AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 2002
REGISTRATION NO. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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LENNOX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 42-0991521
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
CARL E. EDWARDS, JR.
2140 LAKE PARK BOULEVARD EXECUTIVE VICE PRESIDENT, CHIEF LEGAL OFFICER AND SECRETARY
RICHARDSON, TEXAS 75080 LENNOX INTERNATIONAL INC.
(972) 497-5000 2140 LAKE PARK BOULEVARD
(Address, including zip code, and telephone number, RICHARDSON, TEXAS 75080
including area code, of registrant's principal executive offices) (972) 497-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
DOUGLASS M. RAYBURN
BAKER BOTTS L.L.P.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 953-6500
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
--------------------------------- ------------ -------------- -------------- ----------------
6 1/4% Convertible Subordinated
Notes due June 1, 2009...... $ 143,750,000 100% $143,750,000 $13,225
Common Stock, $0.01 par value
per share....................... 7,947,478 shares(1) n/a n/a n/a
(1) This number represents the number of shares of common stock that are
initially issuable upon conversion of the 6 1/4% Convertible Subordinated Notes
due June 1, 2009 registered hereby. For purposes of estimating the number of
shares of Common Stock to be included in the registration statement upon
conversion of the notes, Lennox International Inc. calculated the number of
shares issuable upon conversion of the notes based on a conversion rate of
55.2868 shares per $1,000 principal amount of the notes. In addition to the
shares set forth in the table, the amount to be registered includes an
indeterminate number of shares of Common Stock issuable upon conversion of the
notes, by means of adjustment to the conversion price applicable thereto.
Pursuant to Rule 457(i) under the Securities Act of 1933, there is no filing fee
with respect to the shares of common stock issuable upon conversion of the
exercise of the conversion privilege.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated June 25, 2002
PROSPECTUS $143,750,000
LENNOX INTERNATIONAL INC.
6 1/4% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 1, 2009
AND
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
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This prospectus relates to $143,750,000 in aggregate principal amount
of 6 1/4% Convertible Subordinated Notes due June 1, 2009 of Lennox
International Inc. and 7,947,478 shares of common stock of Lennox International
Inc., which are initially issuable upon conversion of the notes, plus an
indeterminate number of shares as may become issuable upon conversion as a
result of adjustments to the conversion rate. The notes were originally issued
and sold by Lennox International Inc. in a private placement on May 8, 2002.
This prospectus will be used by selling securityholders to resell their notes
and the common stock issuable upon conversion of the notes.
We will not receive any proceeds from the sale of the notes or shares
of common stock issuable upon conversion of the notes by any of the selling
securityholders. Holders of the notes or the shares of our common stock issuable
upon conversion of the notes may offer the notes or the common stock for sale at
any time at market prices prevailing at the time of sale or at privately
negotiated prices. The selling holders may sell the notes or the common stock
directly to purchasers or through underwriters, broker-dealers or agents, who
may receive compensation in the form of discounts, concessions or commissions.
Interest on the notes is payable on June 1 and December 1 of each year,
commencing on December 1, 2002.
Upon the limited circumstances described in this prospectus, including
the closing price of our common stock reaching a specified threshold above the
conversion premium, the notes will be convertible into 55.2868 shares of our
common stock per $1,000 principal amount of notes, subject to adjustment in
certain circumstances. This rate results in an initial conversion price of
approximately $18.09 per share.
On or after June 3, 2005, we may at our option redeem the notes, in
whole or in part, at the redemption prices described in this prospectus, plus
any accrued and unpaid interest to the redemption date; provided that the
closing price of our common stock has exceeded 130% of the conversion price then
in effect for at least 20 trading days within a period of 30 consecutive trading
days ending on the trading day prior to the date of mailing of the optional
redemption notice. In the event of a change in control (as defined in this
prospectus) of Lennox International Inc., each holder of notes may require us to
repurchase the notes at 100% of the principal amount of the notes plus accrued
and unpaid interest.
The notes are junior to all of our existing and future senior
indebtedness and will be structurally subordinated to all existing and future
liabilities of our subsidiaries, including trade payables, lease commitments and
money borrowed.
Our common stock is listed on the New York Stock Exchange under the
symbol "LII". The last reported sale price on __________ __, 2002 was $_________
per share.
The notes originally issued in the private placement are eligible for
trading on the PORTAL Market of the National Association of Securities Dealers,
Inc. However, notes sold pursuant to this prospectus will no longer be eligible
for trading on the PORTAL Market. We do not intend to list the notes on any
national securities exchange.
INVESTING IN THE NOTES OR OUR COMMON STOCK INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is ________, 2002
IMPORTANT NOTICE TO READERS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Under this shelf registration process, the selling securityholders may,
from time to time, offer notes or shares of our common stock owned by them. Each
time the selling securityholders offer notes or common stock under this
prospectus, they will provide a copy of this prospectus and, if applicable, a
copy of a prospectus supplement. You should read both this prospectus and, if
applicable, any prospectus supplement together with the information incorporated
by reference in this prospectus. See "Where You Can Find More Information" and
"Incorporation by Reference" for more information.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone else to provide you
with different information. If anyone provides you with different information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus or any document incorporated
by reference in this prospectus is accurate only as of the date on the front
cover of the applicable document or as specifically indicated in the document.
Our business, financial condition, results of operations and prospects may have
changed since that date.
Unless otherwise indicated, in this prospectus, "Lennox," the
"Company," "we," "us" and "our" refer to Lennox International Inc. and our
subsidiaries.
TABLE OF CONTENTS
Page
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IMPORTANT NOTICE TO READERS...................................................................................i
A WARNING ABOUT FORWARD-LOOKING STATEMENTS....................................................................i
LENNOX INTERNATIONAL INC......................................................................................1
RISK FACTORS..................................................................................................3
RATIO OF EARNINGS TO FIXED CHARGES............................................................................8
USE OF PROCEEDS...............................................................................................8
DESCRIPTION OF NOTES..........................................................................................9
DESCRIPTION OF CAPITAL STOCK.................................................................................24
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.....................................................32
SELLING SECURITYHOLDERS......................................................................................39
PLAN OF DISTRIBUTION.........................................................................................40
LEGAL MATTERS................................................................................................42
EXPERTS......................................................................................................42
WHERE YOU CAN FIND MORE INFORMATION..........................................................................42
INCORPORATION BY REFERENCE...................................................................................42
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements," within the
meaning of federal securities laws, that are based upon our beliefs as well as
assumptions made by and information currently available to us. All statements
other than statements of historical fact included in this prospectus constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to, statements
identified by the words "may," "will," "should," "plan," "predict,"
"anticipate," "believe," "intend," "estimate," "potential," "continue" and
"expect" or the negative of such terms and similar expressions. Such statements
reflect our current views with respect to future events, based on what we
believe are reasonable assumptions; however, such statements are subject to
certain risks, uncertainties and assumptions. In particular, we urge you to
fully consider the cautionary statements described in "Risk Factors" beginning
on page 3, which identify many important factors that could cause actual results
to differ materially from our forward-looking statements. These include, but are
not limited to:
i
o general economic conditions in the United States and abroad;
o the impact of the weather on our business;
o warranty and product liability claims;
o our ability to successfully complete and integrate acquisitions;
o our ability to manage new lines of business;
o our substantial indebtedness;
o our ability to incur substantially more indebtedness;
o our dependence on our subsidiaries for cash flow;
o the consolidation trend in the heating, ventilation, air conditioning
and refrigeration, or HVACR, industry;
o competition in the HVACR business;
o our ability to successfully develop and manage new products;
o increases in the prices of components and raw materials;
o labor relations problems; and
o environmental risks.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may differ materially
from those in the forward-looking statements. All forward-looking statements
included in this prospectus speak only as of the date hereof, and we disclaim
any intention or obligation to update or review any forward-looking statements
or information, whether as a result of new information, future events or
otherwise.
ii
LENNOX INTERNATIONAL INC.
We are a leading global provider of climate control solutions. We
design, manufacture, market, install, service and repair a broad range of
products for the heating, ventilation, air conditioning and refrigeration, or
HVACR, markets. Our products are sold under well-established brand names
including "Lennox," "Armstrong Air," "Ducane," "Bohn," "Larkin," "Advanced
Distributor Products," "Heatcraft," "Service Experts" and others. We are one of
the largest manufacturers in North America of heat transfer products, such as
evaporator coils and condenser coils. We have leveraged our expertise in heat
transfer technology, which is critical to the efficient operation of any heating
or cooling system, to become an industry leader known for our product innovation
and the quality and reliability of our products. We are also a leader in the
growing market for hearth products, which includes pre-fabricated fireplaces and
related products. Historically, we have sold our "Lennox" brand of residential
heating and air conditioning products directly to a network of installing
dealers, which currently numbers approximately 6,500, making us one of the
largest wholesale distributors of these products in North America. In September
1998, we initiated a program to acquire dealers or service centers in
metropolitan areas in the United States and Canada so that we can provide
heating and air conditioning products and services directly to consumers. We
greatly expanded this program with the acquisition of Service Experts Inc. in
January 2000.
Shown below are our five business segments, the key products, services
and brand names within each segment and 2001 net sales by segment.
2001 NET
SEGMENT PRODUCTS/SERVICES BRAND NAMES SALES
------------------ ---------------------------------- ------------------------------------- -----------
(IN MILLIONS)
North American Furnaces, heat pumps, air Lennox, Armstrong Air, Air-Ease, $ 1,201.1
Residential conditioners, packaged heating and Aire-Flo, Magic-Pak, Advanced
cooling systems and related Distributor Products, Superior,
products; pre-fabricated Whitfield and Security Chimneys
fireplaces, free standing stoves,
fireplace inserts and accessories
North American Sales, installation and service of Service Experts, various individual 1,002.6
Retail residential and light commercial service center names
comfort equipment
Commercial Air Unitary air conditioning and Lennox and Janka 470.0
Conditioning applied systems
Commercial Chillers, condensing units, unit Heatcraft, Bohn, Friga-Bohn, 333.5
Refrigeration coolers, fluid coolers, air cooled Larkin, Climate Control, Chandler
condensers and air handlers Refrigeration and Kirby
Heat Transfer Heat transfer coils, other heat Heatcraft 215.1
transfer products and equipment and
tooling to manufacture coils
Eliminations (102.6)
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Total................................ $ 3,119.7
==========
Our principal executive offices are located at 2140 Lake Park
Boulevard, Richardson, Texas 75080. Our telephone number at that location is
(972) 497-5000.
RECENT DEVELOPMENTS
In April 2002, we announced that we had entered into a memorandum of
agreement for the formation of a joint venture with Outokumpu Oyj of Finland.
Outokumpu will purchase a 55% interest in our heat transfer business segment for
$55 million, with us retaining 45% ownership. After a period of three years,
Outokumpu
1
will have the option to purchase the remainder of the business contingent upon
several factors, including operating performance of the joint venture. The
agreement, which has been approved by the board of directors of both companies
and is contingent upon regulatory approvals, is currently targeted for
completion in mid-year 2002. As part of the agreement, a separate 50-50
technology partnership will be established to strengthen the leadership position
in heat transfer technology for us and Outokumpu. Included in the joint venture
agreement are our original equipment manufacturer and commercial coil plants in
Grenada, Mississippi, our heat transfer plant in Juarez, Mexico, our European
heat transfer operations in Cremieu, France, Torreglia, Italy, and Prague, Czech
Republic and Livernois Engineering in Dearborn, Michigan.
2
RISK FACTORS
You should carefully consider all of the information contained or
incorporated by reference in this prospectus before deciding whether to invest
in the notes and, in particular, the information set forth below. These and
other risks could materially and adversely affect our business operating results
or financial condition.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS CAN BE HURT BY AN ECONOMIC DOWNTURN.
Our business is affected by a number of economic factors, including the
level of economic activity in the markets in which we operate. A decline in
economic activity in the United States could materially affect our financial
condition and results of operation. Sales in the residential and commercial new
construction market correlate closely to the number of new homes and buildings
that are built, which in turn is influenced by cyclical factors such as interest
rates, inflation, consumer spending habits, employment rates and other
macroeconomic factors over which we have no control. In the HVACR business, a
decline in economic activity, such as that experienced in 2001, as a result of
these cyclical or other factors typically results in a decline in new
construction and replacement purchases, which would result in a decrease in our
sales volume and profitability.
COOLER THAN NORMAL SUMMERS AND WARMER THAN NORMAL WINTERS MAY DEPRESS OUR SALES.
Demand for our products and for our services is strongly affected by
the weather. Hotter than normal summers generate strong demand for our
replacement air conditioning and refrigeration products and colder than normal
winters have the same effect on our heating products. Conversely, cooler than
normal summers and warmer than normal winters depress our sales. Because a high
percentage of our overhead and operating expenses is relatively fixed throughout
the year, operating earnings and net earnings tend to be lower in quarters with
lower sales.
WE MAY INCUR MATERIAL COSTS AS A RESULT OF WARRANTY AND PRODUCT LIABILITY CLAIMS
WHICH WOULD NEGATIVELY AFFECT OUR PROFITABILITY.
The development, manufacture, sale and use of our products involve a
risk of warranty and product liability claims. In addition, because we own
installing heating and air conditioning dealers in the United States and Canada,
we incur the risk of liability claims for the installation and service of
heating and air conditioning products. Our product liability insurance policies
have limits that if exceeded, may result in material costs that would have an
adverse effect on our future profitability. In addition, warranty claims are not
covered by our product liability insurance and there may be types of product
liability claims that are also not covered by our product liability insurance.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE THE BUSINESSES THAT WE HAVE
ACQUIRED.
We have completed approximately 110 acquisitions since the beginning of
1998. The success of our business will depend in part on our ability to
integrate and operate the acquired businesses profitably and to identify and
implement opportunities for cost savings.
