause (c) of Section 6.01
with respect to clauses (iii) and (iv) of Section 5.01, clauses (d) and (e) of
Section 6.01 with respect to Sections 4.03 through 4.17, clauses (f) and (g) of
Section 6.01, and clauses (h) and (i) of Section 6.01 with respect to
Significant Subsidiaries shall be deemed not to be Events of Default, and
Article Ten and Article Eleven shall not apply to the money and/or U.S.
Government Obligations held by the trust referred to in clause (i) below, in
each case with respect to the outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.09) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to in this clause (i), money in an amount or (C) a combination
thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Notes;
(ii) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound and
is permitted by Article Ten;
(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
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(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940 and (B) the Holders
will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04 Application of Trust Money. Subject to Sections 8.05 and
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 8.05 Repayment to Company. Subject to Sections 7.06, 8.01, 8.02
and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years. After payment to the Company,
Holders entitled to such money must look to the Company for payment as general
creditors unless an applicable law designates another Person, and all liability
of all Trustee and such Paying Agent with respect to such money shall cease.
SECTION 8.06 Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 8.01,
8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or
8.03, as the case may be; provided that, if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
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SECTION 8.07 Parent Guarantee. If the Company exercises its options
under this Article VIII, the Guarantor will be released from all of its
obligations with respect to the Parent Guarantee unless, and only to the extent,
the Company's obligations under this Indenture are reinstated pursuant to
Section 8.06.
ARTICLE IX
Amendments, Supplements and Waivers
SECTION 9.01 Without Consent of Holders. The Company, the Guarantor,
and the Trustee may amend or supplement this Indenture, the Notes and the Parent
Guarantee without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to
or in place of certificated Notes (provided that the uncertificated
Notes are issued in registered form for purposes of Section 163 (f) of
the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code);
(4) to add guarantees with respect to the Notes;
(5) to secure the Notes;
(6) to add to the covenants of the Guarantor or the
Company for the benefit of the Holders of the Notes or to surrender
any right or power conferred upon the Guarantor or the Company;
(7) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the TIA;
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee;
(9) to make any change that does not adversely affect the
rights of any Holder.
SECTION 9.02 With Consent of Holders. Subject to Sections 2.09, 6.04
and 6.07, without prior notice to the Holders, the Company and the Guarantor,
and the Trustee may amend this Indenture, the Notes and the Parent Guarantee
with the written consent of the Holders of not
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less than a majority in principal amount of the Notes then outstanding, and the
Holders of not less than a majority in principal amount of the Notes then
outstanding by written notice to the Trustee may waive future compliance by the
Guarantor or the Company with any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or adversely affect any right of repayment at the
option of any Holder of any Note, or change any place of payment where,
or change the currency in which, any Note or any premium or the
interest thereon is payable;
(ii) reduce the percentage in principal amount of outstanding
Notes the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain
provisions of this Indenture or certain Defaults and their consequences
provided for in this Indenture;
(iii) waive a Default in the payment of principal of, premium,
if any, or interest on, any Note;
(iv) modify any of the provisions of this Section 9.02, except
to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Note affected thereby; or
(v) modify any of the provisions of Article Ten (or the
definition of Senior Indebtedness) in a manner adverse to the Holders.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
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SECTION 9.03 Renovation and Effect of Consent. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note if the
Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver shall
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver or any other action required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then, notwithstanding the
immediately preceding paragraph, those persons who were Holders at such record
date (or their duly designated proxies) and only those persons shall be entitled
to consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder.
SECTION 9.04 Notation on or Exchange of Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Note about the changed terms and return it to the Holder and the
Trustee may place an appropriate notation on any Note thereafter authenticated.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue, and the Trustee shall authenticate, a new
Note that reflects the changed terms. Failure to make the appropriate notation
or to issue a new Note shall not affect the validity of such amendment,
supplement or waiver.
SECTION 9.05 Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and (subject to Section 7.01) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture. Subject to the preceding sentence, the Trustee
shall sign such amendment, supplement or waiver if the same does not affect the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.06 Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
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ARTICLE X
Subordination of Notes
SECTION 10.01 Notes Subordinated to Senior Indebtedness. The Company
and the Trustee each covenants and agrees, and each Holder, by its acceptance of
a Note, likewise covenants and agrees that all Notes shall be issued subject to
the provisions of this Article Ten; and each Person holding any Note, whether
upon original issue or upon transfer, assignment or exchange thereof, accepts
and agrees that the Notes shall, to the extent and in the manner set forth in
this Article Ten, be unsecured, general obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company, pari passu in right of payment with any future senior subordinated
indebtedness of the Company and senior in right of payment to any existing or
future subordinated indebtedness of the Company.
SECTION 10.02 No Payment on Notes in Certain Circumstances. (a) The
Company may not make any payment of any kind or character from any source on the
Notes or make any deposit pursuant to Article VIII or repurchase, redeem or
otherwise retire any Notes whether pursuant to the terms of the Notes or upon
acceleration or otherwise if (i) any Obligations with respect to any Designated
Senior Indebtedness of the Company are not paid when due, unless such nonpayment
has been cured or waived or ceases to exist or such Designated Senior
Indebtedness has been paid in full or (ii) any other default on Designated
Senior Indebtedness of the Company occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, the
default has been cured or waived, ceases to exist or any such acceleration has
been rescinded or such Designated Senior Indebtedness has been paid in full.
However, the Company may pay the Notes without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative or Representatives of all Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing.
(b) During the continuance of any default (other than a default
described in clause (i) or (ii) of paragraph (a) of this Section 10.02) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company shall not pay any principal of, premium if any, or interest
on the Notes (including any repurchase of any of the Notes or on account of the
redemption provisions of the Notes) for a period (a "Payment Blockage Period")
commencing upon receipt by the Trustee (with a copy to the Company) of written
notice (a "Blockage Notice") of such default from a Representative for the
holders of such Designated Senior Indebtedness specifying an election to effect
a Payment Blockage Period and ending 179 days thereafter (unless, in each case,
such Payment Blockage Period shall be terminated by (i) written notice to the
Trustee and the Company from the Person or Persons who gave such Blockage
Notice, (ii) because the default
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giving rise to such Blockage Notice is not longer continuing or (iii) because
such Designated Senior Indebtedness has been repaid in full). Notwithstanding
the provisions described in the immediately preceding sentence (but subject to
the provisions described in Section 10.03(a)) unless the holders of such
Designated Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company
must resume payments when due on the Notes after the end of such Payment
Blockage Period. Notwithstanding anything in this Indenture to the contrary, the
Notes shall not be subject to more than one Payment Blockage Period in any
consecutive 360 day period pursuant to this Section 10.02(b). For all purposes
of this Section 10.02(b), no event of default that existed or was continuing (it
being acknowledged that any subsequent event or condition that would give rise
to an event of default pursuant to any provision under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose) on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or shall be made, the basis for the commencement of a
second Payment Blockage Period by the representative for, or the holders of,
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
Notwithstanding the foregoing, so long as any Obligations remain
outstanding under the Credit Agreement dated as of March 12, 1997 described in
the definition of "Bank Credit Agreement," as in effect on the date hereof (and
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith) as the same may be amended, restated, modified
or supplemented from time to time (but not after (x) the date (even if such
Obligations remain outstanding) any agreement relating to any refunding,
replacement or refinancing of less than the entirety of the borrowings and
commitments then outstanding or permitted to be outstanding under such Credit
Agreement is effected or (y) the date such Credit Agreement is terminated and
all such Obligations due and payable at the time of such termination shall have
been paid in full ), then only a Representative of the holders of Senior
Indebtedness under such Credit Agreement shall be entitled to give a Blockage
Notice unless the Company and such Representative or holders agree otherwise in
a writing delivered to the Trustee.
(c) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any holder when such payment is prohibited by
Section 10.02(a) or 10.02(b) of this Indenture, the Trustee shall promptly
notify the holders of Designated Senior Indebtedness of such prohibited payment
and such payment shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of Designated Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Designated Senior Indebtedness may have been
issued, as their respective interests may appear.
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SECTION 10.03 Payment over Proceeds upon Dissolution, Etc. (a) Upon any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, in connection with any
dissolution or winding up or total or partial liquidation or reorganization of
the Company whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings or upon any general assignment for the benefit
of creditors or any other marshaling of assets for the benefit of creditors
generally, all amounts due or to become due upon all Senior Indebtedness
(including, without limitation, any interest accruing subsequent to an event of
bankruptcy whether or not such interest is an allowed claim enforceable against
the debtor under the United States Bankruptcy Code and all contingent claims or
obligations in connection with such Senior Indebtedness) shall first be paid in
full, in cash or cash equivalents, before the Holders or the Trustee on their
behalf shall be entitled to receive any payment by the Company on account of any
principal of, premium if any, or interest on the Notes (including any repurchase
of any of the Notes or on account of the redemption provisions of the Notes) or
any payment to acquire any of the Notes for cash, property or securities, or any
distribution with respect to the Notes of any cash, property or securities.
Before any payment may be made by, or on behalf of, the Company on any principal
of, premium if any, or interest on the Notes (including any repurchase of any of
the Notes or on account of the redemption provisions of the Notes) in connection
with any such dissolution, winding up, liquidation or reorganization, any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the Holders or the
Trustee on their behalf would be entitled, but for the provisions of this
Article Ten, shall be made by the Company or by a receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution or by the Holders or the Trustee if received by them or
it, directly to the holders of Senior Indebtedness (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders)
or their representatives or to any trustee or trustees under any other indenture
pursuant to which any such Senior Indebtedness may have been issued, as their
respective interests appear, to the extent necessary to pay all Obligations with
respect to such Senior Indebtedness in full, in cash or cash equivalents, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
(b) To the extent any payment of all or any portion of Senior
Indebtedness of the Company (whether by or on behalf of the Company as proceeds
of security or enforcement of any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then if such payment is recovered by, or paid over to, such receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Indebtedness or part thereof originally intended to be satisfied shall be deemed
to be reinstated and outstanding as if such payment had not occurred. To the
extent the obligation to repay all or any portion of any Senior Indebtedness is
declared to be fraudulent,
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invalid, or otherwise set aside under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then the obligation so declared
fraudulent, invalid or otherwise set aside (and all other amounts that would
come due with respect thereto had such obligation not been affected) shall be
deemed to be reinstated and outstanding as Senior Indebtedness for all purposes
hereof as if such declaration, invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or any Holder at a time when
such payment or distribution is prohibited by Section 10.03(a) of this Indenture
and before all Obligations in respect of Senior Indebtedness are paid in full,
in cash or cash equivalents, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to the
holders of Senior Indebtedness (pro rata to such holders on the basis of such
respective amount of Senior Indebtedness held by such holders) or their
representatives, or to the trustee or trustees under any indenture pursuant to
which any such Senior Indebtedness may have issued, as their respective
interests appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full, in
cash or Cash equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(d) The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the sale, conveyance, transfer, lease or other disposition of
all or substantially all of its property and assets to another corporation upon
the terms and conditions provided in Article Five of this Indenture shall not be
deemed a dissolution, winding up, liquidation or reorganization for the purposes
of this Section 10.03 if such other corporation shall, as a part of such
consolidation, merger, sale, conveyance, transfer, lease or other disposition,
comply (to the extent required) with the conditions stated in Article Five of
this Indenture.
SECTION 10.04 Subrogation. (a) Upon the payment in full of all Senior
Indebtedness in cash or cash equivalents, the Holders shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such Senior
Indebtedness until the principal of, premium, if any, and interest on the Notes
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders or the Trustee on their behalf would be entitled
except for the provisions of this Article Ten, and no payment pursuant to the
provisions of this Article Ten to the holders of Senior Indebtedness by Holders
or the Trustee on their behalf shall, as between the Company, its creditors
other than holders of Senior Indebtedness, and the Holders, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness. It is
understood that the provisions of this Article Ten are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.
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(b) If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of all
amounts payable under Senior Indebtedness, then, and in such case, the Holders
shall be entitled to receive from the holders of such Senior Indebtedness any
payments or distributions received by such holders of Senior Indebtedness in
excess of the amount required to make payment in full, in cash or cash
equivalents, of such Senior Indebtedness of such holders.
SECTION 10.05 Obligations of Company Unconditional. (a) Nothing
contained in this Article Ten is intended to or shall impair, as among the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on the Notes as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Holders or
the Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Ten of the holders of the Senior Indebtedness.