OUR SUBSTANTIAL INDEBTEDNESS WILL LIMIT CASH FLOW AVAILABLE FOR OUR OPERATIONS
AND COULD ADVERSELY AFFECT OUR ABILITY TO SERVICE DEBT OR OBTAIN ADDITIONAL
FINANCING, IF NECESSARY.
As of March 31, 2002, after giving effect to our private placement of
the notes and the use of proceeds therefrom, we would have had $523.9 million of
consolidated indebtedness outstanding and $406.8 million of consolidated
stockholders' equity. In addition, we would have had $139.4 million of
additional credit available under our credit facility.
Our significant level of indebtedness will have several important
consequences to our operations and for the holders of the notes, including:
3
o we will need to use a large portion of our consolidated cash
flow to pay principal and interest on the notes and other
indebtedness, which will reduce the amount of money available
to finance our operations and other business activities;
o we may have difficulty borrowing money in the future for
working capital, capital expenditures, acquisitions or other
purposes;
o we may have a much higher level of debt than some of our
competitors, which may put us at a competitive disadvantage;
o our debt level will make us more vulnerable to economic
downturns and adverse developments in our business;
o we are exposed to the risk of increasing interest rates
because some of our debt, including debt under our senior
credit facility, has variable rates of interest;
o our debt level will reduce our flexibility to respond to
changing business and economic conditions, including increased
competition in our industry; and
o our debt level will limit our ability to pursue other business
opportunities, borrow more money for operations or capital in
the future and implement our business strategy.
Our ability to make payments with respect to the notes will depend on
our future operating performance, which will be affected by prevailing economic
conditions and financial, business, competitive and other factors. We will not
be able to control many of these factors, such as the economic conditions in the
markets in which we operate and initiatives taken by our competitors. We cannot
be certain that our cash flow will be sufficient to allow us to pay principal
and interest on our debt, including the notes, and to meet our other
obligations. If we do not have enough money to do so, we may be required to
refinance all or part of our existing debt, including the notes, sell assets or
borrow more money. We cannot assure you that we will be able to do so on
commercially reasonable terms, if at all. In addition, the terms of our existing
or future debt arrangements, including our credit facility, may restrict us from
adopting any of these alternatives.
WE AND OUR SUBSIDIARIES MAY INCUR SUBSTANTIALLY MORE DEBT WHICH WOULD INCREASE
OUR LEVERAGE AND THE RISK TO YOU OF HOLDING THE NOTES.
We and our subsidiaries may incur substantial additional debt in the
future. Some or all of any future borrowings could be senior to the notes. If
new debt is added to our and our subsidiaries' current debt levels, the risks to
you of holding the notes may increase.
OUR DEPENDENCE ON OUR SUBSIDIARIES FOR CASH FLOW MAY NEGATIVELY AFFECT OUR
BUSINESS AND OUR ABILITY TO PAY THE PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE ON
THE NOTES.
Our ability to meet our cash obligations in the future will be
dependent upon the ability of our subsidiaries to make cash distributions to us.
The ability of our subsidiaries to make these distributions is and will continue
to be restricted by, among other limitations, applicable provisions of governing
law and contractual provisions. The indenture governing the notes does not limit
the ability of our subsidiaries to incur such restrictions in the future. Our
right to participate in the assets of any subsidiaries (and thus the ability of
holders of the notes to benefit indirectly from such assets) is generally
subject to the prior claims of creditors, including trade creditors, of that
subsidiary except to the extent that we are recognized as a creditor of such
subsidiary, in which case our claim would still be subject to any security
interest of other creditors of such subsidiary. The notes, therefore, are
structurally subordinated to creditors, including trade creditors, of our
subsidiaries with respect to the assets of the subsidiaries against which such
creditors have a claim.
4
THE CONSOLIDATION OF DISTRIBUTORS AND DEALERS COULD FORCE US TO LOWER OUR PRICES
OR HURT OUR BRAND NAMES WHICH WOULD RESULT IN LOWER SALES.
There is currently an effort underway in the United States by several
companies to purchase independent distributors and dealers and consolidate them
into large enterprises. These large enterprises may be able to exert pressure on
us to reduce prices. Additionally, these new enterprises tend to emphasize their
company name, rather than the brand of the manufacturer, in their promotional
activities, which could lead to dilution of the importance and value of our
brand names. Future price reductions and the brand dilution caused by the
consolidation among HVAC distributors and dealers could have an adverse effect
on our business and results of operation.
WE MAY NOT BE ABLE TO COMPETE FAVORABLY IN THE HIGHLY COMPETITIVE HVACR
BUSINESS.
Competition in our various markets could cause us to reduce our prices
or lose market share, or could negatively affect our cash flow, which could have
an adverse effect on our future financial results. Substantially all of the
markets in which we participate are highly competitive. The most significant
competitive factors we face are product reliability, product performance,
service and price, with the relative importance of these factors varying among
our product lines. Other factors that affect competition in the HVACR market
include the development and application of new technologies and an increasing
emphasis on the development of more efficient HVACR products. Moreover, new
product introductions are an important factor in the market categories in which
our products compete. Several of our competitors have greater financial and
other resources than we have, allowing them to invest in more extensive research
and development. In addition, our company-owned dealers face competition from
independent dealers and dealers owned by consolidators and utility companies,
some of whom may be able to provide their products or services at lower prices
than we can. We may not be able to compete successfully against current and
future competition and we cannot assure you that the current and future
competitive pressures faced by us will not materially adversely affect our
business and results of operations.
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND MARKET NEW PRODUCTS.
Our future success will depend upon our continued investment in
research and new product development and our ability to continue to realize new
technological advances in the HVACR industry. Our inability to continue to
successfully develop and market new products or our inability to achieve
technological advances on a pace consistent with that of our competitors could
lead to a material adverse effect on our business and results of operations.
WE MAY BE ADVERSELY AFFECTED BY PROBLEMS IN THE AVAILABILITY OF OR INCREASES IN
THE PRICES OF COMPONENTS AND RAW MATERIALS.
Increases in the prices of raw materials or components or problems in
their availability could depress our sales or increase the costs of our
products. We are dependent upon components purchased from third parties as well
as raw materials such as copper, aluminum and steel. We enter into contracts
each year for the supply of key components at fixed prices. However, if a key
supplier is unable or unwilling to meet our supply requirements, we could
experience supply interruptions or cost increases, either of which could have an
adverse effect on our gross profit. In addition, we regularly pre-purchase a
portion of our raw materials at a fixed price each year to hedge against price
fluctuations, but a large increase in raw materials prices could significantly
increase our cost of goods sold.
SINCE A SIGNIFICANT PERCENTAGE OF OUR WORKFORCE IS UNIONIZED, WE FACE RISKS OF
WORK STOPPAGES AND OTHER LABOR RELATIONS PROBLEMS.
We are subject to a risk of work stoppage and other labor relations
matters because a significant percentage of our workforce is unionized. As of
December 31, 2001, approximately 25% of our workforce was unionized. As we
expand our operations, we are subject to increased unionization of our
workforce. The results of future negotiations with these unions, including the
effects of any production interruptions or labor stoppages, could have an
adverse effect on our future financial results.
5
Moreover, our ability to provide high-quality mechanical and electrical
services on a timely basis requires an adequate supply of skilled technicians.
Many companies in our industry are currently experiencing shortages of qualified
technicians. We cannot assure you that we will be able to maintain an adequate
skilled labor force or that our labor expenses will not increase. A shortage of
skilled labor would require us to curtail our planned internal growth or may
require us to use less-skilled labor which could adversely affect our ability to
perform.
EXPOSURE TO ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
Our future profitability could be adversely affected by current or
future environmental laws. We are subject to extensive and changing federal,
state and local laws and regulations designed to protect the environment in the
United States and in other parts of the world. These laws and regulations could
impose liability for remediation costs and often result in civil or criminal
penalties in cases of non-compliance. Compliance with environmental laws
increases our costs of doing business. Because these laws are subject to
frequent change, we are unable to predict the future costs resulting from
environmental compliance.
The United States and other countries have established programs for
limiting the production, importation and use of certain ozone depleting
chemicals, including refrigerants that we use in most of our air conditioning
and refrigeration products. Some categories of these refrigerants have been
banned completely and others are currently scheduled to be phased out in the
United States by the year 2030. The United States is under pressure from the
international environmental community to accelerate the current 2030 deadline.
In Europe, this phase out may occur even sooner. The industry's failure to find
suitable replacement refrigerants for substances that have been or will be
banned or the acceleration of any phase out schedules for these substances by
governments could have an adverse effect on our future financial results.
THE NORRIS FAMILY WILL BE ABLE TO EXERCISE SIGNIFICANT CONTROL OVER OUR COMPANY.
As of March 1, 2002, approximately 110 descendants of or persons
otherwise related to D.W. Norris, one of our original owners, collectively
control over 50% of the outstanding shares of our common stock. Accordingly, if
the Norris family were to act together it would have the ability to determine
the outcome of any action requiring the approval of the holders of our common
stock, including the election of all of our board of directors. Circumstances
may occur in which the interests of the Norris family could conflict with your
interests as a holder of the notes.
OUR STOCKHOLDER RIGHTS PLAN AND SOME PROVISIONS IN OUR CERTIFICATE OF
INCORPORATION AND OUR BYLAWS COULD DELAY OR PREVENT A CHANGE IN CONTROL.
Our stockholder rights plan and our governing documents contain
provisions that make it more difficult to implement corporate actions that may
have the effect of delaying, deterring or preventing a change in control. A
stockholder might consider a change in control in his or her best interest
because he or she might receive a premium for his or her common stock. Examples
of these provisions include:
o a vote of more than 80% of the outstanding voting stock is
required for stockholders to amend specified provisions of the
governing documents;
o our board of directors is divided into three classes, each
serving three-year terms;
o members of our board of directors may be removed only for
cause and only upon the affirmative vote of at least 80% of
the outstanding voting stock; and
o a vote of more than 80% of the outstanding voting stock is
required to approve specified transactions between us and any
person or group that owns at least 10% of our voting stock.
Our board of directors has the ability, without stockholder action, to
issue shares of preferred stock that could, depending on their terms, delay,
discourage or prevent a change in control of Lennox. In addition, the
6
Delaware General Corporation Law, under which we are incorporated, contains
provisions that impose restrictions on business combinations such as mergers
between us and a holder of 15% or more of our voting stock. See "Description of
Capital Stock" for a more complete description of these provisions.
RISKS RELATED TO THE NOTES
THE NOTES WILL BE SUBORDINATED TO OUR SENIOR INDEBTEDNESS AND WILL BE
STRUCTURALLY SUBORDINATED TO ALL LIABILITIES OF OUR SUBSIDIARIES.
The notes are junior in right of payment to all of our existing and
future senior indebtedness, and are structurally subordinated to all liabilities
of our subsidiaries, including trade payables, lease commitments and money
borrowed. As of March 31, 2002, we and our subsidiaries had approximately $380.2
million of consolidated obligations effectively ranking senior to the notes. The
indenture governing the notes does not restrict the incurrence of senior
indebtedness or other debt by us or our subsidiaries. Substantially all of our
operations are conducted through subsidiaries. None of our subsidiaries has
guaranteed or otherwise become obligated with respect to the notes and, as a
result, the notes will be structurally subordinated to all indebtedness and
other obligations of our subsidiaries with respect to our subsidiaries' assets.
By reason of such subordination, in the event of the insolvency, bankruptcy,
liquidation, reorganization, dissolution or winding up of our business, our
assets will be available to pay the amounts due on the notes only after all of
our senior indebtedness has been paid in full, and, therefore, there may not be
sufficient assets remaining to pay amounts due on any or all of the notes then
outstanding. See "Description of Notes -- Subordination of Notes."
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL OFFER REQUIRED BY THE INDENTURE.
If we undergo a change in control (as defined in the indenture), each
holder of the notes may require us to repurchase all or a portion of the
holder's notes. We cannot assure you that there will be sufficient funds
available for any required repurchases of the notes if a change in control
occurs. In addition, the terms of any agreements related to borrowing which we
may enter from time to time may prohibit or limit or make our repurchase of
notes an event of default under those agreements. If we fail to repurchase the
notes in that circumstance, we will be in default under the indenture governing
the notes. See "Description of Notes-Change In Control Permits Purchase of Notes
by Us at the Option of the Holder."
ABSENCE OF A PUBLIC MARKET FOR THE NOTES COULD CAUSE PURCHASERS OF THE NOTES TO
BE UNABLE TO RESELL THEM FOR AN EXTENDED PERIOD OF TIME.
There is no established trading market for the notes. The notes
originally issued in the private placement are eligible for trading on the
PORTAL Market. However, notes sold pursuant to this prospectus will no longer be
eligible for trading on the PORTAL Market. The notes will not be listed on any
securities exchange or included in any automated quotation system. We cannot
assure you that an active trading market for the notes will develop or, if such
market develops, how liquid it will be.
If a trading market does not develop or is not maintained, holders of
the notes may experience difficulty in reselling, or an inability to sell, the
notes. If a market for the notes develops, any such market may be discontinued
at any time. If a public trading market develops for the notes, future trading
prices of the notes will depend on many factors, including, among other things,
the price of our common stock into which the notes are convertible, prevailing
interest rates, our operating results and the market for similar securities.
Depending on the price of our common stock into which the notes are convertible,
prevailing interest rates, the market for similar securities and other factors,
including our financial condition, the notes may trade at a discount from their
principal amount.
7
RATIO OF EARNINGS TO FIXED CHARGES
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31, 2002
----------------------------------------------------- --------------------------------
1997 1998 1999 2000 2001
------ ------ ------ ------ ------
-- 3.94x 3.53x 2.23x -- 1.08x
Earnings consist of income (loss) before income taxes and fixed
charges, excluding minority interest. Fixed charges consist of the total of
interest expense, amortization of loan origination costs and that portion of
rental expense considered to represent interest cost. Due to restructuring
charges in 2001 of $73.2 million, additional earnings of $44.3 million would
have been necessary to cover fixed charges. Due to product inspection charges in
1997 of $140.0 million, additional earnings of $45.7 million would have been
necessary to cover fixed charges.
USE OF PROCEEDS
All of the notes and the shares of our common stock issuable upon
conversion of the notes are being sold by the selling securityholders or by
their pledgees, donees, transferees or other successors in interest. We will not
receive any proceeds from the sale of the notes or the shares of our common
stock issuable upon conversion of the notes.
8
DESCRIPTION OF NOTES
We issued $143,750,000 aggregate principal amount of notes in a private
placement on May 8, 2002. The notes were issued under an indenture entered into
between us and The Bank of New York, as trustee. The following statements are
subject to the detailed provisions of the indenture and are qualified in their
entirety by reference to the indenture. We will provide copies of the indenture
to prospective investors upon request, and it is also available for inspection
at the office of the trustee. Particular provisions of the indenture which are
referred to in this prospectus are incorporated by reference as a part of the
statements made, and the statements are qualified in their entirety by the
reference. For purposes of this summary, the terms "Lennox," the "Company,"
"we," "us" and "our" refer only to Lennox International Inc. and not to any of
our subsidiaries. References to "interest" shall be deemed to include
"liquidated damages" unless the context otherwise requires.
GENERAL
The notes represent our unsecured general obligations, subordinate in
right of payment to certain of our obligations as described under "Subordination
of Notes," and convertible into our common stock as described under "Conversion
rights." The notes are limited to $143,750,000 aggregate principal amount.
Interest on the notes is payable semi-annually on June 1 and December 1 of each
year, with the first interest payment to be made on December 1, 2002, at the
rate of 6 1/4% per annum, to the persons who are registered holders of the notes
at the close of business on the preceding May 15 and November 15, respectively.
Unless previously redeemed, repurchased or converted, the notes will mature on
June 1, 2009. The notes are payable at the office of the paying agent, which
initially is an office or agency of the trustee, or an office or agency
maintained by us for such purpose, in the Borough of Manhattan, the City of New
York. Payments in respect of the notes may, at our option, be made by check and
mailed to the holders of record as shown on the register for the notes.
The notes are issued without coupons in denominations of $1,000 and
integral multiples thereof.
Holders may present for conversion any notes that have become eligible
for conversion at the office of the conversion agent, and may present notes for
registration of transfer at the office of the trustee.
The indenture does not contain any financial covenants or any
restrictions on the payment of dividends or on the repurchase of our securities.
The indenture does not require us to maintain any sinking fund or other reserves
for repayment of the notes.
The notes are not subject to defeasance or covenant defeasance.
CONVERSION RIGHTS
GENERAL
Holders may convert any outstanding notes (or portions of outstanding
notes) under the circumstances summarized below into 55.2868 shares of our
common stock, par value $0.01 per share, per $1,000 principal amount of notes,
subject to adjustment in certain circumstances as described below. This rate
results in an initial conversion price of approximately $18.09 per share. We
will not issue fractional shares of common stock upon conversion of notes.
Instead, we will pay a cash adjustment based upon the closing sale price of our
common stock on the business day immediately preceding the conversion date. You
may convert notes only in denominations of $1,000 and whole multiples of $1,000.
Holders may surrender notes for conversion into our common stock only
under the following circumstances:
o during any conversion period, as described below, if the
closing price of our common stock for at least 20 consecutive
trading days in the 30 consecutive trading-day period ending
on the first day of the conversion period was more than 110%
of the conversion price in effect on that thirtieth trading
day;
9
o during the five business-day period following any 10
consecutive trading-day period in which the daily average of
the trading prices (as described below under "Conversion
Rights -- Conversion upon satisfaction of market price
conditions") for the notes for that 10 trading-day period was
less than 95% of the average conversion value, as described
below, for the notes during that period;
o if we have called the notes for redemption; or
o upon the occurrence of the corporate transactions summarized
below.
CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITIONS
A holder may convert its notes into our common stock during any
quarterly conversion period if the closing price of our common stock for at
least 20 consecutive trading days during the 30 consecutive trading-day period
ending on the first day of the conversion period exceeds 110% of the conversion
price in effect on that thirtieth trading day. A "conversion period" will be the
period from and including the thirtieth trading day in a fiscal quarter to, but
not including, the thirtieth trading day in the immediately following fiscal
quarter.
A holder also may convert its notes into our common stock during the
five business-day period following any 10 consecutive trading-day period in
which the daily average of the trading prices for the notes for that 10
trading-day period was less than 95% of the average conversion value for the
notes during that period.
"Conversion value" is equal to the product of the closing price for our
common stock on a given day multiplied by the then current conversion rate,
which is the number of shares of common stock into which each note is then
convertible.
The "trading price" of the notes on any date of determination means the
average of the secondary market bid quotations per note obtained by us or the
calculation agent for $10,000,000 principal amount of notes at approximately
3:30 p.m., New York City time, on such determination date from three independent
nationally recognized securities dealers we select, provided that if at least
three such bids cannot reasonably be obtained by us or the calculation agent,
but two such bids are obtained, then the average of the two bids shall be used,
and if only one such bid can reasonably be obtained by us or the calculation
agent, this one bid shall be used. If either we or the calculation agent cannot
reasonably obtain at least one bid for $10,000,000 principal amount of notes
from a nationally recognized securities dealer or, in our reasonable judgment,
the bid quotations are not indicative of the secondary market value of the
notes, then the trading price of the notes will equal (a) the then-applicable
conversion rate of the notes multiplied by (b) the closing price of our common
stock on such determination date.
CONVERSION UPON NOTICE OF REDEMPTION
A holder may surrender for conversion any notes we call for redemption
at any time prior to the close of business on the day that is one business day
prior to the redemption date, even if the notes are not otherwise convertible at
that time. If a holder already has delivered a change in control purchase notice
with respect to a note, however, the holder may not surrender that note for
conversion until the holder has withdrawn the notice in accordance with the
indenture.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
If:
o we distribute to all holders of our common stock certain
rights entitling them to purchase, for a period expiring
within 60 days of the date of distribution, common stock at
less than the current market price of the common stock at the
time of the announcement of such distribution;
10
o we elect to distribute to all holders of our common stock cash
or other assets, debt securities or certain rights to purchase
our securities, which distribution has a per share value
exceeding 10% of the closing price of the common stock on the
trading day preceding the declaration date for the
distribution; or
o a change in control, as described below under "Change In
Control Permits Purchase of Notes by Us at the Option of the
Holder," occurs other than pursuant to a transaction described
in the following paragraph, then we must notify the holders of
notes at least 20 days prior to the ex-dividend date for the
distribution or within 30 days of the occurrence of the change
in control, as the case may be. Once we have given that
notice, holders may convert their notes at any time until
either (a) the earlier of close of business on the business
day immediately prior to the ex-dividend date and our
announcement that the distribution will not take place, in the
case of a distribution, or (b) within 30 days of the change in
control notice, in the case of a change in control. In the
case of a distribution, no adjustment to the ability of a
holder of notes to convert will be made if the holder
participates or will participate in the distribution without
conversion.
In addition, if we are party to a consolidation, merger or binding share
exchange or transfer of all or substantially all our assets pursuant to which
our common stock will be converted into or the right to receive cash, securities
or other property, a holder may convert notes at any time from and after the
date which is 15 days prior to the anticipated effective date of the transaction
until 15 days after the effective date of the transaction. If we are a party to
a consolidation, merger or binding share exchange or transfer of all or
substantially all our assets pursuant to which our common stock is converted
into or the right to receive cash, securities or other property, then at the
effective time of the transaction, the right to convert a note into common stock
will be changed into a right to convert the note into or the right to receive
the kind and amount of cash, securities or other property which the holder would
have received if the holder had converted such note immediately prior to the
transaction. If the transaction also constitutes a "change in control," as
defined below, the holder can require us to repurchase all or a portion of its
notes as described below under "Change In Control Permits Purchase of Notes by
Us at the Option of the Holder."
CONVERSION PROCEDURES
We are not obligated to pay accrued interest on notes submitted for
conversion. Accordingly, if a note is converted after the close of business of a
record date for the payment of interest and before the opening of business on
the next succeeding interest payment date, notes submitted for conversion must
be accompanied by funds equal to the interest payable to the registered holder
on the interest payment date on the principal amount of such notes submitted for
conversion. We will then make the interest payment due on the interest payment
date to the registered holder of the note on the record date. Notwithstanding
anything to the contrary in this paragraph, any note submitted for conversion
need not be accompanied by any funds if such notes have been called for
redemption on a redemption date that is after a record date for the payment of
interest and on or before the date that is one business day immediately
following the corresponding interest payment date.
As soon as practicable following the conversion date, we will deliver
through the conversion agent a certificate for the full number of full shares of
common stock into which any note is converted, together with any cash payment
for fractional shares. For a discussion of the tax treatment of a holder
receiving common shares upon surrendering notes for conversion, see "Material
United States Federal Income Tax Considerations -- Tax Consequences to United
States Holders -- Conversion of the Notes."
CONVERSION PRICE ADJUSTMENTS
We will adjust the conversion rate for:
o dividends or distributions on shares of our common stock
payable in common stock or other capital stock of ours;
o subdivisions, combinations or certain reclassifications of our
common stock;
11
o distributions to all holders of common stock of certain rights
or warrants entitling them for a period of 60 days or less to
purchase common stock at less than the current market price at
the time; provided that the conversion rate will be readjusted
to the extent the rights or warrants are not exercised prior
to their expiration;
o distributions to all holders of our common stock of our assets
or debt securities or certain rights to purchase our
securities, but excluding cash dividends or other cash
distributions from current or retained earnings referred to in
the next paragraph;
o all-cash distributions to all or substantially all holders of
our common stock in an aggregate amount that, together with
(1) any cash and the fair market value of any other
consideration payable in respect of any tender offer
or exchange offer by us or any of our subsidiaries
for our common stock consummated within the preceding
12 months not triggering a conversion rate adjustment
and
(2) all other all-cash distributions to all or
substantially all stockholders made within the
preceding 12 months not triggering a conversion rate
adjustment,
exceeds an amount equal to 10% of the market capitalization of
our common stock on the business day immediately preceding the
day on which we declare the distribution; and
o payment in respect of a tender offer or exchange offer by us
or any of our subsidiaries for our common stock to the extent
that the offer involves aggregate consideration that, together
with
(1) any cash and the fair market value of any other
consideration payable in respect of any tender offer
or exchange offer by us or any of our subsidiaries
for our common stock consummated within the preceding
12 months not triggering a conversion rate adjustment
and
(2) all-cash distributions to all or substantially all
stockholders made within the preceding 12 months not
triggering a conversion rate adjustment,
exceeds an amount equal to 10% of the market capitalization of
our common stock on the expiration date of the tender offer or
exchange offer.
Each adjustment referred to above will be made upon conclusion of the
applicable event. We will not adjust the conversion rate, however, if holders of
notes are to participate in the transaction without conversion, or in certain
other cases.
No adjustment in the conversion rate will be required unless the
adjustment would require a change of at least 1% in the conversion rate then in
effect; provided that any adjustment that would otherwise be required to be made
will be carried forward and taken into account in any subsequent adjustment.
We may at any time increase the conversion rate by any amount for any
period of time, provided that the conversion price is not less than the par
value of a share of our common stock, the period during which the increased rate
is in effect is at least 20 days or such longer period as may be required by law
and the increased rate is irrevocable during such period.
If we are party to a consolidation, merger or binding share exchange
pursuant to which our common stock is converted into cash, securities or other
property, at the effective time of the transaction, the right to convert a note
into common stock will be changed into a right to convert it into the kind and
amount of cash, securities or other property which the holder would have
received if the holder had converted its note immediately prior to the
transaction.
12
In the event of:
o a taxable distribution to holders of shares of common stock
which results in an adjustment of the conversion rate; or
o an increase in the conversion rate at our discretion,
the holders of the notes may, in certain circumstances, be deemed to have
received a distribution subject to Federal income tax as a dividend. See
"Material United States Federal Income Tax Considerations -- Tax Consequences to
United States Holders-- Conversion of the Notes."
REDEMPTION OF NOTES AT OUR OPTION
No sinking fund is provided for the notes. Prior to June 3, 2005, we
cannot redeem the notes. The notes will be redeemable at our option, in whole or
in part, at any time on or after June 3, 2005, on any date not less than 30 nor
more than 60 days after the mailing of a redemption notice to each holder of
notes to be redeemed at the address of the holder appearing in the security
register; provided that the closing price of our common stock has exceeded 130%
of the conversion price then in effect for at least 20 trading days within a
period of 30 consecutive trading days ending on the trading day prior to the
date of mailing of the optional redemption notice. The redemption price for the
notes, expressed as a percentage of principal amount, if redeemed during the
twelve-month period beginning on the date set forth below, is as follows:
PERIOD BEGINNING REDEMPTION PRICE
---------------- ----------------
June 3, 2005.................... 103.571%
June 1, 2006.................... 102.679%
June 1, 2007.................... 101.786%
June 1, 2008 and thereafter..... 100.893%
Accrued and unpaid interest will also be paid to the redemption date.
If we will redeem less than all of the outstanding notes, the trustee
will select the notes to be redeemed on a pro rata basis in principal amounts of
$1,000 or integral multiples of $1,000. If a portion of a holder's notes is
selected for partial redemption and the holder converts a portion of the notes,
the converted portion shall be deemed to be the portion selected for redemption.
CHANGE IN CONTROL PERMITS PURCHASE OF NOTES BY US AT THE OPTION OF THE HOLDER
In the event of a change in control (as defined below) with respect to
us, each holder will have the right, at its option, subject to the terms and
conditions of the indenture, to require us to purchase for cash all or any
portion of the holder's notes in integral multiples of $1,000 principal amount,
at a price for each $1,000 principal amount of such notes equal to 100% of the
principal amount of such notes tendered, plus any accrued and unpaid interest to
the purchase date. We will be required to purchase the notes no later than 30
business days after notice of a change in control has been mailed as described
below. We refer to this date in this prospectus as the "change in control
purchase date."