(b) Without limiting the generality of the foregoing, nothing contained
in this Article Ten will restrict the right of the Trustee or the Holders to
take any action to declare the Notes to be due and payable prior to their Stated
Maturity pursuant to Section 6.02 of this Indenture or to pursue any rights or
remedies hereunder; provided, however, that all Senior Indebtedness then due and
payable or thereafter declared to be due and payable shall first be paid in
full, in cash or cash equivalents, before the Holders or the Trustee are
entitled to receive any direct or indirect payment from the Company on the
Notes.
SECTION 10.06 Notice to Trustee. (a) The Company shall give prompt
written notice to the Trustee of any fact known to the Company that would
prohibit the making of any payment to or by the Trustee in respect of the Notes
pursuant to the provisions of this Article Ten. The Trustee shall not be charged
with the knowledge of the existence of any default or event of default with
respect to any Senior Indebtedness or of any other facts that would prohibit the
making of any payment to or by the Trust unless and until the Trust shall have
received notice in writing at its Corporate Trust Office to that effect signed
by an Officer of the Company, or by a holder of Senior Indebtedness or trustee
or agent thereof; and prior to the receipt of any such written notice, the
Trustee shall, subject to Article Seven, be entitled to assume that no such
facts exist; provided that, if the Trustee shall not have received the notice
provided for in this Section 10.06 at least two Business Days prior to the date
upon which, by the terms of this Indenture, any monies shall become payable for
any purpose (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Note), then, notwithstanding anything herein
to the contrary, the Trustee shall have full power and authority to receive any
monies from the Company and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it on or after such prior date except
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for an acceleration of the Notes prior to such application. Nothing contained in
this Section 10.06 shall limit the right of the holders of Senior Indebtedness
to recover payments as contemplated by this Article Ten. The foregoing shall not
apply if the Paying Agent is the Company. The Trustee shall be entitled to rely
on the delivery to it of a written notice by a Person representing himself or
itself to be a holder of any Senior Indebtedness (or a trustee on behalf of, or
other representative of, such holder) to establish that such notice has been
given by a holder of such Senior Indebtedness or a trustee or representative on
behalf of any such holder.
(b) In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Ten and, if such evidence is not furnished to the
Trustee, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 10.07 Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets or securities referred to in
this Article Ten, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or distribution,
delivered to the Trustee or to the Holders for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Ten.
SECTION 10.08 Trustee's Relation to Senior Indebtedness. (a) The
Trustee and any Paying Agent shall be entitled to all the rights set forth in
this Article Ten with respect to any Senior Indebtedness that may at any time be
held by it in its individual or any other capacity to the same extent as any
other holder of Senior Indebtedness and nothing in this Indenture shall deprive
the Trustee or any Paying Agent of any of its rights as such holder.
(b) With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness (except as provided in
Sections 10.02(c) and 10.03(c) of this Indenture) and shall not be liable to any
such holders if the Trustee shall in good faith mistakenly pay over or
distribute to Holders of Notes or to the
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Company or to any other person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article Ten or
otherwise.
SECTION 10.09 Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Indebtedness. No right of any present or future
holders of any Senior Indebtedness to enforce subordination as provided in this
Article Ten will at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms of this Indenture, regardless of any knowledge thereof that any such
holder may have or otherwise be charged with. The provisions of this Article Ten
are intended to be for the benefit of, and shall be enforceable directly by, the
holders of Senior Indebtedness.
SECTION 10.10 Holders Authorize Trustee to Effectuate Subordination of
Notes. Each Holder by his acceptance of any Notes authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Ten, and
appoints the Trustee his attorney-in-fact for such purposes, including, in the
event of any dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the property and assets of the
Company, the filing of a claim for the unpaid balance of its Notes in the form
required in those proceedings. If the Trustee does not file a proper claim or
proof of indebtedness in the form required in such proceeding at least 30 days
before the expiration of the time to file such claim or claims, each holder of
Senior Indebtedness is hereby authorized to file an appropriate claim for and on
behalf of the Holders.
SECTION 10.11 Not to Prevent Events of Default. The failure to make a
payment on account of principal of, premium, if any, or interest on the Notes by
reason of any provision of this Article Ten will not be construed as preventing
the occurrence of an Event of Default.
SECTION 10.12 Trustee's Compensation Not Prejudiced. Nothing in this
Article Ten will apply to amounts due to the Trustee pursuant to other sections
of this Indenture, including Section 7.06.
SECTION 10.13 No Waiver of Subordination Provisions. Without in any way
limiting the generality of Section 10.09, the holders of Senior Indebtedness
may, at any time and from time to time, without the consent of or notice to the
Trustee or the Holders, without incurring responsibility to the Holders and
without impairing or releasing the subordination provided in this Article Ten or
the obligations hereunder of the Holders to the holders of Senior Indebtedness,
do any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise
deal with any property pledged,
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mortgaged or otherwise securing Senior Indebtedness; (c) release any Person
liable in any manner for the collection of Senior Indebtedness; and (d) exercise
or refrain from exercising any rights against the Company and any other Person.
SECTION 10.14 Payments May Be Paid Prior to Dissolution. Nothing
contained in this Article Ten or elsewhere in this Indenture shall prevent (i)
the Company except under the conditions described in Section 10.02 or 10.03,
from making payments of principal of, premium, if any, and interest on the
Notes, or from depositing with the Trustee any money for such payments, or (ii)
the application by the Trustee of any money deposited with it for the purpose of
making such payments of principal of, premium, if any, and interest on the Notes
to the holders entitled thereto unless, at least two Business Days prior to the
date upon which such payment becomes due and payable, the Trustee shall have
received the written notice provided for in Section 10.02(b) of this Indenture
(or there shall have been an acceleration of the Notes prior to such
application) or in Section 10.06 of this Indenture. The Company shall give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Company.
SECTION 10.15 Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article Eight by the Trustee for the
payment of principal of, premium, if any, and interest on the Notes shall not be
subordinated to the prior payment of any Senior Indebtedness (provided that at
the time deposited, such deposit did not violate any then outstanding Senior
Indebtedness), and none of the Holders shall be obligated to pay over any such
amount to any holder of Senior Indebtedness.
SECTION 10.16 Acceleration of Payment of Notes. If payment of the Notes
is accelerated because of an Event of Default, the Company or the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness (or their
Representatives) of the acceleration. Under no circumstances shall the Company
pay the Notes until five Business Days after the Representatives of all
Designated Senior Indebtedness receive notice of such acceleration, and
thereafter, the Company shall pay the Notes only if the payments are otherwise
permitted pursuant to this Article 10 at such time.
SECTION 10.17 Consent of Designated Senior Indebtedness. The provisions
of this Article 10 (including the definitions contained in this Article 10 and
reference to this Article 10 contained in this Indenture) shall not be amended
in a manner that would adversely affect the rights of the holders of Senior
Indebtedness, and no such amendment shall become effective unless (x) the
holders of Senior Indebtedness under the Credit Agreement described in clause
(A) of the definition of Bank Credit Agreement shall have consented (in
accordance with the provisions of the applicable agreement or agreements
governing such Senior Indebtedness) to such amendment or (y) such agreement is
no longer in effect and no Obligations remain outstanding thereunder.
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ARTICLE XI
Parent Guarantee
SECTION 11.01 Parent Guarantee. Subject to the provisions of this
Article XI, the Guarantor hereby fully and unconditionally guarantees, on a
senior subordinated basis, to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, irrespective
of the validity or enforceability of this Indenture, the Notes or the
obligations of the Company under this Indenture or the Notes, that: (i) the
principal of, premium (if any) and interest on the Notes will be paid in full
when due, whether at Stated Maturity or Interest Payment Date, by acceleration
or call for redemption, (ii) all other obligations of the Company to the Holders
or the Trustee under this Indenture or the Notes will be promptly paid in full
or performed, all in accordance with the terms of this Indenture and the Notes;
and (iii) in case of any extension of time in payment or renewal of any Notes or
any of such other obligations, they will be paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at maturity,
by acceleration or otherwise. Failing payment when due of any amount so
guaranteed for whatever reason, the Guarantor will be obligated to pay the same
before failure to pay becomes an Event of Default. The Guarantor agrees that
this is a guarantee of payment not a guarantee of collection.
The Guarantor hereby agrees that its obligations with regard to this
Parent Guarantee shall be unconditional, irrespective of the validity or
enforceability of the Notes or the obligations of the Company under this
Indenture, the absence of any action to enforce the same, the recovery of any
judgment against the Company or any other obligor with respect to this
Indenture, the Notes or the obligations of the Company under this Indenture or
the Notes, any action to enforce the same or any other circumstances (other than
complete performance) which might otherwise constitute a legal or equitable
discharge or defense of the Guarantor. The Guarantor further, to the extent
permitted by law, hereby waives (a) demand, protest and notice of any kind (b)
any defense that may arise by reason of the incapacity, lack of authority, death
or disability of any other Person or the failure of the Trustee, the Holders or
the Company (each a "Benefitted Party") to file or enforce a claim against the
estate (in administration, bankruptcy or any other proceeding) of any other
Person, (c) notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation, (d) any right to require a proceeding
first against the Company or right to require the prior disposition of the
assets of the Company to meet its obligations, (e) any defense based upon an
election of remedies by a Benefitted Party, including but not limited to an
election law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal; (f) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under Bankruptcy Law, of the application of 11 U.S.C.
Section 1111(b)(2); or (g) any defense based on
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any borrowing or grant of a security interest under 11 U.S.C. Section 364. The
Guarantor hereby covenants that its Parent Guarantee will not be discharged
except by complete performance of the obligations contained in its Parent
Guarantee and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or the Guarantor, or any custodian acting in
relation to either the Company or the Guarantor, any amount paid by the Company
or the Guarantor to the Trustee or such Holder, the Parent Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect. The
Guarantor agrees that it will not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
The Guarantor hereby agrees that by virtue of the Guarantor's execution
and delivery of this Indenture, the Guarantor shall be deemed to have signed on
each Note issued hereunder the notation of the Parent Guarantee set forth on the
form of the Note attached hereto as Exhibit A.
SECTION 11.02 Parent Guarantee Subordinated to Senior Indebtedness. The
Guarantor and the Trustee each covenants and agrees, and each Holder, by its
acceptance of a Note and the corresponding Parent Guarantee, likewise covenants
and agrees that the indebtedness evidenced by the Parent Guarantee is subject to
the provisions of this Article Eleven; and each Person holding any Note, whether
upon original issue or upon transfer, assignment or exchange thereof, accepts
and agrees that the indebtedness evidenced by the Parent Guarantee shall, to the
extent and in the manner set forth in this Article Eleven, be unsecured, general
obligations of the Guarantor, subordinated in right of payment to all existing
and future Senior Indebtedness of the Guarantor, pari passu in right of payment
with any future senior subordinated indebtedness of the Guarantor and senior in
right of payment to any existing or future subordinated indebtedness of the
Guarantor.
SECTION 11.03 No Payment under Parent Guarantee in Certain
Circumstances. (a) The Guarantor may not make any payment of any kind or
character from any source on the Notes or make any deposit pursuant to Article
VIII or repurchase, redeem or otherwise retire any Notes whether pursuant to the
terms of the Notes and the Parent Guarantee or upon acceleration or otherwise if
(i) any Obligations with respect to any Designated Senior Indebtedness of the
Guarantor are not paid when due, unless such non-payment has been cured or
waived or ceases to exist or such Designated Senior Indebtedness has been paid
in full or (ii) any other default on Designated Senior Indebtedness of the
Guarantor occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, the default has been cured or
waived or ceases to exit or any such acceleration has been rescinded or such
Designated Senior Indebtedness has been paid in full. However, the Guarantor may
pay the Notes pursuant to the Parent Guarantee without regard to the foregoing
if the Guarantor and the Trustee receive written notice approving such payment
from the Representative or Representatives of all Designated Senior Indebtedness
with respect to which either of the events set forth in clause (i)
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or (ii) of the immediately preceding sentence has occurred and is continuing.
(b) During the continuance of any default (other than a default
described in clause (i) or (ii) of paragraph (a) of this Section 11.03) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Guarantor shall not pay any principal of, premium if any, or
interest on the Notes (including any repurchase of any of the Notes or on
account of the redemption provisions of the Notes) for a Payment Blockage Period
commencing upon receipt by the Trustee (with a copy to the Guarantor) of a
Blockage Notice of such default from a Representative for the holders of such
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (unless, in each case, such
Payment Blockage Period shall be terminated by (i) written notice to the Trustee
and the Guarantor from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is not longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions described in Section 11.03(a)), unless the
holders of such Designated Senior Indebtedness or the Representative of such
holders shall have accelerated the maturity of such Designated Senior
Indebtedness, the Guarantor must resume payments when due on the Notes if
required pursuant to the Parent Guarantee after the end of such Payment Blockage
Period. Notwithstanding anything in this Indenture to the contrary, the Notes
shall not be subject to more than one Payment Blockage Period in any consecutive
360 day period pursuant to this Section 11.03(b). For all purposes of this
Section 11.03(b), no event of default that existed or was continuing (it being
acknowledged that any subsequent event or condition that would give rise to an
event of default pursuant to any provision under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose) on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or shall be made, the basis for the commencement of a
second Payment Blockage Period by the representative for, or the holders of,
such Designated Senior Indebtedness, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days.
Notwithstanding the foregoing, so long as any Obligations remain
outstanding under the Credit Agreement dated as of March 12, 1997 described in
the definition of "Bank Credit Agreement," as in effect on the date hereof (and
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith) as the same may be amended, restated, modified
or supplemented from time to time (but not after (x) the date (even if such
Obligations remain outstanding) any agreement relating to any refunding,
replacement or refinancing of less than the entirety of the borrowings and
commitments then outstanding or permitted to be outstanding under such Credit
Agreement is effected or (y) the date such Credit Agreement is terminated and
all such Obligations due and payable at the time of such termination shall have
been paid in full), then only a Representative of the holders of Senior
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Indebtedness under such Credit Agreement shall be entitled to give a Blockage
Notice unless the Guarantor and such Representative or holders agree otherwise
in a writing delivered to the Trustee.
(c) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 11.03(a) or 11.03(b) of this Indenture, the Trustee shall promptly
notify the holders of Designated Senior Indebtedness of such prohibited payment
and such payment shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of Designated Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Designated Senior Indebtedness may have been
issued, as their respective interests may appear.
SECTION 11.04 Payment over Proceeds upon Dissolution, Etc. (a) Upon any
payment or distribution of assets or securities of the Guarantor of any kind or
character, whether in cash, property or securities, in connection with any
dissolution or winding up or total or partial liquidation or reorganization of
the Guarantor, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings or upon any general assignment for the benefit
of creditors or any other marshaling of assets for the benefit of creditors
generally, all amounts due or to become due upon all Senior Indebtedness
(including, without limitation, any interest accruing subsequent to an event of
bankruptcy whether or not such interest is an allowed claim enforceable against
the debtor under the United States Bankruptcy Code and all contingent claims or
obligations in connection with such Senior Indebtedness) shall first be paid in
full, in cash or cash equivalents, before the Holders or the Trustee on their
behalf shall be entitled to receive any payment by the Guarantor on the Parent
Guarantee on account of any principal of, premium if any, or interest on the
Notes (including any repurchase of any of the Notes or on account of the
redemption provisions of the Notes), or any payment to acquire any of the Notes
for cash, property or securities, or any distribution with respect to the Notes
of any cash, property or securities. Before any payment may be made by, or on
behalf of, the Guarantor on the Parent Guarantee on any principal of, premium if
any, or interest on the Notes (including any repurchase of any of the Notes or
on account of the redemption provisions of the Notes) in connection with any
such dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets or securities of the Guarantor of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee on
their behalf would be entitled, but for the provisions of this Article Eleven,
shall be made by the Guarantor or by a receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person making such payment or
distribution, or by the holders or the Trustee if received by them or it,
directly to the holders of Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by such holders) or
their representatives or to any trustee or trustees under any other indenture
pursuant to which any such Senior Indebtedness may have been issued, as their
respective interests appear, to the extent necessary to pay all Obligations with
respect to such Senior Indebtedness in full, in cash or Cash equivalents, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
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(b) To the extent any payment of all or any portion of Senior
Indebtedness of the Guarantor (whether by or on behalf of the Guarantor as
proceeds of security or enforcement of any right of setoff or otherwise) is
declared to be fraudulent or preferential, set aside or required to be paid to
any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then if such payment is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay all or any portion of
any Senior Indebtedness is declared to be fraudulent, invalid, or otherwise set
aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then the obligation so declared fraudulent, invalid or otherwise
set aside (and all other amounts that would come due with respect thereto had
such obligation not been affected) shall be deemed to be reinstated and
outstanding as Senior Indebtedness for all purposes hereof as if such
declaration, invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Guarantor of any kind or character, whether in cash,
property or securities, shall be receved by the Trustee or any Holder at a time
when such payment or distribution is prohibited by Section 11.03(a) of this
Indenture and before all obligations in respect of Senior Indebtedness are paid
in full, in cash or cash equivalents, such payment or distribution shall be
received and held in trust for the benefit of, and shall be paid over or
delivered to the holders of Senior Indebtedness (pro rata to such holders on the
basis of such respective amount of Senior Indebtedness held by such holders) or
their representatives, or to the trustee or trustees under any indenture
pursuant to which any such Senior Indebtedness may have issued, as their
respective interests appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full, in cash or cash equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(d) The consolidation of the Guarantor with, or the merger of the
Guarantor with or into, another corporation or the liquidation or dissolution of
the Guarantor following the sale, conveyance, transfer, lease or other
disposition of all or substantially all of its property and assets to another
corporation upon the terms and conditions provided in Article Five of this
Indenture shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 11.04 if such other corporation
shall, as a part of such consolidation, merger, sale, conveyance, transfer,
lease or other disposition, comply (to the extent required) with the conditions
stated in Article Five of this Indenture.
SECTION 11.05 Obligations of Guarantor Unconditional. (a) Nothing
contained in this Article Eleven is intended to or shall impair, as among the
Guarantor and the Holders, the
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obligation of the Guarantor, which is absolute and unconditional, to pay to the
Holders the principal of, premium, if any, and interest on the Notes in
accordance with the Parent Guarantee as and when the same shall become due and
payable in accordance with the terms of the Parent Guarantee, or is intended to
or shall affect the relative rights of the Holders and the respective creditors
of the Guarantor, other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Holders or the Trustee on their behalf
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article Eleven
of the holders of the Senior Indebtedness.
(b) Without limiting the generality of the foregoing, nothing contained
in this Article Eleven will restrict the right of the Trustee or the Holders to
take any action to declare the Notes to be due and payable prior to their Stated
Maturity pursuant to Section 6.02 of this Indenture or to pursue any rights or
remedies hereunder; provided, however, that all Senior Indebtedness then due and
payable or thereafter declared to be due and payable shall first be paid in
full, in cash or cash equivalents, before the Holders or the Trustee are
entitled to receive any direct or indirect payment from the Guarantor of Senior
Subordinated Indebtedness.
SECTION 11.06 Notice to Trustee. (a) The Guarantor shall give prompt
written notice to the Trustee of any fact known to the Guarantor that would
prohibit the making of any payment to or by the Trustee in respect of the Parent
Guarantee pursuant to the provisions of this Article Eleven. The Trustee shall
not be charged with the knowledge of the existence of any default or event of
default with respect to any Senior Indebtedness or of any other facts that would
prohibit the making of any payment to or by the Trust unless and until the Trust
shall have received notice in writing at its Corporate Trust Office to that
effect signed by an Officer of the Guarantor or by a holder of Senior
Indebtedness or trustee or agent thereof; and prior to the receipt of any such
written notice, the Trustee shall, subject to Article Seven, be entitled to
assume that no such facts exist; provided that, if the Trustee shall not have
received the notice provided for in this Section 11.06 at least two Business
Days prior to the date upon which, by the terms of this Indenture, any monies
shall become payable for any purpose (including, without limitation, the payment
of the principal of, premium, if any, or interest on any Note), then,
notwithstanding anything herein to the contrary, the Trustee shall have full
power and authority to receive any monies from the Guarantor and to apply the
same to the purpose for which they were received, and shall not be affected by
any notice to the contrary that may be received by it on or after such prior
date except for an acceleration of the Notes prior to such application. Nothing
contained in this Section 11.06 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by this Article Eleven. The
foregoing shall not apply if the Paying Agent is the Company or the Guarantor.
The Trustee shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself or itself to be a holder of any Senior
Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
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(b) In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eleven, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eleven and, if such evidence is not
furnished to the Trustee, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 11.07 Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets or securities referred to in
this Article Eleven, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person making such payment or
distribution, delivered to the Trustee or to the Holders for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other Indebtedness of the Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Eleven.
SECTION 11.08 Trustee's Relation to Senior Indebtedness. (a) The
Trustee and any Paying Agent shall be entitled to all the rights set forth in
this Article Eleven with respect to any Senior Indebtedness that may at any time
be held by it in its individual or any other capacity to the same extent as any
other holder of Senior Indebtedness and nothing in this Indenture shall deprive
the Trustee or any Paying Agent of any of its rights as such holder.
(b) With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness (except as provided in
Sections 11.03(c) and 11.04(c) of this Indenture) and shall not be liable to any
such holders if the Trustee shall in good faith mistakenly pay over or
distribute to Holders of Notes or to the Company or to any other person cash,
property or securities to which any holders of Senior Indebtedness shall be
entitled by virtue of this Article Eleven or otherwise.
SECTION 11.09 Subordination Rights Not Impaired by Acts or Omissions of
the Guarantor or Holders of Senior Indebtedness. No right of any present or
future holders of any Senior Indebtedness to enforce subordination as provided
in this Article Eleven will at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Guarantor or by any act or failure
to act, in good faith, by any such holder, or by any noncompliance by the
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Guarantor with the terms of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with. The provisions of
this Article Eleven are intended to be for the benefit of, and shall be
enforceable directly by, the holders of Senior Indebtedness.
SECTION 11.10 Holders Authorize Trustee to Effectuate Subordination
of Parent Guarantee. Each Holder by his acceptance of any Notes authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Eleven, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
property and assets of the Guarantor, the filing of a claim for the unpaid
balance of its Notes under the Parent Guarantee in the form required in those
proceedings. If the Trustee does not file a proper claim or proof of
indebtedness in the form required in such proceeding at least 30 days before the
expiration of the time to file such claim or claims, each holder of Senior
Indebtedness is hereby authorized to file an appropriate claim for and on behalf
of the Holders.
SECTION 11.11 Not to Prevent Events of Default. The failure to make a
payment on account of principal of, premium, if any, or interest on the Notes
under the Parent Guarantee by reason of any provision of this Article Eleven
will not be construed as preventing the occurrence of an Event of Default.
SECTION 11.12 Trustee's Compensation Not Prejudiced. Nothing in this
Article Eleven will apply to amounts due to the Trustee pursuant to other
sections of this Indenture, including Section 7.06.
SECTION 11.13 No Waiver of Subordination Provisions. Without in any way
limiting the generality of Section 11.09, the holders of Senior Indebtedness
may, at any time and from time to time, without the consent of or notice to the
Trustee or the Holders, without incurring responsibility to the Holders and
without impairing or releasing the subordination provided in this Article Eleven
or the obligations hereunder of the Holders to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against the Guarantor and any other Person.
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SECTION 11.14 Payments May Be Paid Prior to Dissolution. Nothing
contained in this Article Eleven or elsewhere in this Indenture shall prevent
(i) the Guarantor, except under the conditions described in Section 11.03 or
11.04, from making payments of principal of, premium, if any, and interest on
the Notes, or from depositing with the Trustee any money for such payments, or
(ii) the application by the Trustee of any money deposited with it for the
purpose of making such payments of principal of, premium, if any, and interest
on the Notes to the holders entitled thereto unless, at least two Business Days
prior to the date upon which such payment becomes due and payable, the Trustee
shall have received the written notice provided for in Section 11.03(b) of this
Indenture (or there shall have been an acceleration of the Notes prior to such
application) or in Section 11.06 of this Indenture. The Guarantor shall give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Guarantor.
SECTION 11.15 Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article Eight by the Trustee for the
payment of principal of, premium, if any, and interest on the Notes shall not be
subordinated to the prior payment of any Senior Indebtedness (provided that at
the time deposited, such deposit did not violate any then outstanding Senior
Indebtedness), and none of the Holders shall be obligated to pay over any such
amount to any holder of Senior Indebtedness.