Within 30 business days after the occurrence of a change in control, we must
mail to the trustee and to all holders of notes at their addresses shown in the
register of the registrar and to beneficial owners as required by applicable law
a notice regarding the change in control, which notice must state, among other
things:
o the events causing a change in control;
o the date of such change in control;
o the last date on which a holder may exercise the purchase
right;
o the change in control purchase price;
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o the change in control purchase date;
o the name and address of the paying agent and the conversion
agent;
o the conversion rate and any adjustments to the conversion
rate;
o that notes with respect to which a change in control purchase
notice is given by the holder may be converted, if otherwise
convertible, only if the change in control purchase notice has
been withdrawn in accordance with the terms of the indenture;
and
o the procedures that holders must follow to exercise these
rights.
To exercise this right, the holder must deliver a written notice so as
to be received by the paying agent no later than the close of business on the
third business day prior to the change in control purchase date. The required
purchase notice upon a change in control must state:
o the certificate numbers of the notes to be delivered by the
holder, if applicable;
o the portion of the principal amount of notes to be purchased,
which portion must be $1,000 or an integral multiple of
$1,000; and
o that we are to purchase such notes pursuant to the applicable
provisions of the indenture.
A holder may withdraw any change in control purchase notice by
delivering to the paying agent a written notice of withdrawal prior to the close
of business on the business day prior to the change in control purchase date.
The notice of withdrawal must state:
o the principal amount of the notes being withdrawn;
o the certificate numbers of the notes being withdrawn, if
applicable; and
o the principal amount, if any, of the notes that remain subject
to a change in control purchase notice.
Our obligation to pay the change in control purchase price for a note
for which a change in control purchase notice has been delivered and not validly
withdrawn is conditioned upon delivery of the note, together with necessary
endorsements, to the paying agent at any time after the delivery of such change
in control purchase notice. We will cause the change in control purchase price
for such note to be paid promptly following the later of the change in control
purchase date or the time of delivery of such note.
If the paying agent holds money sufficient to pay the change in control
purchase price of the note on the change in control purchase date in accordance
with the terms of the indenture, then, immediately after the change in control
purchase date, interest on such note will cease to accrue, whether or not the
note is delivered to the paying agent. Thereafter, all other rights of the
holder shall terminate, other than the right to receive the change in control
purchase price upon delivery of the note.
Under the indenture, a "change in control" is deemed to have occurred
at such time as:
o any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), other than an "exempt person" (as defined below), is or
becomes the "beneficial owner" (as such term is used in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50%
or more of the voting power of our common stock or other
capital stock into which our common stock is reclassified or
changed;
14
o at any time the following persons cease for any reason to
constitute a majority of our board of directors:
(1) individuals who on the issue date of the notes
constituted our board of directors and
(2) any new directors whose election by our board of
directors or whose nomination for election by our
stockholders was approved by at least a majority of
the directors then still in office who were either
directors on the issue date of the notes or whose
election or nomination for election was previously so
approved; or
o the sale, lease or transfer of all or substantially all of our
assets and property to any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act),
including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act. Our grant of a security
interest in our properties or assets in connection with a
financing arrangement is not a conveyance, transfer or lease
for the foregoing purposes.
"Exempt person" means any member of the Norris family; provided that
such member does not participate in an extraordinary corporate transaction, such
as a merger or a going private transaction, which results in our common stock
(or that of our successor) no longer being traded on a U.S. securities exchange
or quoted on The Nasdaq National Market. "Norris family" means all persons who
are lineal descendants of D.W. Norris (by birth or adoption), all spouses of
such descendants, all estates of such descendants or spouses which are in the
course of administration, all trusts for the benefit of such descendants or
spouses, and all corporations or other entities in which, directly or
indirectly, such descendants or spouses (either alone or in conjunction with
other such descendants or spouses) have the right, whether by ownership of stock
or other equity interests or otherwise, to direct the management and policies of
such corporations or other entities (each such person, spouse, estate, trust,
corporation or entity being referred to herein as a "member" of the Norris
family). In addition, members of the Norris family will not be counted as
affiliates or associates of any other person in determining beneficial ownership
of a "group" (as such term is used for purposes of Sections 13(d) and 14(d) of
the Exchange Act); provided that such member does not participate in an
extraordinary corporate transaction, such as a merger or a going private
transaction, which results in our common stock (or that of our successor) no
longer being traded on a U.S. securities exchange or quoted on The Nasdaq
National Market.
However, a change in control will not be deemed to have occurred if
either:
o the last sale price of our common stock for any five trading
days during the ten trading days immediately preceding the
change in control is at least equal to 105% of the conversion
price in effect on such trading day; or
o in the case of a merger or consolidation, all of the
consideration (excluding cash payments for fractional shares
and cash payments pursuant to dissenters' appraisal rights) in
the merger or consolidation constituting the change of control
consists of common stock traded on a U.S. securities exchange
or quoted on the Nasdaq National Market (or which will be so
traded or quoted when issued or exchanged in connection with
such change in control) and as a result of such transaction or
transactions the notes become convertible solely into such
common stock.
In connection with any purchase offer in the event of a change in
control, we will to the extent applicable:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which may then
be applicable; and
o file Schedule TO or any other required schedule under the
Exchange Act.
15
The phrase "all or substantially all" of our assets will likely be
interpreted under applicable law and will be dependent upon particular facts and
circumstances. As a result, there may be a degree of uncertainty in ascertaining
whether a sale, lease or transfer of "all or substantially all" of our assets
has occurred, in which case a holder's ability to require us to purchase their
notes upon a change in control may be impaired. In addition, we can give no
assurance that we will be able to acquire the notes tendered upon a change in
control.
The change in control purchase feature of the notes may in certain
circumstances make more difficult or discourage a takeover of our company.
We could, in the future, enter into certain transactions, including
certain capitalizations, that would not constitute a change in control with
respect to the change in control purchase feature of the notes but that would
increase the amount of our, or our subsidiaries', indebtedness.
We may not purchase notes at the option of holders upon a change in
control if there has occurred and is continuing an event of default with respect
to the notes, other than a default in the payment of the change in control
purchase price with respect to the notes.
SUBORDINATION OF NOTES
Upon any distribution to our creditors in our liquidation or
dissolution or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to us or our property, the payment of all amounts
due on the notes (other than cash payments due upon conversion in lieu of
fractional shares) will be subordinated, to the extent provided in the
indenture, in right of payment to the prior payment in full of all senior
indebtedness and all indebtedness of our subsidiaries.
We will not pay, directly or indirectly, any amount due on the notes
(including any repurchase price pursuant to the exercise of the repurchase
right), or acquire any of the notes, in the following circumstances:
o if any default in payment of principal, premium, if any, or
interest on senior indebtedness (as defined below) exists,
unless and until the default has been cured or waived or has
ceased to exist;
o if any default, other than a default in payment of principal,
premium, if any, or interest, has occurred with respect to
senior indebtedness, and that default permits the holders of
the senior indebtedness to accelerate its maturity, until the
expiration of the "payment blockage period" described below
unless and until the default has been cured or waived or has
ceased to exist; or
o if the maturity of senior indebtedness has been accelerated,
until the senior indebtedness has been paid or the
acceleration has been cured or waived.
A "payment blockage period" is a period that begins on the date that we
receive a written notice from any holder of senior indebtedness or a holder's
representative, or from a trustee under an indenture under which senior
indebtedness has been issued, that an event of default with respect to and as
defined under any senior indebtedness (other than default in payment of the
principal of, or premium, if any, or interest on any senior indebtedness), which
event of default permits the holders of senior indebtedness to accelerate its
maturity, has occurred and is continuing and ends on the earlier of (1) the date
on which such event of default has been cured or waived and (2) 180 days from
the date notice is received. Notwithstanding the foregoing, only one payment
blockage notice with respect to the same event of default may be given during
any period of 360 consecutive days unless such event of default has been cured
or waived for a period of not less than 90 consecutive days; provided that in no
event shall more than one interest payment be blocked during any such 360-day
period. No new payment blockage notice may be commenced by the holders of senior
indebtedness during any period of 360 consecutive days unless all events of
default which trigger the preceding payment blockage period have been cured or
waived. However, if the maturity of such senior indebtedness is accelerated, no
payment may be made on the notes until such senior indebtedness that has matured
has been paid or such acceleration has been cured or waived.
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Senior indebtedness is defined in the indenture as all indebtedness (as
defined below) of ours outstanding at any time that is senior in right of
payment to the notes except indebtedness that by its terms is pari passu or
subordinate in right of payment to the notes. Senior indebtedness does not
include our indebtedness to any of our subsidiaries.
Indebtedness is defined with respect to any person as the principal of,
and premium, if any, and interest on (a) all indebtedness of such person for
borrowed money (including all indebtedness evidenced by notes, bonds, debentures
or other securities sold by such person for money), (b) all obligations incurred
by such person in the acquisition (whether by way of purchase, merger,
consolidation or otherwise and whether by such person or another person) of any
business, real property or other assets (except inventory and related items
acquired in the ordinary course of the conduct of the acquiror's usual
business), (c) guarantees by such person of indebtedness described in clause (a)
or (b) of another person, (d) all renewals, extensions, refundings, deferrals,
restructurings, amendments and modifications of any indebtedness, obligation or
guarantee, (e) all reimbursement obligations of such person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such person, (f) all capital lease obligations of such person and (g)
all net obligations of such person under interest rate swaps, currency exchanges
or similar agreements of such person.
By reason of the subordination provisions described above, in the event
of insolvency, funds which would otherwise be payable to noteholders will be
paid to the holders of senior indebtedness to the extent necessary to pay senior
indebtedness in full. As a result of these payments, our general creditors may
recover less, ratably, than holders of senior indebtedness and such general
creditors may recover more, ratably, than holders of notes or other subordinated
indebtedness of ours.
Substantially all of our operations are currently and are expected in
the future to be conducted through subsidiaries, which are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amounts due on the notes or to make any funds available therefor, whether by
dividends, loans or other payments. The payment of dividends and loans and
advances to us by our subsidiaries may be subject to statutory or contractual
restrictions, are contingent upon the earnings of our subsidiaries and are
subject to various business considerations.
The notes are effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables) of our subsidiaries. Any
right that we have to receive assets of any of our subsidiaries upon its
liquidation or reorganization (and the consequent right of the holders of the
notes to participate in those assets) will be effectively subordinated to the
claims of that subsidiary's creditors (including trade creditors), except to the
extent that we ourselves are recognized as a creditor of that subsidiary, in
which case our claims would still be subordinate to any security interests in
the assets of that subsidiary and any indebtedness of that subsidiary senior to
that held by us.
There are no restrictions in the indenture upon the creation of
additional senior indebtedness by us, or on the creation of any indebtedness by
us or any of our subsidiaries. As of March 31, 2002, we had approximately $380.2
million of consolidated indebtedness and other obligations effectively ranking
senior to the notes.
MERGER OR CONSOLIDATION, OR CONVEYANCE, TRANSFER OR LEASE OF PROPERTIES AND
ASSETS
The indenture provides that we may not consolidate with or merge with
or into any other person or convey, transfer or lease our properties and assets
substantially as an entirety to another person, unless, among other things:
o the resulting, surviving or transferee person is a corporation
organized and existing under the laws of the United States,
any state thereof or the District of Columbia;
o such person assumes all our obligations under the notes and
the indenture; and
o we or such successor person shall not immediately thereafter
be in default under the indenture.
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Upon the assumption of our obligations by such a person in such
circumstances, subject to certain exceptions, we shall be discharged from all
obligations under the notes and the indenture.
Although such transactions are permitted under the indenture, certain
of the foregoing transactions could constitute a change in control permitting
each holder to require us to purchase the notes of such holder as described in
"-- Change In Control Permits Purchase of Notes by Us at the Option of the
Holder."
EVENTS OF DEFAULT
The following are events of default for the notes:
o default in the payment of the principal amount, redemption
price or change in control purchase price with respect to any
note when such amount becomes due and payable;
o default in the payment of accrued and unpaid interest, if any
(including liquidated damages), on the notes for 30 days;
o failure by us to comply with any of our other covenants in the
notes or the indenture upon receipt by us of notice of such
default by the trustee or by holders of not less than 25% in
aggregate principal amount of the notes then outstanding and
our failure to cure (or obtain a waiver of) such default
within 60 days after receipt of such notice;
o default by us in the payment at the final maturity thereof,
after the expiration of any applicable grace period, of
principal of, or premium, if any, on indebtedness for money
borrowed, other than non-recourse indebtedness, in the
principal amount then outstanding of $25 million or more, or
acceleration of any indebtedness in such principal amount so
that it becomes due and payable prior to the date on which it
would otherwise have become due and payable and such
acceleration is not rescinded within 30 business days after
notice to us in accordance with the indenture; or
o certain events of bankruptcy, insolvency or reorganization
affecting us.
If an event of default shall have occurred and be continuing, either
the trustee or the holders of not less than 25% in aggregate principal amount of
notes then outstanding may declare the principal amount of the notes plus
accrued and unpaid interest, if any, on the notes accrued through the date of
such declaration to be immediately due and payable. In the case of certain
events of our bankruptcy, insolvency or reorganization, the principal amount of
the notes plus accrued and unpaid interest, if any, accrued thereon through the
occurrence of such event shall automatically become and be immediately due and
payable.
MODIFICATIONS OF THE INDENTURE
We and the trustee may enter into supplemental indentures that add,
change or eliminate provisions of the indenture or modify the rights of the
holders of the notes with the consent of the holders of at least a majority in
principal amount of the notes then outstanding. However, without the consent of
each holder, no supplemental indenture may:
o reduce the rate or change the time of payment of interest
(including any liquidated damages) on any note;
o make any note payable in money or securities other than that
stated in the note;
o change the stated maturity of any note;
o reduce the principal amount, redemption price or change in
control purchase price with respect to any note;
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o make any change that adversely affects the right of a holder
to require us to purchase a note;
o adversely affect the right to convert, or receive payment with
respect to, a note, or the right to institute suit for the
enforcement of any payment with respect to, or conversion of,
the notes; or
o change the provisions in the indenture that relate to
modifying or amending the indenture.