SECTION 11.16 Limitation of Guarantor's Liability. The Guarantor and by
its acceptance hereof, each beneficiary hereof, hereby confirms that it is its
intention that the Parent Guarantee of the Guarantor not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law to the extent applicable to the Parent Guarantee. To
effectuate the foregoing intention, each such person hereby irrevocably agrees
that the obligation of the Guarantor under the Parent Guarantee under this
Article Eleven shall be limited to the maximum amount as will, after giving
effect to such maximum amount and all other (contingent or otherwise)
liabilities of the Guarantor that are relevant under such laws, result in the
obligations of the Guarantor in respect of such maximum amount not constituting
a fraudulent conveyance. Each beneficiary under the Parent Guarantee, by
accepting the benefits hereof, confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Company or the
Guarantor in which concurrent claims are made upon the Guarantor hereunder, to
the extent such claims will not be fully satisfied, each such claimant with a
valid claim against the Company shall be entitled to a ratable share of all
payments by the Guarantor in respect of such concurrent claims.
SECTION 11.17 Release of Guarantor. The Guarantor shall be released
from all its obligations under the Parent Guarantee and this Indenture (i) in
accordance with Section 8.07 and (ii) following any consolidation, merger or
sale or other disposition of all or substantially all of
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the property and assets of the Company (other than a consolidation or merger
upon the completion of which the Company shall remain a Subsidiary of the
Guarantor) in compliance with the requirements of Section 5.01.
SECTION 11.18 Consent of Designated Senior Indebtedness. The provisions
of this Article 11 and references to this Article 11 contained in this
Indenture) shall not be amended in a manner that would adversely affect the
rights of the holders of Senior Indebtedness, and no such amendment shall become
effective unless (x) the holders of Senior Indebtedness under the Credit
Agreement described in clause (A) of the definition of Bank Credit Agreement
shall have consented (in accordance with the provisions of the applicable
agreement or agreements governing such Senior Indebtedness) to such amendment or
(y) such agreement is no longer in effect and no Obligations remain outstanding
thereunder.
ARTICLE XII
Miscellaneous
SECTION 12.01 Trust Indenture Act of 1939. This Indenture shall be
subject to the provisions of the TIA that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
SECTION 12.02 Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
Scotsman Group Inc.
820 Forest Edge Drive
Vernon Hills, Illinois 60061
Attention: Vice President - Finance
if to the Guarantor:
Scotsman Industries, Inc.
820 Forest Edge Drive
Vernon Hills, Illinois 60061
Attention: Vice President - Finance
if to the Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, IL 60606
Attention: Indenture Trust Division
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The Company, the Guarantor or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications. The Trustee shall promptly notify the Representatives, to the
extent identified to the Trustee, of all changes of addresses for notices or
communications pursuant to this Section 12.02.
Any notice or communication to the Representative of the holders of
Senior Indebtedness under the Credit Agreement dated as of March 12, 1997
described in the definition of "Bank Credit Agreement" shall be sufficiently
given if in writing and delivered in person or mailed by first class mail
addressed as follows:
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attention: Julia Bristow
or to such additional or different addresses as the Representatives may
designate by notice to the Company and the Trustee.
Any notice or communication mailed to a Holder shall be mailed to him
at his address as it appears on the Security Register by first class mail and
shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided in this Section 12.02, it is
duly given, whether or not the addressee receives it.
SECTION 12.03 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company or the Guarantor to the Trustee to
take any action under this Indenture, the Company or the Guarantor, as the case
may be shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
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SECTION 12.04 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
delivering such opinion has read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public officials and any
Officer's Certificate may be based, insofar as it relates to legal matters, upon
an Opinion of Counsel.
SECTION 12.05 Acts of Holders. (a) 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 or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are received by the Trustee and, where it is hereby expressly required, by the
Company and the Guarantor. 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, the
Guarantor and the Company, if made in the manner provided in this Section.
(b) The ownership of Notes shall be proved by the Security
Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holders of any Note shall bind every future Holder
of the same Note or the Holder of every Note issued upon the transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, suffered
or omitted to be done by the Trustee, any Paying Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
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(d) 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 such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other act, but the
Company shall have no obligation to do so. Notwithstanding Trust Indenture Act
Section 316(c), any such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not more than 30 days
prior to the first solicitation of Holders generally in connection therewith and
no later than the date such solicitation is completed.
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 purposes of determining
whether Holders of the requisite proportion of Notes then outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other act, and for this purpose the Notes
then outstanding shall be computed as of such record date; provided that no such
request, demand, authorization, direction, notice, consent, waiver or other act
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 12.06 Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07 Payment Date Other Than a Business Day. If an Interest
Payment Date, Redemption Date, Change of Control Payment Date, Excess Proceeds
Payment Date, Stated Maturity or date of maturity of any Note shall not be a
Business Day at any place of payment, then payment of principal of, premium, if
any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day at such place of
payment with the same force and effect as if made on the Interest Payment Date,
Change of Control Payment Date, Excess Proceeds Payment Date, or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; provided that
no interest shall accrue for the period from and after such Interest Payment
Date, Change of Control Payment Date, Excess Proceeds Payment Date, Redemption
Date, Stated Maturity or date of maturity, as the case may be.
SECTION 12.08 Governing Law. The laws of the State of New York shall
govern this Indenture and the Notes.
SECTION 12.09 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loss or debt agreement
of the Company or any Subsidiary of the Guarantor or the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
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SECTION 12.10 No Recourse Against Others. No recourse for the payment
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Guarantor or the Company
contained in this Indenture, the Parent Guarantee or in any of the Notes, or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator or against any past, present or future partner,
shareholder, other equityholder, officer, director, employee or controlling
person, as such, of the Guarantor or the Company or of any successor Person,
either directly or through the Guarantor or the Company or any successor Person,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
SECTION 12.11 Successors. All agreements of the Guarantor and the
Company in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 12.12 Duplicate Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 12.13 Separability. In case any provision in this Indenture or
in the Notes 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 12.14 Table of Contents, Headings, Etc. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
[SIGNATURE PAGE FOLLOWS]
89
<PAGE> 97
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
SCOTSMAN GROUP INC.,
as Issuer
By: /S/ D.D. Holmes
----------------------------------------
Name: /S/ D.D. Holmes
-----------------------------------
Title: /S/ V.P.
-----------------------------------
SCOTSMAN INDUSTRIES, INC.,
as Guarantor
By: /S/ D.D. Holmes
----------------------------------------
Name: /S/ D.D. Holmes
-----------------------------------
Title: /S/ V.P.
-----------------------------------
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /S/ J. Bartolini
----------------------------------------
Name: /S/ J. Bartolini
-----------------------------------
Title: /S/ V.P.
-----------------------------------
90
<PAGE> 98
EXHIBIT A
[FACE OF NOTE]
SCOTSMAN GROUP INC.
8 5/8% Senior Subordinated Notes due 2007
CUSIP NO. 809337AC2
No. 1 $100,000,000.00
SCOTSMAN GROUP INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to CEDE & CO., or its registered assigns, the
principal sum of ONE HUNDRED MILLION DOLLARS ($100,000,000.00 ) on December 15,
2007.
Interest Payment Dates: June 15 and December 15, commencing June 15,
1998.
Regular Record Dates: June 1 and December 1.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
SCOTSMAN GROUP INC. 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 IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON 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.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
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<PAGE> 99
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE
WITH THE INDENTURE.]
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: SCOTSMAN GROUP INC.
By:
----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
By:
----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
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<PAGE> 100
(Form of Trustee's Certificate of Authentication)
This is one of the 85/8% Senior Subordinated Notes due 2007 described in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
----------------------------------------
Authorized Signatory
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<PAGE> 101
[REVERSE SIDE OF NOTE]
SCOTSMAN GROUP INC.
8 5/8% Senior Subordinated Note due 2007
1. Principal and Interest.
The Company will pay the principal of this Note on December 15, 2007.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the June 1 or December 1 immediately preceding
the Interest Payment Date) on each Interest Payment Date, commencing June 15,
1998.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 22, 1997;
provided that, if there is no existing default in the payment of interest and if
this Note is authenticated between a Regular 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.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 1% in excess of the rate otherwise payable.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each June 15 and December 15
to the persons who are Holders (as reflected in the Security Register at the
close of business on such June 1 and December 1 immediately preceding the
Interest Payment Date), in each case, even if the Note is canceled on
registration of transfer or registration of exchange after such record date;
provided that, with respect to the payment of principal, the Company will make
payment to the Holder that surrenders this Note to a Paying Agent on or after
December 15, 2007.
The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and
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<PAGE> 102
private debts. However, the Company may pay principal, premium, if any, and
interest by its check payable in such money. It may mail an interest check to a
Holder's registered address (as reflected in the Security Register). If a
payment date is a date other than a Business Day at a place of payment, payment
may be made at that place on the next succeeding day that is a Business Day and
no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of December
17, 1997 (the "Indenture"), among the Company, Scotsman Industries, Inc. (the
"Guarantor") and Harris Trust and Savings Bank (the "Trustee"). Capitalized
terms herein are used as defined in the Indenture unless otherwise indicated.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act. The Notes are subject
to all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are unsecured, general obligations of the Company. The
Indenture limits the original aggregate principal amount of the Notes to
$100,000,000.
5. Redemption.
The Notes will be redeemable, at the Company's option, in whole or in
part, at any time and from time to time on or after December 15, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of their
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date) if redeemed during the 12- month period commencing on
December 15 of the applicable year set forth below:
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<PAGE> 103
Redemption
Year Price
2002...................... 104.3125%
2003...................... 102.15625%
2004 and thereafter 100.000%
In addition, at any time and from time to time prior to December 15,
2000, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Notes with the proceeds of one or more Equity Offerings,
at a redemption price (expressed as a percentage of principal amount) of 1085/8
% plus accrued and unpaid interest to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that either (i) at least $65
million in aggregate principal amount of the Notes must remain outstanding after
each such redemption or (ii) such redemption must retire the Notes in their
entirety and, in any case, that such redemption occurs within 60 days following
the closing of any such Equity Offering.
Notice of any optional redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at his last address as it appears in the Security Register. Notes in
original denominations larger than $1,000 may be redeemed in part. On and after
the Redemption Date, interest ceases to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
6. Repurchase upon Change of Control.
Upon the occurrence of any Change of Control, the Company must commence
and consummate an Offer to Purchase all Notes outstanding as described in the
Indenture at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as its appears
in the Security Register. Notes in original denominations larger than $1,000 may
be sold to the Company in part. On and after the payment date, interest ceases
to accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder
may register the transfer or exchange of Notes in accordance with the Indenture.
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. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register the
transfer
A-6
<PAGE> 104
or exchange of any Notes for a period of 15 days before a selection of Notes to
be redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to the Stated Maturity and
certain other conditions are satisfied, the Company will be discharged from
certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not adversely
affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
suffer to exist restrictions on the ability of Restricted Subsidiaries to make
certain payments to the Company, issue Capital Stock of Restricted Subsidiaries,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Each year, within 120 days after the last day
of the Company's
A-7
<PAGE> 105
immediately preceding fiscal year, the Company must report to the Trustee on
compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) the Company defaults in the payment of the principal of (or
premium, if any, on) any Note when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise, whether or not such payment is
prohibited by Article Ten; (b) the Company defaults in the payment of interest
on any Note when the same becomes due and payable, and such default continues
for a period of 30 days, whether or not such payment is prohibited by Article
Ten; (c) the Company or the Guarantor, as the case may be, defaults in the
performance of or breaches the provisions of Section 5.01 and such default or
breach continues for a period of 30 consecutive days after written notice to the
Company or the Guarantor, as the case may be, by the Trustee or the Holders of
25% or more in aggregate principal amount of the Notes; (d) the Company or the
Guarantor, as the case may be, defaults in the performance of or breaches the
provisions of Section 4.03, Section 4.05, Section 4.06, Section 4.07, Section
4.08, Section 4.09 (other than a failure to purchase the Notes), Section 4.10,
Section 4.11, Section 4.12 (other than a failure to purchase the Notes) and
Section 4.17 and such default or breach continues for a period of 30 consecutive
days after written notice to the Company and the Guarantor by the Trustee or the
Holders of 25% or more in aggregate principal amount of the Notes; (e) the
Company or the Guarantor, as the case may be, defaults in the performance of or
breaches any other covenant or agreement of the Company or the Guarantor, as the
case may be, in the Indenture or under the Notes or the Parent Guarantee (other
than a default specified in clause (a), (b) (c) or (d) above) and such default
or breach continues for a period of 60 consecutive days after written notice to
the Company and the Guarantor, by the Trustee or the Holders of 25% or more in
aggregate principal amount of the Notes; (f) there occurs with respect to any
issue or issues of Indebtedness of the Company or the Guarantor having an
outstanding principal amount of $10 million or more in the aggregate for all
such issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder thereof
to declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within any applicable grace period and/or (II)
the failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within any applicable grace period; (g) any final judgment or order (not covered
by insurance) for the payment of money in excess of $10 million in the aggregate
for all such final
A-8
<PAGE> 106
judgments or orders against all such Persons (treating any self-insurance as not
so covered) shall be rendered against the Company, the Guarantor or any
Restricted Subsidiary and shall remain outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within 10 days
after notice to the Company and the Guarantor by the Trustee or the Holders of
25% or more in aggregate principal amount of the Notes; (h) a court having
jurisdiction in the premises enters a decree or order for (A) relief in respect
of the Company, the Guarantor or any Significant Subsidiary in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company, the
Guarantor or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company, the Guarantor or any Significant Subsidiary
or (C) the winding up or liquidation of the affairs of the Company, the
Guarantor or any Significant Subsidiary and, in each case, such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; (i) the
Company, the Guarantor or any Significant Subsidiary (A) commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company, the Guarantor or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company, the Guarantor or any Significant Subsidiary or (C)
effects any general assignment for the benefit of creditors; or (j) the Parent
Guarantee ceases to be in full force and effect (other than in accordance with
the terms of the Parent Guarantee) or the Guarantor denies or disaffirms its
obligations under the Parent Guarantee if such default continues for a period of
10 days after notice thereof to the Company and the Guarantor by the Trustee or
the Holders of 25% or more in aggregate principal amount of the Notes.
If an Event of Default, as defined in the Indenture (other than an
Event of Default specified in clause (h) or (i) above), occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable as provided in the
Indenture. If an Event of Default under clause (h) or (i) above occurs, the
Notes automatically become due and payable as provided in the Indenture. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture
and acceleration of the Notes may be rescinded as provided therein. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of at least a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power.
15. Subordination.
The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full, in
cash or Cash equivalents, of all Senior Indebtedness.
A-9
<PAGE> 107
16. Guarantee.
As set forth in the Indenture, the due and punctual payment of the
principal of, premium, if any, and interest on the Notes, whether at the
maturity or interest payment date, by acceleration, call for redemption or
otherwise, and of interest on the overdue principal of and interest on the Notes
and all other obligations of the Company to the Holders or the Trustee under the
Indenture or the Notes is guaranteed on an unsecured, senior subordinated basis
by the Guarantor pursuant and subject to Article XI of the Indenture. Each
Holder of a Note, by accepting the same, agrees to be bound by such provisions,
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate such subordination and
appoints the Trustee to act as such Holder's attorney-in fact for such purpose.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Guarantor, the Company or its Affiliates and may otherwise deal with the
Guarantor, the Company or its Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligations, covenant or
agreement of the Guarantor or the Company contained in the Indenture, or in any
of the Notes, or because of any Indebtedness represented thereby, shall be had
against any incorporator or any past, present or future partner, shareholder,
other equityholder, officer, director, employee or controlling person, as such,
of the Guarantor or the Company or of any successor Person thereof. Each Holder
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
19. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
20. 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 right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
A-10
<PAGE> 108
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Scotsman Group Inc., 820
Forest Edge Drive, Vernon Hills, Illinois 60061, Attention: Vice President -
Finance.
A-11
<PAGE> 109
{FORM OF TRANSFER NOTICE}
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------------
- ----------------------------------------
Please print or typewrite name and address including zip code of assignee
- ----------------------------------------
- ----------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ____________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
Date: Your Signature:
-------------- ---------------------------
(sign exactly as your name
appears on the Note)
Signature Guarantee:
A-12
<PAGE> 110
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.09 or 4.12 of the Indenture, check the box below:
[ ] Section 4.09 [ ] Section 4.12
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.09 or Section 4.12 of the Indenture, state the
amount you elect to have purchased:
$
--------------
Date: Your Signature:
-------------- ---------------------------
(sign exactly as your name
appears on the Note)
Tax Identification No.:
--------------
Signature Guarantee.
A-13
<PAGE> 111
[To Be Attached to Global Securities]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Date of Amount of Amount of Principal Signature of authorized
Exchange decrease in increase in Amount of this officer of Trustee or
Principal Principal Amount Global Securities Custodian
Amount of this of this Global Security
Global Security Security following such
decrease or
increase
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
A-14
<PAGE> 1
EXHIBIT 10.13
SCOTSMAN INDUSTRIES, INC.
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
(As Amended and Restated by the Board of Directors on February 10, 1998)
1. Purpose
The purpose of the Long-Term Executive Incentive Compensation Plan
(the "Plan") is to further the long-term growth of Scotsman Industries, Inc.
(the "Company") and its divisions and subsidiaries by strengthening the ability
of the Company to attract and retain key employees and to provide additional
motivation and incentives for the performance of key employees.
2. Administration
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The Committee shall consist of
at least two such Directors as the Board may from time to time designate.
Membership on the Committee shall be limited to members of the Board of
Directors who meet the definitions of a "non- employee director" under Rule
16b-3 under Section 16 of the Securities Exchange Act of 1934, as amended, and
an "outside director" under Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder. The Committee shall have
such powers to administer the Plan as are delegated to it by the Plan or the
Board of Directors, including the power to interpret the Plan and any
agreements executed thereunder, to prescribe rules and regulations relating to
the Plan, and to make all other determinations necessary or advisable for
administering the Plan.
3. Grant of Awards; Shares Subject to Plan
(a) The Committee may grant any type of award permitted under the
terms of the Plan (all such awards in the aggregate being hereinafter referred
to as "Awards"). Only employees of the Company and its divisions and
subsidiaries may be selected by the Committee for Awards under the Plan.
(b) The maximum number of shares of Common Stock of the Company
that may be issued under the Plan is 1,000,000, all of which shares may be made
subject to Options. The maximum number of shares of Common Stock with respect
to which Options or Stock Appreciation Rights ("SARs"), or any combination
thereof, may be granted under the Plan to any employee within a calendar-year
period may not exceed 100,000, subject to Paragraph (c) of this Section 3. The
Common Stock issued pursuant to the Plan may consist of authorized and unissued
shares of the Company's Common Stock or Common Stock held in the Company's
treasury. If any Award granted under the Plan shall terminate or lapse for any
reason, any shares of Common Stock subject to such Award shall again be
available for the grant of an Award.
(c) In the event of corporate changes affecting the Company's
Common Stock or this Plan or Awards granted thereunder (including without
limiting the generality of the foregoing, stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, or other relevant
changes in capitalization), the Board of Directors or the Committee shall make
appropriate adjustments in price, number and kind of shares of Common Stock or
other consideration subject to such Awards or in the terms of such Awards,
which it deems equitable to prevent dilution or enlargement of rights under the
Awards. In addition, the Board of Directors or the Committee may from time to
time equitably change the aggregate number or remaining number or kind of
shares which may be issued under the Plan or to any employee under the Plan to
reflect any such corporate changes.
<PAGE> 2
4. Options
(a) The Committee may grant any type of statutory or non-statutory
Option to purchase shares of the Company's Common Stock as is permitted by law
at the time the Option is granted. The term of each Option shall not be more
than ten years and one day from the date of grant and may be exercised at the
rate set by the Committee.
(b) The per share purchase price of the Company's Common Stock
which may be acquired pursuant to an Option shall be at least 100% of the fair
market value of one share of Common Stock of the Company on the date on which
the Option is granted. Within this limitation such price shall be determined
by the Committee.
(c) Notwithstanding sub-section (b) above, the Committee in its
discretion and for Options granted on or prior to April 20, 1989 may grant
Options with a per share purchase price less than 100% of the fair market value
of one share of the Company's Common Stock on the date on which the Option is
granted; however, the Committee may only grant Options pursuant to this
sub-section (c) to former employees of Household Manufacturing, Inc. or its
subsidiaries who have forfeited or will be forfeiting employee stock options
previously granted by Household International, Inc. as a result of termination
of employment. The exercise price for Options granted pursuant to this
sub-section (c) at less than fair market value on the date of grant will be
determined by the Committee based on the appreciation in value of Household
International, Inc. employee stock options being forfeited. No Option shall be
granted to an employee pursuant to this sub-section (c) unless such employee
has agreed to forfeit any remaining rights such employee may have in options
granted by Household International, Inc.
(d) Except as otherwise provided in the Plan or in any stock
option agreement, the optionee shall pay the purchase price of the shares of
Common Stock upon the exercise of any Option (i) in cash, (ii) in cash received
from a broker-dealer to whom the optionee has submitted an exercise notice
consisting of a fully endorsed Option (however in the case of an optionee
subject to Section 16 of the Securities Exchange Act of 1934, this payment
option shall only be available to the extent such payment procedures comply
with Regulation T issued by the Federal Reserve Board), (iii) by delivering
shares of Common Stock having an aggregate fair market value on the date of
exercise equal to the option purchase price, (iv) by directing the Company to
withhold such number of shares of Common Stock otherwise issuable upon exercise
of such Option having an aggregate fair market value on the date of exercise
equal to the option purchase price, (v) by such other medium of payment as the
Committee, in its discretion, shall authorize at the time of grant, or (vi) by
any combination of (i), (ii), (iii), (iv) and (v). In the case of an election
pursuant to (i) or (ii) above, cash shall mean cash or check issued by a
federally insured bank or savings and loan association, and made payable to
Scotsman Industries, Inc. In the case of payment pursuant to (ii), (iii) or
(iv) above, the optionee's election must be made on or prior to the date of
exercise and shall be irrevocable. In lieu of a separate election governing
each exercise of an Option, an optionee may file a blanket election with the
Committee which shall govern all future exercises of Options until revoked by
the optionee. The Company shall issue, in the name of the optionee, stock
certificates representing the total number of shares of Common Stock issuable
pursuant to the exercise of any Option as soon as reasonably practicable after
such exercise, provided that any shares of Common Stock purchased by an
optionee through a broker-dealer pursuant to clause (ii) above, shall be
delivered to such broker-dealer in accordance with 12 C.F.R.Section
220.3(e)(4), or other applicable provision of law.
(e) Whenever the Company proposes or is required to issue or
transfer shares of Common Stock to an employee under the Plan, the Company
shall have the right to require the employee to remit
<PAGE> 3
to the Company an amount sufficient to satisfy all federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares of Common Stock. If such certificates have been
delivered prior to the time a withholding obligation arises, the Company shall
have the right to require the employee to remit to the Company an amount
sufficient to satisfy all federal, state or local withholding tax requirements
at the time such obligation arises and to withhold from other amounts payable
to the employee, as compensation or otherwise, as necessary. Whenever payments
under the Plan are to be made to an employee in cash, such payment shall be net
of any amount sufficient to satisfy all federal, state and local withholding
tax requirements. In lieu of requiring an employee to make a payment to the
Company in an amount related to the withholding tax requirement, the Committee
may, in its discretion, provide that, at the employee's election, the tax
withholding obligation shall be satisfied by the Company's withholding a
portion of the shares of Common Stock otherwise distributable to the employee,
such shares of Common Stock being valued at their fair market value at the date
of exercise, or by the employee's delivering to the Company shares of Common
Stock previously owned by the employee, such shares of Common Stock being
valued at their fair market value as of the date of delivery of such shares of
Common Stock by the employee to the Company. For this purpose, the amount of
required withholding shall be a specified rate not less than the statutory
minimum federal, state and local (if any) withholding rate, and not greater
than the maximum federal, state and local (if any) marginal tax rate applicable
to the employee and to the particular transaction. Notwithstanding any
provision of the Plan to the contrary, an employee's election pursuant to the
preceding sentences (i) must be made on or prior to the date as of which income
is realized by the recipient in connection with the particular exercise
transaction, and (ii) must be irrevocable. In lieu of a separate election on
each effective date of each exercise transaction, an employee may file a
blanket election with the Committee which shall govern all future exercise
transactions until revoked by the employee.