Without the consent of any holder of notes, we and the trustee may
enter into supplemental indentures for any of the following purposes:
o to evidence a successor to us and the assumption by that
successor of our obligations under the indenture and the
notes;
o to add to our covenants for the benefit of the holders of the
notes or to surrender any right or power conferred upon us;
o to secure our obligations in respect of the notes;
o to make any changes or modifications to the indenture
necessary in connection with the registration of the notes
under the Securities Act of 1933 and the qualification of the
indenture under the Trust Indenture Act of 1939;
o to cure any ambiguity or inconsistency in the indenture; or
o to make any changes that do not adversely affect the rights of
any holder.
No supplemental indenture entered into pursuant to the second, third,
fourth or fifth bullets of the preceding paragraph may be entered into without
the consent of the holders of a majority in principal amount of the notes,
however, if such supplemental indenture may materially and adversely affect the
interests of the holders of the notes.
The holders of a majority in principal amount of the outstanding notes
may, on behalf of the holders of all notes:
o waive compliance by us with restrictive provisions of the
indenture, as detailed in the indenture; and
o waive any past default under the indenture and its
consequences, except a default in the payment of the principal
amount, accrued and unpaid interest, if any (including
liquidated damages), redemption price or change in control
purchase price or obligation to deliver common shares upon
conversion with respect to any note or in respect of any
provision which under the indenture cannot be modified or
amended without the consent of the holder of each outstanding
note affected.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of ours, as
such, shall have any liability for any of our obligations under the notes or the
indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
Securities and Exchange Commission that a waiver of such liabilities is against
public policy.
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UNCLAIMED MONEY; PRESCRIPTION
If money deposited with the trustee or paying agent for the payment of
principal or interest remains unclaimed for two years, the trustee and paying
agent shall notify us and shall pay the money back to us at our written request.
Thereafter, holders of notes entitled to the money must look to us for payment,
subject to applicable law, and all liability of trustee and the paying agent
shall cease. Other than as described in this paragraph, the indenture does not
provide for any prescription period for the payment of interest and principal on
the notes.
REPORTS TO TRUSTEE
We will regularly furnish to the trustee copies of our annual report to
stockholders, containing audited financial statements, and any other financial
reports which we furnish to our stockholders.
TRUSTEE AND TRANSFER AGENT
The trustee for the notes is The Bank of New York. The transfer agent
for our common stock is Mellon Investor Services LLC.
LISTING AND TRADING
The notes originally issued in the private placement are eligible for
trading on the PORTAL Market. However, notes sold pursuant to this prospectus
will no longer be eligible for trading on the PORTAL Market. We do not intend to
list the notes on any national securities exchange. Our common stock is listed
on the New York Stock Exchange under the symbol "LII."
FORM, DENOMINATION AND REGISTRATION OF NOTES
The notes were issued in registered form, without interest coupons, in
denominations of $1,000 and integral multiples thereof, in the form of both
global securities and certificated securities, as further provided below.
The trustee is not required:
o to issue, register the transfer of or exchange any note for a
period of 15 days before a selection of notes to be redeemed
or repurchased,
o to register the transfer of or exchange any note so selected
for redemption or repurchase in whole or in part, except, in
the case of a partial redemption or repurchase, that portion
of any of the notes not being redeemed or repurchased, or
o if a redemption or a repurchase is to occur after a regular
record date but on or before the corresponding interest
payment date, to register the transfer or exchange of any note
on or after the regular record date and before the date of
redemption or repurchase.
See "-- Global Securities" and "-- Certificated Securities" for a
description of additional transfer restrictions applicable to the notes.
No service charge will be imposed in connection with any transfer or
exchange of any note, but we may in general require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith.
GLOBAL SECURITIES
Global securities representing the notes have been deposited with a
custodian for The Depository Trust Company ("DTC"), and registered in the name
of DTC or a nominee for DTC.
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Except in the limited circumstances described below and in "--
Certificated Securities," holders of notes represented by interests in a global
security will not be entitled to receive notes in certificated form. Unless and
until it is exchanged in whole or in part for certificated securities, each
global security may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC.
Any beneficial interest in one global security that is transferred to a
person who takes delivery in the form of an interest in another global security
will, upon transfer, cease to be an interest in such global security and become
an interest in the other global security and, accordingly, will thereafter be
subject to all transfer restrictions applicable to beneficial interests in such
other global security for as long as it remains such an interest.
The custodian and DTC will electronically record the principal amount
of notes represented by global securities held within DTC. Beneficial interests
in the global securities will be shown on records maintained by DTC and its
direct and indirect participants, including Euroclear Bank, S.A./N.V., as
operator of the Euroclear System ("Euroclear") and Clearstream Banking, societe
anonyme ("Clearstream"). So long as DTC or its nominee is the registered owner
or holder of a global security, DTC or such nominee will be considered the sole
owner or holder of the notes represented by such global security for all
purposes under the indenture and the notes. No owner of a beneficial interest in
a global security will be able to transfer such interest except in accordance
with DTC's applicable procedures and the applicable procedures of its direct and
indirect participants.
Payments of principal and interest under each global security will be
made to DTC's nominee as the registered owner of such global security. We expect
that the nominee, upon receipt of any such payment, will immediately credit DTC
participants' accounts with payments proportional to their respective beneficial
interests in the principal amount of the relevant global security as shown on
the records of DTC. We also expect that payments by DTC participants to owners
of beneficial interests will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants, and none of us, the trustee, the
custodian or any paying agent or registrar will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial interests in any global security or for maintaining or reviewing
any records relating to such beneficial interests.
DTC has advised us that it is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered under the Exchange Act. DTC was created
to hold the securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers (including the initial
purchasers), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the depository.
Access to DTC's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The ownership
interest and transfer of ownership interest of each actual purchaser of each
security held by or on behalf of DTC are recorded on the records of the
participants and indirect participants.
CERTIFICATED SECURITIES
If DTC notifies us that it is unwilling or unable to continue as
depositary for a global security and a successor depositary is not appointed by
us within 90 days of such notice, or an event of default has occurred and the
trustee has received a request from DTC, the trustee will exchange each
beneficial interest in that global security for one or more certificated
securities registered in the name of the owner of such beneficial interest, as
identified by DTC.
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SAME-DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the notes
represented by the global securities be made by wire transfer of immediately
available funds to the accounts specified by holders of the global securities.
With respect to notes in certificated form, we will make all payments by wire
transfer of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each holder's
registered address.
The notes represented by the global securities are eligible for trading
in DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such notes will, therefore, be required by DTC to be settled
in immediately available funds. We expect that secondary trading in any
certificated securities will also be settled in immediately available funds.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
Transfers between participants in Euroclear and Clearstream will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the global security in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositaries for
Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in a global security from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised
us that cash received in Euroclear or Clearstream as a result of sales of
interests in a global security by or through a Euroclear or Clearstream
participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for Euroclear or
Clearstream following DTC's settlement date.
The information described above concerning DTC, Euroclear and
Clearstream and their book-entry systems has been obtained from sources that we
believe to be reliable, but we take no responsibility for the accuracy thereof.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the global securities among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue those procedures, and those procedures may be
discontinued at any time. None of us, the initial purchasers of the notes in the
private placement or the trustee will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
PURCHASE AND CANCELLATION
All notes surrendered for payment, redemption, registration of transfer
or exchange or conversion shall, if surrendered to any person other than the
trustee, be delivered to the trustee. All notes delivered to the trustee shall
be cancelled promptly by the trustee. No notes shall be authenticated in
exchange for any notes cancelled.
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We may, to the extent permitted by law, purchase notes in the open
market or by tender offer at any price or by private agreement. Any notes
purchased by us may, to the extent permitted by law, be reissued or resold or
may, at our option, be surrendered to the trustee for cancellation. Any notes
surrendered for cancellation may not be reissued or resold and will be promptly
cancelled. Any notes held by us or one of our subsidiaries shall be disregarded
for voting purposes in connection with any notice, waiver, consent or direction
requiring the vote or concurrence of note holders.
REGISTRATION RIGHTS
In connection with the private placement on May 8, 2002, we entered
into a registration rights agreement with the initial purchasers of the notes.
In the registration rights agreement, we agreed to use our commercially
reasonable efforts to keep the registration statement of which this prospectus
is a part effective for a period of two years after the original issuance of the
notes on May 8, 2002 or such shorter time (1) as permitted by Rule 144(k) under
the Securities Act or any successor provisions thereunder or (2) that will
terminate when each of the registrable securities covered by the registration
statement ceases to be a registrable security. "Registrable securities" means
each note and any underlying share of common stock until the earlier of (x) the
date on which such note or underlying share of common stock has been effectively
registered under the Securities Act and disposed of, whether or not in
accordance with the registration statement of which this prospectus forms a
part, and (y) the date which is two years after the date of original issue of
such note or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder.
We are permitted to prohibit offers and sales of securities pursuant to
this prospectus under certain circumstances and subject to certain conditions
for a period not to exceed 45 days in the aggregate in any three-month period or
90 days in the aggregate in any 12-month period. We also agreed to pay
liquidated damages to certain holders of the notes and shares of common stock
issuable upon conversion of the notes if the prospectus is unavailable for
periods in excess of those permitted.
GOVERNING LAW
The indenture and the notes are governed by and construed in accordance
with the laws of the State of New York, without giving effect to such state's
conflicts of laws principles.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 200,000,000 shares of common
stock and 25,000,000 shares of preferred stock, par value $.01 per share. Of the
200,000,000 shares of common stock authorized, 61,062,051 were outstanding as of
March 31, 2002, 3,005,861 shares were held in treasury and 10,090,340 shares
have been reserved for issuance under our incentive plans and employee stock
purchase program. None of the preferred stock is outstanding.
COMMON STOCK
The holders of our common stock are entitled to one vote per share on
all matters to be voted on by stockholders. Generally, all matters to be voted
on by stockholders must be approved by a majority (or, in the case of election
of directors, by a plurality) of the votes entitled to be cast by all shares of
common stock present in person or represented by proxy, voting together as a
single class, except as may be required by law and subject to any voting rights
granted to holders of any preferred stock. However, the removal of a director
from office, the approval and authorization of specified business combinations
and amendments to specified provisions of our certificate of incorporation each
require the approval of not less than 80% of the combined voting power of our
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class. See "-- Certificate of
Incorporation and Bylaw Provisions." The common stock does not have cumulative
voting rights.
Subject to the prior rights of the holders of any shares of our
preferred stock, the holders of our common stock shall be entitled to receive,
to the extent permitted by law, such dividends as may be declared from time to
time by our board of directors. On our liquidation, dissolution or winding up,
after payment in full of the amounts required to be paid to holders of preferred
stock, if any, all holders of common stock are entitled to share ratably in any
assets available for distribution to holders of shares of common stock.
The outstanding shares of our common stock are legally issued, fully
paid and nonassessable. The common stock does not have any preemptive,
subscription or conversion rights. Additional shares of authorized common stock
may be issued, as authorized by our board of directors from time to time,
without stockholder approval, except as may be required by applicable stock
exchange requirements.
PREFERRED STOCK
As of the date of this prospectus, no shares of preferred stock are
outstanding. Our board of directors may authorize the issuance of preferred
stock in one or more series and may determine, for the series, the designations,
powers, preferences and rights of such series, and the qualifications,
limitations and restrictions of the series, including:
o the designation of the series;
o the consideration for which the shares of any such series are
to be issued;
o the rate or amount per annum, if any, at which holders of the
shares of such series shall be entitled to receive dividends,
the dates on which such dividends shall be payable, whether
the dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which such dividends shall
be cumulative;
o the redemption rights and price or prices, if any, for shares
of the series;
o the amounts payable on and the preferences, if any, of shares
of the series in the event of dissolution or upon distribution
of our assets;
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o whether the shares of the series will be convertible into or
exchangeable for other of our securities, and the price or
prices or rate or rates at which conversion or exchange shall
be exercised;
o the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of the series;
o the voting rights, if any, of the holders of shares of the
series; and
o such other preferences and rights, privileges and restrictions
applicable to any such series as may be permitted by law.
We believe that the ability of our board of directors to issue one or
more series of preferred stock will provide us with flexibility in structuring
possible future financings and acquisitions and in meeting other corporate needs
that might arise. The authorized shares of preferred stock will be available for
issuance without further action by our stockholders, unless such action is
required by applicable law or the rules of any stock exchange on which our
securities may be listed or traded.
Although our board of directors has no intention at the present time of
doing so, it could issue a series of preferred stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. Our board of directors will make any determination to
issue such shares based on its judgment as to our best interests and the best
interests of our stockholders. Our board of directors, in so acting, could issue
preferred stock having terms that could discourage a potential acquiror from
making, without first negotiating with our board of directors, an acquisition
attempt through which such acquiror may be able to change the composition of our
board of directors, including a tender offer or other transaction that some, or
a majority, of our stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
current market price of such stock.
BUSINESS COMBINATION STATUTE
As a corporation organized under the laws of the State of Delaware, we
will be subject to Section 203 of the Delaware General Corporation Law, which
restricts specified business combinations between us and an "interested
stockholder" or its affiliates or associates for a period of three years
following the time that the stockholder becomes an "interested stockholder." In
general, an "interested stockholder" is defined as a stockholder owning 15% or
more of our outstanding voting stock. The restrictions do not apply if:
o prior to an interested stockholder becoming such, our board of
directors approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
o upon completion of the transaction which resulted in any
person becoming an interested stockholder, such interested
stockholder owns at least 85% of our voting stock outstanding
at the time the transaction commenced, excluding shares owned
by employee stock ownership plans and persons who are both
directors and officers of Lennox; or
o at or subsequent to the time an interested stockholder becomes
such, the business combination is both approved by our board
of directors and authorized at an annual or special meeting of
our stockholders, not by written consent, by the affirmative
vote of at least 66?% of the outstanding voting stock not
owned by the interested stockholder.