5. Stock Appreciation Rights
(a) The Committee may grant SARs in tandem with the grant of an
Option under the Plan or with respect to a previously granted Option under the
Plan. In either case the number of shares of Common Stock in respect of which
SARs are granted by the Committee shall not be greater than the number of
shares subject to the related Option. In exchange for the surrender in whole
or in part of the right to exercise the related Option, such SAR shall entitle
the employee to payment of an amount equal to the appreciation in value of the
surrendered Options (the excess of the fair market value of such Common Stock
subject to Options at the time of surrender over their aggregate option price).
An SAR granted pursuant to this subsection (a) shall be exercisable to the
extent and only to the extent that the related Option is exercisable, but if an
SAR is granted with respect to a previously-granted Option, the SAR will not be
exercisable for a period of twelve months from the date of grant of such SAR.
No such SAR shall be exercisable except upon surrender of the related Option,
and to the extent such Option is surrendered, the shares covered by such Option
shall again be available for purposes of the Plan to the extent that payment of
such SAR is not made in shares of Common Stock of the Company. The exercise of
any Option shall result in the cancellation of any related SAR.
(b) The Committee may also grant units of SARs on a stand-alone
basis which are not issued in tandem with Options. The term of each such SAR
shall not be more than ten years from the date of grant and may be exercised at
the rate set by the Committee; provided, however, that no such SAR shall be
exercised less than one year from the date of grant. The "base price" of each
unit of a "stand-alone" SAR shall be at least 100% of the fair market value of
one share of Common Stock of the Company on the date on which such SAR is
granted. Within this limitation the base price shall be determined by the
Committee. Each unit of a "stand-alone" SAR entitles the holder, upon
exercise, to payment of an amount
3
<PAGE> 4
equal to the difference between the base price of such SAR unit and the fair
market value on the date of exercise of a share of Common Stock of the Company.
(c) At the discretion of the Committee, payment upon exercise of
SARs may be made in cash, in shares of Common Stock of the Company valued at
their fair market value as of the date of exercise of the SAR, or partly in
cash and partly in shares of Common Stock of the Company.
(d) The Committee may establish a maximum appreciation value
payable under an SAR.
6. Transfer of Options and Stock Appreciation Rights; Exercise of Options
and Stock Appreciation Rights Following Termination of Employment
(a) Except as otherwise provided in subsections (b) and (c) of
this Section 6, Options and SARs may not be transferred except by will or the
laws of descent and distribution, and during the lifetime of the holder may be
exercised only by him. If the holder of an Option or SAR shall cease to be an
employee of the Company, a division, or a subsidiary, and unless otherwise
provided by the Committee or as provided for in Section 8, all rights under
such Option or SAR shall, subject to sub-section (b), terminate, as set forth
below:
(i) in the event of termination of a holder who is
retirement-eligible under the terms of a pension plan of the
Company or a subsidiary, the Option or SAR may be exercised
within three years following the date of termination of
employment
(ii) in the event of termination of employment due to
permanent and total disability of a holder who is not
retirement-eligible under the terms of a pension plan of the
Company or a subsidiary, the Option or SAR may be exercised
within three years following the date of such termination of
employment.
(iii) in the event of death during employment, the Option
or SAR may be exercised by the executor, administrator, or
other personal representative of the holder within three years
succeeding death if such holder was retirement-eligible under
the terms of a pension plan of the Company or a subsidiary, or
twelve months if such holder was not retirement-eligible under
the terms of a pension plan of the Company or a subsidiary.
(iv) in the event of termination of employment other than
as set forth in subsections (i), (ii) or (iii) above, the
Option or SAR may be exercised within three months following
the date of termination.
(v) in the event of death of a holder of an Option or SAR
following termination of employment, the Option or SAR may be
exercised by the executor, administrator, or other personal
representative of the holder, notwithstanding the time period
specified in (i), (ii), (iii) or (iv) above, within (a) twelve
months following death or (b) the remainder of the period in
which the holder was entitled to exercise the Option or SAR,
whichever period is longer.
If the Committee determines that the termination is for cause,
the Option or SAR will not under any circumstances be
exercisable following termination of employment.
4
<PAGE> 5
(b) Notwithstanding the provisions of sub-section (a), an Option
or SAR may not be exercised pursuant to this Section after the expiration of
the term of such Option or SAR and may be exercised only to the extent that the
holder is entitled to exercise such Option or SAR on the date of termination of
employment.
(c) Notwithstanding the provisions of subsection (a) of this
Section 6, an employee who is the holder of a non-statutory Option, at any time
prior to his death, may assign all or any portion of the Option to (i) his
spouse or any lineal descendant, (ii) the trustee of a trust for the primary
benefit of his spouse or any lineal descendant, or (iii) a tax-exempt
organization as described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended. In such event the spouse, lineal descendant, trustee or
tax-exempt organization will be entitled to all of the rights of the employee
with respect to the assigned portion of such Option, and such portion of the
Option will continue to be subject to all of the terms, conditions and
restrictions applicable to the Option as set forth herein, and in the related
stock option agreement, immediately prior to the effective date of the
assignment. Any such assignment will be permitted only if (i) the employee
does not receive any consideration therefor, and (ii) the assignment is
expressly approved by the Committee. Any such assignment shall be evidenced by
an appropriate written document executed by the employee, and a copy thereof
shall be delivered to the Committee on or prior to the effective date of the
assignment. This subsection (c) shall apply to all non-statutory stock options
granted under the Plan at any time.
7. Restricted Stock and Restricted Stock Rights
(a) The Committee from time to time may grant shares of Common
Stock of the Company to any employee selected by the Committee, subject to the
forfeiture of such stock to the Company if such employee fails to remain an
employee of the Company or a division, or any subsidiary for the period of time
established by the Committee ("Restricted Stock"). The Committee may also
grant Restricted Stock Rights ("RSRs") to any employee selected by the
Committee, which would entitle such employee to receive a stated number of
shares of Common Stock of the Company, subject to forfeiture of such RSRs if
such employee fails to remain continuously an employee of the Company, a
division, or any subsidiary for the period of time established by the
Committee.
(b) Restricted Stock and RSRs shall be subject to the following
restrictions and limitations:
(i) Restricted Stock and RSRs may not be transferred
except by will or the laws of descent and distribution;
(ii) Except as otherwise provided in Paragraphs (d) and
(e) of this Section 7, or as provided in Section 8, Restricted
Stock and RSRs and the shares subject to such RSRs shall be
forfeited and all rights of a grantee of such Restricted Stock
and RSRs and shares subject to RSRs shall terminate without
any payment of consideration by the Company if the employee
fails to remain continuously as an employee of the Company, a
division, or any subsidiary for the period of time established
by the Committee (the "Restricted Period"). A grantee shall
not be deemed to have terminated his period of continuous
employment with the Company, a division, or any subsidiary if
he leaves the employ of the Company or any subsidiary for
immediate reemployment with the Company, a division, or any
subsidiary.
5
<PAGE> 6
(c) A holder of RSRs shall not be entitled to any of the rights of
a holder of the Common Stock with respect to the shares subject to such RSRs
prior to the issuance of such shares pursuant to the Plan. At the Committee's
discretion, during the Restricted Period, for each share subject to RSRs, the
Company may pay the holder an amount in cash equal to the cash dividend
declared on a share of Common Stock of the Company during the Restricted Period
on or about the date the Company pays such dividend to its stockholders of
record.
(d) The Committee in its sole discretion may accelerate the
termination of the Restricted Period with respect to any Restricted Stock and
RSRs.
(e) In the event that the employment of a holder terminates by
reason of death or permanent and total disability, (i) a holder of Restricted
Stock shall be entitled to have the risk of forfeiture removed from the number
of shares of Restricted Stock multiplied by a fraction (x) the numerator of
which shall be the number of full months between the date of grant of such
Restricted Stock and the date of such termination of employment, and (y) the
denominator of which shall be the number of full months in the Restricted
Period; and (ii) a holder of RSRs shall be entitled to receive the number of
shares subject to such RSRs multiplied by a fraction (x) the numerator of which
shall be the number of full months between the date of such RSRs and the date
of such termination of employment, and (y) the denominator of which shall be
the number of full months in the Restricted Period; provided, however, that any
fractional share shall not be awarded. A holder of Restricted Stock or RSRs
whose employment terminates for reasons other than those listed in this
paragraph will forfeit his rights under any outstanding shares of Restricted
Stock or RSRs. This automatic forfeiture may be waived in whole or in part by
the Committee in its sole discretion.
(f) When a grantee shall be entitled to receive shares of Common
Stock pursuant to RSRs, the Company shall issue the appropriate number of
shares registered in the name of the grantee.
8. Change in Control
The following provisions shall apply in the event of a "Change in
Control":
(a) In the event of a Change in Control, as defined in this
Section 8:
(i) any SARs outstanding for at least 6 months and any
Options not previously exercisable and vested shall become
fully exercisable and vested;
(ii) the restrictions applicable to any Restricted Stock
shall lapse and such Restricted Stock shall be deemed fully
vested; and
(iii) each holder of RSRs shall be entitled to receive the
number of shares subject to such RSRs.
(b) For purpose of this Section 8, "Change in Control" means:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Sections 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
6
<PAGE> 7
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding 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 in Control: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of a conversion or
exchange privilege in respect of outstanding convertible or exchangeable
securities), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation involving the
Company, if immediately after such reorganization, merger or consolidation,
each of the conditions described in clauses (i), (ii) and (iii) of subsection
(3) of this Section 8(b) shall be satisfied; and provided further that, for
purposes of clause (B), if any Person (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company shall become the beneficial owner of 20%
or more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the
Company and such person shall, after such acquisition by the Company, become
the beneficial owner of any additional shares of the Outstanding Company Common
Stock or any additional Outstanding Company Voting Securities and such
beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control;
(2) individuals who, as of October 25, 1991, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided, however, that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the vote
of at least a majority of the directors then comprising the Incumbent Board
shall be deemed to have been a member of the Incumbent Board; and provided
further, that no individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act,
or any other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall be deemed to have been a member
of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation unless, in any such case, immediately
after such reorganization, merger or consolidation, (i) more than 60% of the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined
voting power of the then outstanding 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 or
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation and in substantially the
same proportions relative to each other as their ownership, immediately prior
to such reorganization, merger or consolidation, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(ii) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or the corporation resulting from
such reorganization, merger or consolidation (or any corporation controlled by
the Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of such corporation or
20% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election
7
<PAGE> 8
of directors and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing for such
reorganization, merger or consolidation; or
(4) approval by the stockholders of the Company of (i) a
plan of complete liquidation or dissolution of the Company or (ii) 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, immediately after such sale
or other disposition, (A) more than 60% of the then outstanding shares of
common stock thereof and more than 60% of the combined voting power of the then
outstanding securities thereof 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 the
Outstanding Company Voting Securities immediately prior to such sale or other
disposition and in substantially the same proportions relative to each other as
their ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities,
as the case may be, (B) no Person (other than the Company, any employee benefit
plan (or related trust) sponsored or maintained by the Company or such
corporation (or any corporation controlled by the Company) and any Person which
beneficially owned) immediately prior to such sale or other disposition,
directly or indirectly, 20% or more of the Outstanding Company Common Stock or
the Outstanding Company Voting Securities, as the case may be, beneficially
owns, directly or indirectly, 20% or more of the then outstanding shares of
common stock thereof or 20% or more of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board of directors
thereof were members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such sale or other
disposition.
9. Amendment and Termination of the Plan
The Board of Directors or the Committee may amend the Plan or any
Award granted thereunder at any time, except that the Board of Directors or the
Committee may not, except as permitted by Section 3(c), (i) without stockholder
approval, increase the number of shares of Common Stock of the Company which
may be issued pursuant to the Plan, change the purchase price of an Option or
base price of a "stand-alone" SAR, or make any other amendment to the Plan
which is required by law to be approved by the stockholders of the Company;
(ii) amend an Award granted thereunder in a manner materially and adversely
affecting the rights of the holder thereof without such holder's consent. The
Board of Directors may terminate the Plan at any time, but such termination
shall not affect Awards previously granted under the Plan.