Under some circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
under Section 203. Our certificate of incorporation does not exclude us from the
restrictions imposed under Section 203. It is anticipated that the provisions of
Section 203 may encourage companies interested in acquiring us to negotiate in
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advance with our board of directors since the stockholder approval requirement
would be avoided if a majority of the directors then in office approves, prior
to the date on which a stockholder becomes an interested stockholder, either the
business combination or the transaction which results in the stockholder
becoming an interested stockholder.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The summary below describes provisions of our certificate of
incorporation and bylaws. The provisions of our certificate of incorporation and
bylaws discussed below may have the effect, either alone or in combination with
the provisions of Section 203 discussed above, of making more difficult or
discouraging a tender offer, proxy contest or other takeover attempt that is
opposed by our board of directors but that a stockholder might consider to be in
such stockholder's best interest. Those provisions include:
o restrictions on the rights of stockholders to remove
directors;
o prohibitions against stockholders calling a special meeting of
stockholders or acting by unanimous written consent in lieu of
a meeting;
o requirements for advance notice of actions' proposed by
stockholders for consideration at meetings of the
stockholders; and
o restrictions on business combination transactions with any
person, entity or group that beneficially owns at least 10% of
our aggregate voting stock -- such person, entity or group is
sometimes referred to as a "Related Person."
CLASSIFIED BOARD OF DIRECTORS; REMOVAL; NUMBER OF DIRECTORS, FILLING
VACANCIES
Our certificate of incorporation and bylaws provide that our board of
directors shall be divided into three classes, designated Class I, Class II and
Class III, with the classes to be as nearly equal in number as possible. The
term of office of each class shall expire at the third annual meeting of
stockholders for the election of directors following the election of such class.
Each director is to hold office until his or her successor is duly elected and
qualified, or until his or her earlier resignation or removal.
Our bylaws provide that the number of directors will be fixed from time
to time by to a resolution adopted by our board of directors; provided that the
number so fixed shall not be more than 15 nor less than three directors. Our
bylaws also provide that any vacancies will be filled only by the affirmative
vote of a majority of the remaining directors, even if less than a quorum.
Accordingly, absent an amendment to the bylaws, our board of directors could
prevent any stockholder from enlarging our board of directors and filling the
new directorships with such stockholder's own nominees. Moreover, our
certificate of incorporation and bylaws provide that directors may be removed
only for cause and only upon the affirmative vote of holders of at least 80% of
our voting stock at a special meeting of stockholders called expressly for that
purpose.
The classification of directors could have the effect of making it more
difficult for stockholders to change the composition of our board of directors.
At least two annual meetings of stockholders, instead of one, are generally
required to effect a change in a majority of our board of directors. Such a
delay may help ensure that our directors, if confronted by a holder attempting
to force a proxy contest, a tender or exchange offer, or an extraordinary
corporate transaction, would have sufficient time to review the proposal as well
as any available alternatives to the proposal and to act in what they believe to
be the best interest of the stockholders. The classification provisions will
apply to every election of directors, however, regardless of whether a change in
the composition of our board of directors would be beneficial to us and our
stockholders and whether or not a majority of our stockholders believe that such
a change would be desirable.
The classification provisions could also have the effect of
discouraging a third party from initiating a proxy contest, making a tender
offer or otherwise attempting to obtain control of us, even though such an
attempt might be beneficial to us and our stockholders. The classification of
our board of directors could thus increase the likelihood that incumbent
directors will retain their positions. In addition, because the classification
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provisions may discourage accumulations of large blocks of our stock by
purchasers whose objective is to take control of us and remove a majority of our
board of directors, the classification of our board of directors could tend to
reduce the likelihood of fluctuations in the market price of the common stock
that might result from accumulations of large blocks. Accordingly, stockholders
could be deprived of opportunities to sell their shares of common stock at a
higher market price than might otherwise be the case.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT, SPECIAL MEETINGS
Our certificate of incorporation and bylaws provide that stockholder
action can be taken only at an annual or special meeting of stockholders and
stockholder action may not be taken by written consent in lieu of a meeting.
Special meetings of stockholders can be called only by our board of directors by
a resolution adopted by a majority of our board of directors, or by the chairman
of the board, vice chairman or the president. Moreover, the business permitted
to be conducted at any special meeting of stockholders is limited to the
business brought before the meeting under the notice of meeting given by us.
The provisions of our certificate of incorporation and bylaws
prohibiting stockholder action by written consent and permitting special
meetings to be called only by the chairman, vice chairman or president, or at
the request of a majority of our board or directors, may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
The provisions would also prevent the holders of a majority of our voting stock
from unilaterally using the written consent procedure to take stockholder
action. Moreover, a stockholder could not force stockholder consideration of a
proposal over the opposition of the chairman, vice chairman or president, or a
majority of our board of directors, by calling a special meeting of stockholders
prior to the time such parties believe such consideration to be appropriate.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS
Our bylaws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors or bring other business
before an annual meeting of stockholders.
The stockholder notice procedure provides that only persons who are
nominated by, or at the direction of, our board of directors, or by a
stockholder who has given timely written notice containing specified information
to our secretary prior to the meeting at which directors are to be elected, will
be eligible for election as our directors. The stockholder notice procedure also
provides that at an annual meeting only such business may be conducted as has
been brought before the meeting by, or at the direction of, the chairman of the
board of directors, or in the absence of the chairman of the board, the
president, or by a stockholder who has given timely written notice containing
specified information to our secretary of such stockholder's intention to bring
such business before such meeting. Under the stockholder notice procedure, for
notice of stockholder nominations or proposals to be made at an annual meeting
to be timely, such notice must be received by us not less than 60 days nor more
than 90 days in advance of such meeting. For notice of stockholder nominations
or proposals to be made at a special meeting of stockholders to be timely, such
notice must be received by us not later than the close of business on the tenth
day following the date on which notice of such meeting is first given to
stockholders. However, in the event that less than 70 days notice or prior
public disclosure of the date of the meeting of stockholders is given or made to
the stockholders, to be timely, notice of a nomination or proposal delivered by
the stockholder must be received by our secretary not later than the close of
business on the tenth day following the day on which notice of the date of the
meeting of stockholders was mailed or such public disclosure was made to the
stockholders. If our board of directors or, alternatively, the presiding officer
at a meeting, in the case of a stockholder proposal, or the chairman of the
meeting, in the case of a stockholder nomination to our board of directors,
determines at or prior to the meeting that business was not brought before the
meeting or a person was not nominated in accordance with the stockholder notice
procedure, such business will not be conducted at such meeting, or such person
will not be eligible for election as a director, as the case may be.
By requiring advance notice of nominations by stockholders, the
stockholder notice procedure will afford our board of directors an opportunity
to consider the qualifications of the proposed nominees and, to the extent
considered necessary or desirable by our board of directors, to inform
stockholders about such qualifications. By requiring advance notice of other
proposed business, the stockholder notice procedure will
27
also provide a more orderly procedure for conducting annual meetings of
stockholders and, to the extent considered necessary or desirable by our board
of directors, will provide our board of directors with an opportunity to inform
stockholders, prior to such meetings, of any business proposed to be conducted
at such meetings, together with any recommendations as to our board of
directors' position regarding action to be taken regarding such business, so
that stockholders can better decide whether to attend such a meeting or to grant
a proxy regarding the disposition of any such business.
Although our bylaws do not give our board of directors any power to
approve or disapprove stockholder nominations for the election of directors or
proposals for action, they may have the effect of precluding a contest for the
election of directors or the consideration of stockholder proposals if the
proper procedures are not followed, and of discouraging or deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to us
and our stockholders.
FAIR PRICE PROVISION
Our certificate of incorporation contains a "fair price" provision that
applies to specified business combination transactions involving any person,
entity or group that beneficially owns at least 10% of our aggregate voting
stock -- such person, entity or group is sometimes referred to as a "related
person." This provision requires the affirmative vote of the holders of not less
than 80% of our voting stock to approve specified transactions between a related
person and us or our subsidiaries, including:
o any merger, consolidation or share exchange;
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of our assets, or the assets of any of our
subsidiaries having a fair market value of more than 10% of
our total consolidated assets, or assets representing more
than 10% of our earning power and our subsidiaries taken as a
whole, which is referred to as a "substantial part";
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with us or any of our subsidiaries of all or
a substantial part of the assets of a related person;
o the issuance or transfer of any of our securities or any of
our subsidiaries by us or any of our subsidiaries to a related
person;
o any reclassification of securities, recapitalization, or any
other transaction involving us or any of our subsidiaries that
would have the effect of increasing the voting power of a
related person;
o the adoption of a plan or proposal for our liquidation or
dissolution proposed by or on behalf of a related person;
o the acquisition by or on behalf of a related person of shares
constituting a majority of our voting power; and
o the entering into of any agreement, contract or other
arrangement providing for any of the transactions described
above.
This voting requirement will not apply to certain transactions,
including:
(a) any transaction approved by a two-thirds vote of the
continuing directors; or
(b) any transaction in which:
(1) the consideration to be received by the holders of
common stock, other than the related person involved
in the business combination, is not less in amount
than the highest per
28
share price paid by the related person in acquiring
any of its holdings of common stock; and
(2) if necessary, a proxy statement complying with the
requirements of the Securities Exchange Act of 1934
shall have been mailed at least 30 days prior to any
vote on such business combination to all of our
stockholders for the purpose of soliciting
stockholder approval of such business combination.
This provision could have the effect of delaying or preventing a change
in control of us in a transaction or series of transactions that did not satisfy
the "fair price" criteria.
LIABILITY OF DIRECTORS, INDEMNIFICATION
Our certificate of incorporation provides that a director will not be
personally liable for monetary damages to us or our stockholders for breach of
fiduciary duty as a director, except for liability:
o for any breach of the director's duty of loyalty to us or our
stockholders;
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o for paying a dividend or approving a stock repurchase in
violation of Section 174 of the Delaware General Corporation
Law; or
o for any transaction from which the director derived an
improper personal benefit.
Any amendment or repeal of such provision shall not adversely affect
any right or protection of a director existing under such provision for any act
or omission occurring prior to such amendment or repeal.
Our bylaws provide that each person who at any time serves or served as
one of our directors or officers, or any person who, while one of our directors
or officers, is or was serving at our request as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall be entitled to indemnification and the advancement of expenses from us,
and to the fullest extent, permitted by Section 145 of the Delaware General
Corporation Law or any successor statutory provision. We will indemnify any
person who was or is a party to any threatened, pending or completed action,
suit or proceeding because he or she is or was one of our directors or officers,
or is or was serving at our request as a director or officer of another
corporation, partnership or other enterprise. However, as provided in Section
145, this indemnification will only be provided if the indemnitee acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
our best interests.
AMENDMENTS
Our certificate of incorporation provides that we reserve the right to
amend, alter, change, or repeal any provision contained in our certificate of
incorporation, and all rights conferred to stockholders are granted subject to
such reservation. The affirmative vote of holders of not less than 80% of our
voting stock, voting together as a single class, shall be required to alter,
amend, adopt any provision inconsistent with or repeal specified provisions of
our certificate of incorporation, including those provisions discussed in this
section. In addition, the 80% vote described in the prior sentence shall not be
required for any alteration, amendment, adoption of inconsistent provision or
repeal of the "fair price" provision discussed under "-- Fair Price Provision"
above which is recommended to the stockholders by two-thirds of our continuing
directors and such alteration, amendment, adoption of inconsistent provision or
repeal shall require the vote, if any, required under the applicable provisions
of the Delaware General Corporation Law and our certificate of incorporation. In
addition, our certificate of incorporation provides that stockholders may only
adopt, amend or repeal our bylaws by the affirmative vote of holders of not less
than 80% of our voting stock, voting together as a single class. Our bylaws may
be amended by our board of directors.
29
RIGHTS PLAN
On July 27, 2000, our board of directors declared a dividend of one
preferred stock purchase right (individually, a "right" and collectively, the
"rights") to stockholders of record at the close of business on August 7, 2000
and approved the further issuance of rights with respect to all shares of common
stock that are subsequently issued. The rights expire on July 27, 2010. Each
right entitles the holder, under certain circumstances, to purchase from us one
one-hundredth of a share of our Series A Junior Participating Preferred Stock at
an exercise price of $75.00 per fractional share subject to certain adjustments.
Initially, the rights are attached to outstanding certificates
representing our common stock, and no separate certificates representing the
rights are distributed. The rights will separate from our common stock and will
become exercisable upon the earlier of
o ten days following a public announcement or disclosure that a
person or group (an "acquiring person") becomes the beneficial
owner of 15% or more of our outstanding common stock; or
o ten days following the commencement of a tender offer or
exchange offer which would result in the offeror becoming an
acquiring person.
Lineal descendants of D.W. Norris (and their spouses) and trusts
established primarily for the benefit of such lineal descendants (and their
spouses) will not become an acquiring person and will not be counted as
affiliates or associates of any other person in determining whether such person
is an acquiring person, in each case as long as the primary purpose for holding
shares in us is not to effect an extraordinary corporate transaction. In
addition, holders of 1% or more of our common stock which are identified in the
prospectus relating to our initial public offering are also excluded from
becoming an acquiring person.
If the rights become exercisable, each right (other than rights held by
the acquiring person) will entitle the holder to purchase, at a price equal to
the exercise price of the right, a number of shares of our common stock having a
then-current market value of twice the exercise price of the right. If at any
time from and after the time an acquiring person becomes such we agree to merge
into another entity or we sell more than 50% of our assets, each right (other
than rights held by the acquiring person) will entitle the holder to purchase,
at a price equal to the exercise price of the right, a number of shares of
common stock of such entity having a then-current market value of twice the
exercise price.