8
<PAGE> 1
EXHIBIT 10.14
February 23, 1998
SCOTSMAN INDUSTRIES, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN AA
PARTICIPANT R.C. OSBORNE
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel
have contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1998
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash
to each participant, or in case of death, to his heirs or
personal representatives, each year following completion of
the regular annual audit by independent public accountants,
which normally is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments
applicable thereto made subsequent to determination of the
bonus for such completed bonus year. No rights of any nature
shall accrue to any participant or employee with respect to
any future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive incentive Compensation Program as applicable to
subsequent bonus years.
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman industries shall recommend to the
<PAGE> 2
Executive Incentive Compensation Program
Plan AA
Page 2
Committee prior to March 1 of each year for its approval,
revision or disapproval, lists of names of employees for
participation in the bonus for the current bonus year.
(b) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee additional names of employees for
participation beginning at a fixed date in the year and upon
approval by the Committee such employees shall participate in
the bonus for that portion of the year subsequent to the fixed
date.
(c) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee the exclusion, for cause, of any
employee from participation in the bonus for the year or for
any portion thereof. Upon approval of the recommendation by
the Committee, any such employee shall not participate in the
bonus for such year or for any portion of the year subsequent
to a date fixed by the Committee.
(d) A participant who is separated from employment, for any
reason, except death, disability, or retirement, prior to the
end of the bonus year shall not participate in the bonus or
any part thereof for the bonus year. However, the Chairman,
President and Chief Executive Officer of Scotsman industries
may, at his sole discretion, recommend the separated employee
to the Committee for participation for all or part of the
bonus year.
3. Computation of Bonus
(a) The actual bonus earned shall consist of two parts, Part I is
discretionary subject to a maximum of 36.0%; Part II is the
percentage of the Earnings Per Share objective earned subject
to a maximum bonus of 42.0% and the percentage of the Cash
Flow objective earned subject to a maximum bonus of 42.0%. For
purposes of this Plan, the bonus percentages are set at
various levels as follows:
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
-----------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Individual Performances
Discretionary 0 18.0% 27.0% 36.0%
Part II - Team Results
Earnings Per Share 0 21.0% 31.5% 42.0%
Cash Flow 0 21.0% 31.5% 42.0%
- ---- ---- ----
Total 0 60.0% 90.0% 120.0%
= ==== ==== =====
</TABLE>
<PAGE> 3
Executive Incentive Compensation Program
Plan AA
Page 3
The bonus percentage under Part II for attainment of
objectives between any three of these levels will be
calculated on a pro rata basis.
(b) The discretionary bonus earned by each participant shall vary
from zero to a maximum of 36.0%. The percentage shall be
determined by the Committee.
(c) Earnings Per Share and Cash Flow objectives for Scotsman
Industries will be established by the Committee in U.S.
dollars.
(d) The bonus payable to each participant shall be a percentage,
as determined in paragraph 3(a) of the participant's bonus
base. The maximum bonus payable under the Plan is 120% of the
participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by
Scotsman Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
(c) Corporate Earnings Per Share shall be reported consolidated
net income divided by fully-diluted weighted average common
shares outstanding, as determined in accordance with general
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
(e) Cash Flow shall be consolidated cash flow before acquisitions
and divestitures for the year.
<PAGE> 4
February 23, 1998
SCOTSMAN INDUSTRIES, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN A-2
PARTICIPANT DONALD HOLMES
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel
have contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1998
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash
to each participant, or in case of death, to his heirs or
personal representatives, each year following completion of
the regular annual audit by independent public accountants,
which normally is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments
applicable thereto made subsequent to determination of the
bonus for such completed bonus year. No rights of any nature
shall accrue to any participant or employee with respect to
any future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee prior
to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
<PAGE> 5
Executive Incentive Compensation Program
Plan A-2
Page 2
(b) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee additional names of employees for
participation beginning at a fixed date in the year and upon
approval by the Committee such employees shall participate in
the bonus for that portion of the year subsequent to the fixed
date.
(c) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee the exclusion, for cause, of any
employee from participation in the bonus for the year or for
any portion thereof. Upon approval of the recommendation by
the Committee, any such employee shall not participate in the
bonus for such year or for any portion of the year subsequent
to a date fixed by the Committee.
(d) A participant who is separated from employment, for any except
death, disability or retirement, prior to the end of the bonus
year shall not participate in the bonus or any part thereof
for the bonus year. However, the Chairman, President and Chief
Executive Officer of Scotsman Industries may, at his sole
discretion, recommend the separated employee to the Committee
for participation for all or part of the bonus year.
3. Computation of Bonus
(a) The actual bonus earned shall consist of two parts. Part I is
discretionary subject to a maximum of 21.0%; Part II is the
percentage of the Earnings Per Share objective earned subject
to a maximum bonus of 24.5% and the percentage of the Cash
Flow objective earned subject to a maximum bonus of 24.5%. For
purposes of this Plan, the bonus percentages are set at
various levels as follows:
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
-----------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Individual Performances
Discretionary 0 10.5% 15.7% 21.0%
Part II - Team Results
Earnings Per Share 0 12.3% 18.4% 24.5%
Cash Flow 0 12.2% 18.4% 24.5%
- ---- ---- ----
Total 0 35.0% 52.5% 70.0%
= ==== ==== ====
</TABLE>
<PAGE> 6
Executive Incentive Compensation Program
Plan A-2
Page 3
The bonus percentage under Part II for attainment of
objectives between any of the levels will be calculated on a
pro rata basis.
(b) The discretionary bonus earned by each participant shall vary
from zero to a maximum of 21.0%. The percentage shall be
recommended by the Chairman, President and Chief Executive
Officer for approval or revision by the Committee.
(c) Earnings Per Share and Cash Flow objectives for Scotsman
Industries will be established by the Committee in U.S.
dollars.
(d) The bonus payable to each participant shall be a percentage,
as determined in paragraph 3(a) of the participant's bonus
base. The maximum bonus payable under the Plan is 70% of the
participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by
Scotsman Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
(c) Corporate Earnings Per Share shall be reported consolidated
net income divided by fully-diluted weighted average common
shares outstanding, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
(e) Cash Flow shall be consolidated cash flow before acquisitions
and divestitures for the year.
<PAGE> 7
February 23, 1998
SCOTSMAN INDUSTRIES, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN A-I
PARTICIPANT EMANUELE LANZANI
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel
have contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1998
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash
to each participant, or in case of death, to his heirs or
personal representatives, each year following completion of
the regular annual audit by independent public accountants,
which normally is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments
applicable thereto made subsequent to determination of the
bonus for such completed bonus year. No rights of any nature
shall accrue to any participant or employee with respect to
any future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee prior
to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
<PAGE> 8
Executive Incentive Compensation Program
Plan A-1
Page 2
(b) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee additional names of employees for
participation beginning at a fixed date in the year and upon
approval by the Committee such employees shall participate in
the bonus for that portion of the year subsequent to the fixed
date.
(c) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee the exclusion, for cause, of any
employee from participation in the bonus for the year or for
any portion thereof. Upon approval of the recommendation by
the Committee, any such employee shall not participate in the
bonus for such year or for any portion of the year subsequent
to a date fixed by the Committee.
(d) A participant who is separated from employment, for any
reason, except death, disability, or retirement, prior to the
end of the bonus year shall not participate in the bonus or
any part thereof for the bonus year. However, the Chairman,
President and Chief Executive Officer of Scotsman Industries
may, at his sole discretion, recommend the separated employee
to the Committee for participation for all or part of the
bonus year.
3. Computation of Bonus
(a) The actual bonus earned shall consist of three parts. Part I
are four Team Objectives subject to a maximum bonus of 16.0%;
Part II is the percentage of the Earnings Before Interest &
Taxes (EBIT) objective earned subject to a maximum bonus of
25.0% and the percentage of the Working Capital to Sales
objective earned subject to a maximum bonus of 19.0%; and Part
III is the percentage of the Corporate Earnings Per Share
(EPS) objective earned subject to a maximum bonus of 10.0%.
For purposes of this Plan, the bonus percentages are set at
various levels as follows:
<PAGE> 9
Executive Incentive Compensation Program
Plan A-1
Page 3
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
-----------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Four Team Objectives 0 8.0% 12.0% 16.0%
------------------------------
Part II - Division Team Results
- Frimont
EBIT 0 8.5% 12.8% 17.0%
Working Capital to Sales 0 6.5% 9.7% 13.0%
- CastelMAC
EBIT 0 4.0% 6.0% 8.0%
Working Capital to Sales 0 3.0% 4.5% 6.0%
Part III - Corporate Team Results
Earnings Per Share 0 5.0% 7.5% 10.0%
- --- --- ----
Total 0 35.0% 52.5% 120.0%
= ==== ==== =====
</TABLE>
The bonus percentages for attainment of objectives between any
of the levels will be calculated on a pro rata basis.
(b) EBIT and Working Capital to Sales for each Division will be
established by the Committee in the local currency of the
participant's Division,
(c) Earnings Per Share for Scotsman Industries will be established
by the Committee in U.S. dollars.
(d) The bonus payable to each participant shall be a percentage,
as determined in paragraph 3(a) of the participant's bonus
base. The maximum bonus payable under the Plan is 70.0% of the
participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by
Scotsman Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
<PAGE> 10
Executive Incentive Compensation Program
Plan A-1
Page 4
(c) Earnings Before Interest and Taxes (EBIT) shall be profit
before interest and taxes of each participating division for
the bonus year, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
EBIT will be measured on a LIFO basis covering U.S. operations
and on a FIFO basis covering foreign operations. However, any
U.S. operations with Corporate approved FIFO inventories will
be measured on a FIFO basis covering those inventories.
(d) Corporate Earnings Per Share shall be reported consolidated
net income divided by fully-diluted weighted average Common
shares outstanding, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
(f) Division Working Capital to Sales shall be the percentage of
the monthly average of the reported division working capital
to the annual sales of the division excluding
inter-division/inter-company transactions. Working Capital is
defined as the net book value of the sum of trade accounts
receivable, inventory and trade accounts payable. Average
working capital will be based on month end balances starting
with the ending balance of the preceding year and ending with
the year end balance of the bonus year (average of 13 monthly
balances), adjusted to eliminate extraordinary gains and
losses determined by the Committee.
<PAGE> 11
February 23, 1998
SCOTSMAN INDUSTRIES, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN A-1
PARTICIPANT MICHAEL DE ST PAER
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel
have contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1998
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash
to each participant, or in case of death, to his heirs or
personal representatives, each year following completion of
the regular annual audit by independent public accountants,
which normally is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments
applicable thereto made subsequent to determination of the
bonus for such completed bonus year. No rights of any nature
shall accrue to any participant or employee with respect to
any future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee prior
to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
<PAGE> 12
Executive Incentive Compensation Program
Plan A-1
Page 2
(b) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee additional names of employees for
participation beginning at a fixed date in the year and upon
approval by the Committee such employees shall participate in
the bonus for that portion of the year subsequent to the fixed
date.
(c) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee the exclusion, for cause, of any
employee from participation in the bonus for the year or for
any portion thereof. Upon approval of the recommendation by
the Committee, any such employee shall not participate in the
bonus for such year or for any portion of the year subsequent
to a date fixed by the Committee.
(d) A participant who is separated from employment, for any
reason, except death, disability, or retirement, prior to the
end of the bonus year shall not participate in the bonus or
any part thereof for the bonus year. However, the Chairman,
President and Chief Executive Officer of Scotsman Industries
may, at his sole discretion, recommend the separated employee
to the Committee for participation for all or part of the
bonus year.
3. Computation of Bonus
(a) The actual bonus earned shall consist of three parts. Part I
are four Team Objectives subject to a maximum bonus of 16.0%;
Part II is the percentage of the Earnings Before Interest &
Taxes (EBIT) objective earned subject to a maximum bonus of
25.0% and the percentage of the Working Capital to Sales
objective earned subject to a maximum bonus of 19.0%; and Part
III is the percentage of the Corporate Earnings Per Share
(EPS) objective earned subject to a maximum bonus of 10.0%.
For purposes of this Plan, the bonus percentages are set at
various levels as follows:
<PAGE> 13
Executive Incentive Compensation Program
Plan A-1
Page 3
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
-----------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Four Team Objectives 0 8.0% 12.0% 16.0%
-----------------------------
Part II - Division Team Results
EBIT 0 12.5% 18.7% 25.0%
Working Capital to Sales 0 9.5% 14.3% 19.0%
Part III - Corporate Team Results
Earnings Per Share 0 5.0% 7.5% 10.0%
- ---- ---- ----
Total 0 35.0% 52.5% 70.0%
= ===== ==== ====
</TABLE>
The bonus percentages for attainment of objectives between any
of the levels will be calculated on a pro rata basis.