We will generally be entitled to redeem the rights at a price of $0.01
per right at any time prior to the day a person becomes an acquiring person. The
description and terms of the rights are set forth in a Rights Agreement dated as
of July 27, 2000 entered into between us and the rights agent named therein. The
Rights Agreement was filed as an exhibit to our Current Report on Form 8-K dated
July 27, 2000, filed with the SEC.
The Rights Agreement approved by our board of directors is designed to
protect and maximize the value of our outstanding equity interests in the event
of an unsolicited attempt to acquire us in a manner or on terms not approved by
our board of directors and that prevent our stockholders from realizing the full
value of their shares of our common stock. However, the rights may have the
effect of rendering more difficult or discouraging an acquisition of us that is
deemed undesirable by our board of directors. The rights may cause substantial
dilution to a person or group that attempts to acquire us on terms or in a
manner not approved by our board of directors, except pursuant to an offer
conditioned upon the negation, purchase or redemption of the rights.
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
Our certificate of incorporation authorizes our board of directors to
create and issue rights, warrants and options entitling the holders of them to
purchase from us shares of any class or classes of our capital stock or other
securities or property upon such terms and conditions as our board of directors
may deem advisable.
30
LISTING
Our common stock is listed on the New York Stock Exchange under the
trading symbol "LII."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Mellon
Investor Services LLC.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material United States federal
income tax consequences of the purchase of the notes, and the ownership and
disposition of the notes and our common stock into which such notes may be
converted. This discussion applies only to notes, and common stock into which
notes are converted, that are held as capital assets within the meaning of
Section 1221 of the Code (generally, for investment).
This discussion does not describe the United States federal income tax
consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules, such as:
o certain financial institutions;
o regulated investment companies;
o insurance companies;
o pension funds;
o tax-exempt organizations;
o dealers in securities or foreign currencies;
o persons holding notes as part of a "straddle," hedge,
"conversion" or similar transaction;
o persons deemed to sell the notes or common stock under the
constructive sale provisions of the Code;
o United States Holders (as defined below) whose functional
currency is not the United States dollar;
o certain former citizens or residents of the United States;
o partnerships or other entities classified as partnerships for
United States federal income tax purposes or persons who hold
the notes or our common stock through such entities; or
o persons subject to the alternative minimum tax.
This summary is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations,
changes to any of which subsequent to the date of this prospectus may affect the
tax consequences described herein, possibly with retroactive effect. We have not
sought any ruling from the Internal Revenue Service ("IRS") with respect to the
statements made and the conclusions reached in this discussion, and there can be
no assurance that the IRS will agree with our statements or conclusions. PERSONS
CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR TAX ADVISERS WITH REGARD
TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a beneficial
owner of a note or our common stock that is for United States federal income tax
purposes:
32
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for
United States federal income tax purposes, created or
organized in or under the laws of the United States or of any
political subdivision thereof;
o an estate the income of which is subject to United States
federal income taxation regardless of its source; or
o a trust if:
o its administration is subject to the primary supervision of a
court within the United States and one or more United States
persons has authority to control all of its substantial
decisions; or
o it was in existence on August 20, 1996, and has elected to
continue to be treated as a United States trust.
STATED INTEREST
Interest paid on a note will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for federal
income tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement (including redemption or
repurchase, but excluding conversion) of a note, a United States Holder will
recognize taxable gain or loss equal to the difference between (i) the amount
realized (i.e., the amount of cash and fair market value of property received in
exchange for the note, but not including any amounts received in respect of
accrued interest, which will be taxed as ordinary income) on the sale, exchange
or retirement and (ii) the United States Holder's adjusted tax basis in the
note. A United States Holder's adjusted tax basis in a note generally will be
equal to the United States Holder's original purchase price for the note. Except
as explained below in "Tax Consequences to United States Holders--Market
discount," gain or loss realized on the sale, exchange or retirement of a note
generally will be capital gain or loss and will be long-term capital gain or
loss if, at the time of sale, exchange or retirement, the note has been held for
more than one year.
CONVERSION OF THE NOTES
A United States Holder's conversion of a note into our common stock
generally will not be a taxable event, except that the receipt of cash in lieu
of a fractional share of common stock will result in capital gain or loss
(measured by the difference between the cash received in lieu of the fractional
share and the United States Holder's tax basis in the fractional share).
A United States Holder's tax basis in common stock received upon the
conversion of a note will be the same as the United States Holder's basis in the
note at the time of conversion, reduced by any basis allocated to a fractional
share. The United States Holder's holding period for the common stock received
will include the Holder's holding period for the note converted.
ADJUSTMENTS OF THE CONVERSION RATIO
The terms of the notes allow for changes in their conversion rate in
certain circumstances. Changes in conversion rate could be treated as a taxable
stock dividend if the changes have the effect of increasing a United States
Holder's proportionate interest in our earnings and profits. This could occur,
for example, if the conversion rate is adjusted to compensate holders of notes
for distributions of property to our stockholders. By contrast, changes in the
conversion rate will not be treated as a taxable stock dividend if the changes
simply
33
prevent the dilution of interests of holders of the notes through application of
a bona fide, reasonable adjustment formula. Any taxable constructive stock
dividend resulting from a change to, or failure to change, the conversion rate
would be treated like dividends paid in cash or other property. The constructive
stock dividend would result in ordinary income to the recipient to the extent of
our earnings and profits (and an increase in the adjusted basis of the notes by
the same amount), with any excess treated first as a tax-free reduction in
adjusted basis and then as capital gain.
DIVIDENDS ON COMMON STOCK
If we make distributions on our common stock, those distributions will
generally be treated as a dividend, subject to tax as ordinary income, to the
extent of our current or accumulated earnings and profits as of the year of
distribution, then as a tax-free return of capital to the extent of the United
States Holder's adjusted tax basis in the common stock and thereafter as gain
from the sale or exchange of that stock.
SALE OF COMMON STOCK
Upon the sale or exchange of our common stock, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received upon
the sale or exchange and (ii) the United States Holder's adjusted tax basis in
the common stock. That capital gain or loss will be long-term if the United
States Holder's holding period is more than one year and will be short-term if
the holding period is equal to or less than one year.
MARKET DISCOUNT
The resale of the notes may be affected by the market discount
provisions of the Code. For this purpose, the market discount on a note
generally will equal the amount, if any, by which the stated redemption price at
maturity of the note immediately after its acquisition (other than at original
issue) exceeds the United States Holder's adjusted tax basis in the note.
Subject to a limited exception, these provisions generally require a United
States Holder who acquires a note at a market discount to treat as ordinary
income any gain recognized on the disposition of that note to the extent of the
accrued market discount on that note at the time of maturity or disposition,
unless the United States Holder elects to include accrued market discount in
income over the life of the note.
This election to include market discount in income over the life of the
note, once made, applies to all market discount obligations acquired on or after
the first day of the first taxable year to which the election applies and may
not be revoked without the consent of the IRS. In general, market discount will
be treated as accruing on a straight-line basis over the remaining term of the
note at the time of acquisition, or, at the election of the United States
Holder, under a constant yield method. If a constant yield election is made, it
will apply only to the note with respect to which it is made, and may not be
revoked. A United States Holder who acquires a note at a market discount and who
does not elect to include accrued market discount in income over the life of the
note may be required to defer the deduction of all or a portion of the interest
on any indebtedness incurred or maintained to purchase or carry the note until
maturity or until the note is disposed of in a taxable transaction. If a United
States Holder acquires a note with market discount and receives common stock
upon conversion of the note, the amount of accrued market discount not
previously included in income with respect to the converted note through the
date of conversion will be treated as ordinary income when the holder disposes
of the common stock.
AMORTIZABLE PREMIUM
A United States Holder who purchases a note at a premium over its
stated principal amount, plus accrued interest, generally may elect to amortize
that premium (referred to as Section 171 premium) from the purchase date to the
note's maturity date under a constant-yield method that reflects semiannual
compounding based on the note's payment period. Amortizable premium, however,
will not include any premium attributable to a note's conversion feature. The
premium attributable to the conversion feature is the excess, if any, of the
note's purchase price over what the note's fair market value would be if there
were no conversion feature. Amortized Section 171 premium is treated as an
offset to interest income on a note and not as a separate
34
deduction. The election to amortize premium on a constant yield method, once
made, applies to all debt obligations held or subsequently acquired by the
electing United States Holder on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns will be filed with the IRS in connection with
payments on the notes or our common stock and the proceeds from a sale or other
disposition of the notes or our common stock. A United States Holder may be
subject to United States backup withholding at the rates specified in the Code
on these payments if it fails to provide its taxpayer identification number to
the paying agent and comply with certain certification procedures or otherwise
establish an exemption from backup withholding. The amount of any backup
withholding from a payment will be allowed as a credit against the United States
Holder's United States federal income tax liability and may entitle the United
States Holder to a refund, provided that the required information is furnished
to the IRS.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means a beneficial
owner of a note or our common stock that is, for United States federal income
tax purposes:
o an individual who is classified as a nonresident for United
States federal income tax purposes;
o a foreign corporation; or
o an estate or trust that is not a United States estate or
trust, as defined above.
PAYMENTS OF INTEREST
Subject to the discussion below concerning backup withholding, payments
of interest on a note by us or any paying agent to any Non-United States Holder
will not be subject to United States federal withholding tax, provided that:
o the Non-United States Holder does not own, actually or
constructively, 10% or more of the total combined voting power
of all classes of our stock entitled to vote, is not a
controlled foreign corporation related, directly or
indirectly, to us through stock ownership and is not a bank
receiving certain types of interest;
o either (i) the Non-United States Holder timely certifies to us
or our paying agent, under penalties of perjury, that such
holder is not a United States person and provides its name and
address, or (ii) a custodian, broker, nominee or other
intermediary acting as an agent for the Non-United States
Holder (such as a securities clearing organization, bank or
other financial institution that holds customer's securities
in the ordinary course of its trade or business) that holds
the notes in such capacity timely certifies to us or our
paying agent, under penalties of perjury, that such statement
has been received from the beneficial owner of the notes by
such intermediary, or by any other financial institution
between such intermediary and the beneficial owner, and
furnishes to us or our paying agent a copy thereof. The
foregoing certification may be provided on a properly
completed IRS Form W-8BEN or W-8IMY, as applicable, or any
successor forms duly executed under penalties of perjury; and
o neither we nor our paying agent has actual knowledge or reason
to know that the conditions of the exemption are, in fact, not
satisfied.
If a Non-United States Holder of a note is engaged in a trade or
business in the United States, and if payments on the note are effectively
connected with the conduct of this trade or business, the Non-United States
Holder, although exempt from the withholding tax discussed above, generally will
be taxed in the same manner
35
as a United States Holder (see "-- Tax Consequences to United States Holders"
above), except that (i) the Non-United States Holder will be required to provide
to us or our paying agent a properly executed IRS Form W-8ECI in order to claim
an exemption from withholding tax, and (ii) if the Non- United States Holder is
a foreign corporation it may also be subject to a branch profits tax on its
effectively connected income at a 30% rate or such lower rate that may be
provided by an applicable income tax treaty. Non-United States Holders should
consult their own tax advisers with respect to other United States tax
consequences of the ownership and disposition of notes including the
applicability of income tax treaties, which may provide different rules.
SALE, EXCHANGE, CONVERSION OR REDEMPTION OF THE NOTES AND COMMON STOCK
Subject to the exceptions in this paragraph, a Non-United States Holder
of a note will not be subject to United States federal income tax (i) upon
conversion of a note into shares of our common stock, or (ii) on gain realized
on the sale, exchange or redemption of the note or our common stock into which
such note may be converted (including cash for a fractional share on
conversion). If the gain is effectively connected with the conduct by the
Non-United States Holder of a trade or business in the United States, the
Non-United States Holder would be subject to the rules described above under
"Tax Consequences to United States Holders--Sale, exchange or retirement of the
notes." Moreover, if that Non--United States Holder is a foreign corporation, it
may also be subject to a branch profits tax on its effectively connected income
at a 30% rate or such lower rate that may be provided by an applicable income
tax treaty. If we are a United States real property holding corporation, or
USRPHC, a Non-United States Holder would, subject to the exception described
below, be subject to federal income tax with respect to gain realized on the
disposition of the notes or shares of our common stock. We do not believe that
we are a USRPHC or will become a USRPHC in the future. If we become a USRPHC, so
long as our common stock continues to be regularly traded on an established
securities market, only a Non-United States Holder (i) who owns notes with a
value greater than 5% of our common stock on the date acquired, or (ii) who
actually or constructively owns (or owned at any time during the five-year
period ending on the date of disposition) more than 5% of our common stock will
be subject to United States tax on the disposition thereof. If you are an
individual who is present in the United States for 183 days or more in the
taxable year of disposition, you are not otherwise a resident of the United
States for United States federal income tax purposes and certain other
requirements are met, you will be subject to a 30% tax on gain realized on the
sale, exchange or other disposition (other than conversion) of a note or our
common stock into which such note may be converted.
ADJUSTMENTS OF THE CONVERSION RATIO
The conversion rate of the notes is subject to adjustment in some
circumstances, which could give rise to a taxable deemed distribution to
Non-United States Holders of the notes. See "-- Tax Consequences to United
States Holders -- Adjustments of the conversion ratio" above. The deemed
distribution will constitute a dividend for United States federal income tax
purposes to the extent of our current or accumulated earnings and profits as
determined under United States federal income tax principles and generally will
be subject to United States withholding tax at a 30% rate (which withholding
generally will be satisfied by withholding subsequent interest payments on the
notes), unless (x) a lower rate is provided by an applicable income tax treaty
and the Non-United States Holder or its agent timely furnishes to us or our
agent a properly completed IRS Form W-8BEN or W-8IMY, as applicable, or any
successor form, duly executed under penalties of perjury, certifying that such
Non-United States Holder is entitled to the reduced or zero percent withholding
tax rate under the income tax treaty, and neither we nor our paying agent has
actual acknowledge or reason to know that the conditions of this exemption are,
in fact, not satisfied or (y) the distribution is effectively connected with the
conduct by the Non-United States Holder of a trade or business in the United
States and the Non-United States Holder timely furnishes to us or our paying
agent a properly completed IRS Form W-8ECI, or any successor form, duly executed
under penalties of perjury, certifying to the foregoing, and neither we nor our
paying agent have actual knowledge or reason to know that the conditions of this
exemption are, in fact, not satisfied.