(b) EBIT and Working Capital to Sales for each Division will be
established by the Committee in the local currency of the
participant's Division.
(c) Earnings Per Share for Scotsman Industries will be established
by the Committee in U.S. dollars.
(d) The bonus payable to each participant shall be a percentage,
as determined in paragraph 3(a) of the participant's bonus
base. The maximum bonus payable under the Plan is 70.0% of the
participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by
Scotsman Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
(c) Earnings Before Interest and Taxes (EBIT) shall be profit
before interest and taxes of each participating division for
the bonus year, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains
<PAGE> 14
Executive Incentive Compensation Program
Plan A-1
Page 4
and losses as determined by the Committee. EBIT will be
measured on a LIFO basis covering U.S. operations and on a
FIFO basis covering foreign operations. However, any U.S.
operations with Corporate approved FIFO inventories will be
measured on a FIFO basis covering those inventories.
(d) Corporate Earnings Per Share shall be reported consolidated
net income divided by fully-diluted weighted average Common
shares outstanding, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
(f) Division Working Capital to Sales shall be the percentage of
the monthly average of the reported division working capital
to the annual sales of the division excluding
inter-division/inter-company transactions. Working Capital is
defined as the net book value of the sum of trade accounts
receivable, inventory and trade accounts payable. Average
working capital will be based on month end balances starting
with the ending balance of the preceding year and ending with
the year end balance of the bonus year Coverage of 13 monthly
balances), adjusted to eliminate extraordinary gains and
losses determined by the Committee.
<PAGE> 1
EXHIBIT 10.21
[SCOTSMAN INDUSTRIES LETTERHEAD]
October 20, 1997
TO: Ludwig Klein cc: M. de St. Paer
This letter is intended to confirm our discussions and agreement regarding your
employment at Hartek. We have agreed to extend your current employment contract
that expires at the end of January 1998 to the end of March 1998. We have also
agreed effective at that time and for a duration of one year, you would continue
to work for Hartek/Whitlenge at one-half pay and one-half time.
You know that both Mike and I respect and appreciate the contributions you have
made at Hartek and believe strongly that you can continue to contribute there
during the management transition and, if interested, in other areas. I think
this continued relationship is very good for all parties.
If under German law or for your own needs we need to modify or develop a
contract for the above employment relationship, please have those documents
prepared and forward to me.
/s/ R. C. Osborne
R. C. Osborne
RCO:dm
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
LIST OF SUBSIDIARIES OF THE REGISTRANT
---------------------------------------
JURISDICTION OF
INCORPORATION OTHER NAMES UNDER WHICH
NAME OF SUBSIDIARY OR ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------ -------------------- ---------------------------
<S> <C> <C>
Scotsman Group Inc. Delaware Scotsman
Scotsman Commercial Ice
Systems, Inc.
Scotsman Ice Systems
Scotsman of Los Angeles
Beleggingsmaatschappij
Interrub B.V. Netherlands None
Booth, Inc. Texas Crystal Tips
Castel MAC, S.p.A. Italy None
Charles Needham Industries, Inc. Michigan Kyson/Needham
Charles Needham Industries LP Delaware Limited None
Partnership
DFC Holding Corporation Delaware None
The Delfield Company Delaware None
Frimont, S.p.A. Italy None
Hartek Awagem Vertriebsges m.b.H. Austria None
Hartek Beverage Handling GmbH Germany None
Homark Holdings Ltd England None
Homark Group Ltd England None
Kysor/Bangor, Inc. Michigan None
Kysor Business Trust Delaware Business Trust None
Kysor CNI, Inc. Michigan None
Kysor Industrial Corporation Michigan Kysor/Warren
Kysor/Kalt, Inc. Michigan None
Kysor/Warren de Mexico Mexico None
S. De R.L. De C.V.
Kysor Worldwide Corp. Barbados None
Scotsman Drink Limited England None
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION OTHER NAMES UNDER WHICH
NAME OF SUBSIDIARY OR ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------ -------------------- ---------------------------
<S> <C> <C>
Scotsman Group FSC, Inc. Barbados None
Scotsman Ice Systems China None
Shenyang Co. Ltd
Whitlenge Acquisition Limited England None
Whitlenge Drink Equipment Limited England None
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K into the Company's previously filed
Registration Statements, File Nos.33-35870, 33-35871, 33-53482, 33-57219,
33-56353, 33-59397, 33-60377, and 333-38489.
Arthur Andersen LLP
Chicago, Illinois
March 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCOTSMAN
INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 28, 1997 AND SCOTSMAN
INDUSTRIES, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED
DECEMBER 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 24,085
<SECURITIES> 0
<RECEIVABLES> 102,880
<ALLOWANCES> 5,371
<INVENTORY> 75,350
<CURRENT-ASSETS> 227,096
<PP&E> 86,762
<DEPRECIATION> 50,866
<TOTAL-ASSETS> 660,124
<CURRENT-LIABILITIES> 147,947
<BONDS> 321,132
0
0
<COMMON> 1,076
<OTHER-SE> 141,578
<TOTAL-LIABILITY-AND-EQUITY> 660,124
<SALES> 571,588
<TOTAL-REVENUES> 571,588
<CGS> 429,598
<TOTAL-COSTS> 429,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,358
<INCOME-PRETAX> 37,561
<INCOME-TAX> 18,642
<INCOME-CONTINUING> 18,919
<DISCONTINUED> 0
<EXTRAORDINARY> (633)
<CHANGES> 0
<NET-INCOME> 18,286
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.69
</TABLE>
<PAGE> 1
EXHIBIT 99
SCOTSMAN INDUSTRIES, INC.
CAUTIONARY STATEMENTS
Information provided by the Company from time to time, either orally or in
writing, may contain certain "forward looking" information, as that term is
defined in the Private Securities Litigation Reform Act of 1995 (the "Act").
Consistent with the Act, such forward-looking information may include
information relating to such matters as sales, income, earnings per share,
return on equity, capital expenditures, dividends, capital structure, cash
flow, debt to capitalization ratios, internal growth rates, future economic
performance, management's plans and objectives for future operations, or the
assumptions relating to, or underlying, any such forward-looking information.
The cautionary statements set forth below are being made pursuant to the
provisions of the Act and with the intention of obtaining the benefits of the
"safe harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those expressed
in, or implied by, the forward-looking statements as a result of various
factors, including but not limited to the following:
1. The Company's performance should be expected to be affected by the
strength or weakness of the various economies in which the Company
markets its products, primarily in the United States and Western Europe,
but also in the Far East. The relative strength or weakness of these
economies may affect the rate at which new hotels, restaurants, fast food
outlets, supermarkets or other facilities with a need for the Company's
products are built, and the rate at which other potential commercial
customers replace or upgrade ice machines, beverage dispensing systems,
food preparation and storage equipment, refrigerated display cases,
walk-in coolers, and insulated panels already in use, thus affecting the
demand for the Company's products.
2. Sales of a significant proportion of the Company's products can be
negatively impacted by abnormal weather conditions during different
seasons and quarters of the year.
3. Underutilization of the Company's facilities may occur as a result of
failure to meet anticipated sales volumes. Such underutilization, which
results in excess capacity costs, may significantly affect the Company's
operating results.
4. The Company's ability to realize operating profits is dependent on its
ability to timely manufacture, source and deliver products which may be
sold for a profit. Labor difficulties, delays in delivery or increased
prices of raw materials and purchased components, scheduling and
transportation difficulties, management dislocations and delays in
development and manufacture of new products can negatively affect
operating profits.
5. The Company's results of operations can be negatively impacted by product
liability or other lawsuits and/or by warranty claims or other returns of
goods.
6. The Company sells products in over 100 countries and has manufacturing
operations in the United States, the United Kingdom, Germany, Italy and
China and joint venture interests in Australia, the United Kingdom and
Indonesia. International operations generally are subject to various
political and other risks that are not present in U.S. operations,
including, among other things, the risk of war or civil unrest,
expropriation and nationalization. In addition, certain international
jurisdictions restrict repatriation of the Company's non-U.S. earnings.
Various international jurisdictions also have laws limiting the right and
ability of non-U.S. entities to pay dividends and remit earnings to
<PAGE> 2
affiliated companies unless specified conditions are met. In addition,
sales in international jurisdictions typically are made in local
currencies, which subjects the Company to risks associated with currency
fluctuations. Currency devaluations and unfavorable changes in
international monetary and tax policies and other changes in the
international regulatory climate could materially affect the Company's
profitability or growth plans.
7. Although no single customer accounts for more than 10% of the Company's
consolidated net sales, the volume of sales of the Company's refrigerated
display cases, food preparation and storage equipment, walk-in coolers and
freezers and beverage systems may be affected, from time to time, by
changes in the buying patterns of certain large customers as a result of
internal cost-control measures adopted by such customers, changes in the
strategic plans of such customers, or other factors.
8. The Company's products and manufacturing processes are subject to various
environmental, health and safety regulations and standards. Such
regulations and standards, from time to time, may require significant
changes in products or manufacturing methods. The Company also is, or may
be, subject from time to time to claims and litigation arising under the
Comprehensive Environmental Response, Compensation and Liability Act and
similar state statutes. The Company believes that environmental, health
and safety matters will not have a material effect on its business or
financial condition. However, legal and regulatory requirements in this
area are increasing, and there can be no assurance that significant costs
and liabilities will not be incurred as a result of currently unidentified
or future problems or new regulatory developments.
9. The acquisition of Kysor Industrial Corporation in March, 1997 (the "Kysor
Acquisition") significantly increased the Company's debt service
obligations. The Kysor Acquisition was financed through a loan facility
established between the Company, the Company's wholly-owned subsidiary
Scotsman Group Inc., and certain other subsidiaries and The First National
Bank of Chicago as agent for the lenders (the "Credit Facility"). In
December 1997, Scotsman Group Inc. issued $100 million of 8 5/8% Senior
Subordinated Notes (the "Notes"). Although the Indenture for the Notes and
the Credit Facility contain covenants that limit the incurrence by the
Company, Scotsman Group and certain of the subsidiaries of additional
indebtedness, such limitations are subject to a number of important
qualifications and exceptions and the Company's indebtedness could increase
if, among other reasons, future acquisitions are financed through
additional borrowings. The Company's ability to make scheduled payments of
principal and interest or to refinance its indebtedness will depend on the
Company's operating performance and cash flows, which are affected by
prevailing economic conditions and financial, competitive and other
factors beyond the Company's control. If the Company is unable to generate
sufficient cash flows to service its debt obligations, it will have to
adopt one or more alternatives, such as reducing or delaying planned
acquisitions, expansion and capital expenditures, selling assets,
restructuring debt or obtaining additional equity capital. There can be no
assurance that any of these alternatives could be effected on satisfactory
terms.
10. The Company's continued rapid growth can be expected to place a significant
strain on its management, operations, employees, and other resources.
There can be no assurance that the Company will be able to manage
effectively its expanding operations or achieve planned growth on a
timely or profitable basis. If the Company is unable to manage growth
effectively, its business, results of operations or financial condition
could be materially adversely affected.
11. The Company's success to date has depended in large part on the skills and
efforts of Richard C. Osborne, Chairman of the Board, President and Chief
Executive Officer, Donald D. Holmes, Vice President-Finance and
Secretary, and the heads of each of the operating units of the Company.
<PAGE> 3
While the Company has employment agreements with certain of its executive
officers, including Messrs. Osborne and Holmes, there can be no assurance
that the Company will be able to retain the services of its officers and
key employees. The loss of Messrs. Osborne, Holmes, or any of the heads of
the Company's operating units could have a material adverse effect on the
Company's business, results of operations or financial condition.
12. The Company's business or results of operations could be negatively
impacted if upgrades, modifications and conversions of its computer
software programs and operating systems to properly utilize dates
beyond December 31, 1999 are not made, or are not made in a timely manner.
The Company is currently communicating with its suppliers and customers
regarding Year 2000 compliance within their organizations. In the event
that any of the Company's significant suppliers or customers does not
successfully and timely achieve Year 2000 compliance, the Company's
business or results of operations could be adversely affected.