DIVIDENDS ON COMMON STOCK
Subject to the discussion below of backup withholding, dividends, if
any, paid on our common stock to a Non-United States Holder generally will be
subject to United States withholding tax at a 30% rate unless (x) a lower rate
is provided by an applicable income tax treaty and the Non-United States Holder
or its agent timely
36
furnishes to us or our agent a properly completed IRS Form W-8BEN or W-8IMY, as
applicable, or any successor form, duly executed under penalties of perjury,
certifying that such Non-United States Holder is entitled to the reduced or zero
percent withholding tax rate under the income tax treaty, and neither we nor our
paying agent has actual knowledge or reason to know that the conditions of this
exemption are, in fact, not satisfied or (y) the distribution is effectively
connected with the conduct by the Non-United States Holder of a trade or
business in the United States and the Non-United States Holder timely furnishes
to us or our paying agent a properly completed IRS Form W-8ECI, or any successor
form, duly executed under penalties of perjury, certifying to the foregoing, and
neither we nor our paying agent have actual knowledge or reason to know that the
conditions of this exemption are, in fact, not satisfied. Dividends for this
purpose may include stock distributions treated as deemed dividends as discussed
in "-- Tax Consequences to United States Holders-Adjustments of the conversion
ratio" above.
Except to the extent otherwise provided under an applicable income tax
treaty, a Non-United States Holder generally will be taxed in the same manner as
a United States Holder on dividends paid (or deemed paid) that are effectively
connected with the conduct of a trade or business in the United States by the
Non-United States Holder (and, if required by an income tax treaty, are
attributable to a permanent establishment maintained in the United States). If
that Non-United States Holder is a foreign corporation, it may also be subject
to a United States branch profits tax on that effectively connected income at a
30% rate or a lower rate as may be specified by an applicable income tax treaty.
UNITED STATES FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen
or resident of the United States, as specially defined for United States federal
estate tax purposes, will not be subject to United States federal estate tax if
the individual did not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock and, at the time of the
individual's death, payments with respect to that note would not have been
effectively connected with the conduct by that individual of a trade or business
in the United States. Common stock held by an individual who at the time of
death is not a citizen or resident of the United States, as specially defined
for United States federal estate tax purposes, will be included in that
individual's estate for United States federal estate tax purposes, and the
applicable rate of tax may be reduced or eliminated if an estate tax treaty
otherwise applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns will be filed annually with the IRS and provided to
each Non-United States Holder with respect to any dividends paid on our common
stock or interest paid on the notes that are subject to withholding or that are
exempt from United States withholding tax pursuant to an income tax treaty or
other reason. Copies of these information returns also may be made available
under the provisions of a specific treaty or agreement to the tax authorities of
the country in which the Non-United States Holder resides. Under certain
circumstances, the Internal Revenue Code imposes a backup withholding
obligation. Dividends or interest paid to a Non-United States Holder of common
stock or notes generally will be exempt from backup withholding if the
Non-United States Holder or its agent provides a properly executed IRS Form
W-8BEN or W-81MY, as applicable, or otherwise establishes an exemption.
The payment of the proceeds from the disposition of common stock or
notes to or through the United States office of any broker, United States or
foreign, will be subject to information reporting and possible backup
withholding unless the owner certifies as to its non-United States status under
penalties of perjury or otherwise establishes an exemption, provided that the
broker does not have actual knowledge that the holder is a United States person
or that the conditions of any other exemption are not, in fact, satisfied. The
payment of the proceeds from the disposition of common stock or notes to or
through a non-United States office of a non-United States broker will not be
subject to information reporting or backup withholding unless the non-United
States broker has certain types of relationships with the United States (a
"United States related person"). In the case of the payment of the proceeds from
the disposition of common stock or notes to or through a non-United States
office of a broker that is either a United States person or a United States
related person, the Treasury regulations require information reporting (but not
backup withholding) on the payment unless the broker has documentary evidence in
its files that the owner is a Non-United States Holder and the broker has no
knowledge to the
37
contrary. Non-United States Holders should consult their own tax advisors on the
application of information reporting and backup withholding to them in their
particular circumstances (including upon their disposition of common stock or
notes).
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules from a payment to a Non-United States Holder will
be refunded or credited against the Non-United States Holder's federal income
tax liability, if any, if the Non-United States Holder provides the required
information to the IRS.
38
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement on May 8, 2002.
The initial purchasers of the notes have advised us that the notes were resold
in transactions exempt from the registration requirements of the Securities Act
to "qualified institutional buyers," as defined in Rule 144A of the Securities
Act, and outside the United States in compliance with Regulation S under the
Securities Act. Selling securityholders may offer and sell the notes and/or
shares of common stock issuable upon conversion of the notes pursuant to this
prospectus.
The following table sets forth information as of _____________, 2002
about the principal amount of notes and the underlying common stock beneficially
owned by each selling securityholder that may be offered using this prospectus.
PRINCIPAL
AMOUNT OF
NOTES NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF COMMON STOCK PERCENTAGE OF
OWNED THAT OF NOTES THAT MAY BE COMMON STOCK
NAME AND ADDRESS OF SELLING SECURITYHOLDER MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
--------------------------------------------------- --------------- --------------- --------------- --------------
Unnamed holders of notes or any future
transferees, pledgees, donees or
successors of or from any such unnamed
holder(3) ......................................... $ 143,750,000 7,947,478
--------------- ---------------
Total ............................................. $ 143,750,000 7,947,478
=============== ===============
* Less than 1%.
(1) Assumes conversion of all of the holder's notes at a conversion rate of
55.2868 shares of common stock per $1,000 principal amount of the notes.
However, this conversion rate will be subject to adjustment as described under
"Description of Notes - Conversion Rights." as a result, the amount of common
stock issuable upon conversion of the notes may increase or decrease in the
future.
(2) Calculated based on __________ shares of common stock outstanding as of
_______ __, 2002. In calculating this amount, we treated as outstanding that
number of shares of common stock issuable upon conversion of all of a particular
holder's notes. However, we did not assume the conversion of any other holder's
notes.
(3) Information about other selling securityholders will be set forth in
prospectus supplements or amendments to this prospectus, if required.
We prepared this table based on the information supplied to us by the
selling securityholders named in the table. Unless otherwise disclosed in the
footnotes to the table, no selling securityholder has indicated that it has held
any position or office or had any other material relationship with us or our
affiliates during the past three years. The selling securityholders listed in
the above table may have sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some of all of their notes
since the date as of which the information is presented in the above table.
Information about the selling securityholders may change over time. Any changed
information supplied to us will be set forth in prospectus supplements or
amendments to this prospectus.
Because the selling securityholders may offer all of some of their
notes or the underlying common stock from time to time, we cannot estimate the
amount of the notes or the underlying common stock that will be held by the
selling securityholders upon the termination of any particular offering. See
"Plan of Distribution."
39
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and
the underlying common stock offered by this prospectus. The notes and the
underlying common stock may be sold from time to time to purchasers:
o directly by the selling securityholders; or
o through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers
of the notes and underlying common stock.
The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock may
be deemed to be "underwriters." As a result, any profits on the sale of the
underlying common stock by selling securityholders and any discounts,
commissions or concessions received by any such broker-dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act. If
the selling securityholders were deemed to be underwriters, the selling
securityholders may be subject to statutory liabilities including, but not
limited to, those of Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the notes and the underlying common stock are sold through
underwriters or broker-dealers, the selling securityholders will be responsible
for underwriting discounts or commissions or agent's commissions.
The notes and the underlying common stock may be sold in one or more
transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o varying prices determined at the time of sale; or
o negotiated prices.
These sales may be effected in transactions:
o on any national securities exchange or quotation service on
which the notes and underlying common stock may be listed or
quoted at the time of the sale, including the New York Stock
Exchange in the case of the common stock;
o in the over-the-counter market;
o in transactions otherwise than on such exchanges or services
or in the over-the-counter market; or
o through the writing of options.
These transactions may include block transactions or crosses. Crosses
are transactions in which the same broker acts as an agent on both sides of the
transaction.
In connection with the sales of the notes and the underlying common
stock or otherwise, the selling securityholders may enter into hedging
transactions with broker-dealers. These broker-dealers may in turn engage in
short sales of the notes and the underlying common stock in the course of
hedging their positions. The selling securityholders may also sell the notes and
the underlying common stock short and deliver notes and the underlying common
stock to close out short positions, or loan or pledge notes and the underlying
common stock to broker-dealers that, in turn, may sell the notes and the
underlying common stock.
40
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the underlying common
stock by the selling securityholders. Selling securityholders may decide not to
sell all or a portion of the notes and the underlying common stock offered by
them pursuant to this prospectus or may decide not to sell notes or the
underlying common stock under this prospectus. In addition, any selling
securityholder may transfer, devise or give the notes and the underlying common
stock by other means not described in this prospectus. Any notes or underlying
common stock covered by this prospectus that qualify for sale pursuant to Rule
144 or Rule 144A of the Securities Act, or Regulation S under the Securities
Act, may be sold under Rule 144 or Rule 144A or Regulation S rather than
pursuant to this prospectus.
Our common stock is listed on the New York Stock Exchange under the
trading symbol "LII." We do not intend to apply for listing of the notes on any
securities exchange or for quotation through any automated quotation system. The
notes originally issued in the private placement are eligible for trading on the
PORTAL Market. However, notes sold pursuant to this prospectus will no longer be
eligible for trading on the PORTAL Market. Accordingly, no assurance can be
given as to the development of liquidity or any trading market for the notes.
The selling securityholders and any other persons participating in the
distribution of the notes or underlying common stock will be subject to the
Exchange Act. The Exchange Act rules include, without limitation, Regulation M,
which may limit the timing of purchases and sales of any of the notes and the
underlying common stock by the selling securityholders and any such other
person. In addition, Regulation M of the Exchange Act may restrict the ability
of any person engaged in the distribution of the notes and the underlying common
stock to engage in market-making activities with respect to the particular notes
and underlying common stock being distributed for a period of up to five
business days prior to the commencement of such distribution. This may affect
the marketability of the notes and the underlying common stock and the ability
to engage in market-making activities with respect to the notes and the
underlying common stock.
Under the registration rights agreement that has been filed as an
exhibit to this registration statement, we agreed to use our commercially
reasonable efforts to keep the registration statement of which this prospectus
is a part effective for a period of two years after the original issuance of the
notes on May 8, 2002 or such shorter time (1) as permitted by Rule 144(k) under
the Securities Act or any successor provisions thereunder or (2) that will
terminate when each of the registrable securities covered by the registration
statement ceases to be a registrable security. "Registrable securities" means
each note and any underlying share of common stock until the earlier of (x) the
date on which such note or underlying share of common stock has been effectively
registered under the Securities Act and disposed of, whether or not in
accordance with the registration statement of which this prospectus forms a
part, and (y) the date which is two years after the date of original issue of
such note or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder.
We are permitted to prohibit offers and sales of securities pursuant to
this prospectus under certain circumstances and subject to certain conditions
for a period not to exceed 45 days in the aggregate in any three-month period or
90 days in the aggregate in any 12-month period. During the time periods when
the use of this prospectus is suspended, each selling securityholder has agreed
not to sell notes or shares of common stock issuable upon conversion of the
notes. We also agreed to pay liquidated damages to certain holders of the notes
and shares of common stock issuable upon conversion of the notes if the
prospectus is unavailable for periods in excess of those permitted.
Under the registration rights agreement, we and the selling
securityholders will each indemnify the other against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to
the registration, offering and sale of the notes and the underlying common stock
to the public other than commissions, fees and discounts of underwriters,
brokers, dealers and agents.
41
LEGAL MATTERS
The validity of the notes and the common stock issuable upon their
conversion will be passed upon for Lennox International Inc. by Baker Botts
L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of Lennox International Inc. as
of December 31, 2001 and 2000 and for each of the three years in the period
ended December 31, 2001, incorporated by reference in this prospectus, have been
audited by Arthur Andersen LLP, independent auditors, as stated in their reports
appearing therein. Arthur Andersen LLP has not consented to the inclusion of
their report in this prospectus, and we have dispensed with the requirement to
file their consent in reliance upon Rule 437a of the Securities Act of 1933.
Because Arthur Andersen LLP has not consented to the inclusion of their report
in this prospectus, you will not be able to recover against Arthur Andersen LLP
under Section 11 of the Securities Act for any untrue statements of a material
fact contained in the financial statements audited by Arthur Andersen LLP or any
omissions to state a material fact required to be stated therein.
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
further information regarding the operation of the SEC's Public Reference Room
by calling the SEC at 1-800-SEC-0330. Our filings are also available to the
public on the SEC's Internet site located at http://www.sec.gov.
INCORPORATION BY REFERENCE
Some of the information that you may want to consider in deciding
whether to invest in the notes is not included in this prospectus, but rather is
incorporated by reference to certain reports that we have filed with the SEC.
This permits us to disclose important information to you by referring to those
documents rather than repeating them in full in this prospectus. The information
incorporated by reference in this prospectus contains important business and
financial information. In addition, information that we file with the SEC after
the date of this prospectus and prior to the completion of the offering of the
notes and common stock under this prospectus will update and supersede the
information contained in this prospectus and incorporated filings. We
incorporate by reference the following documents filed by us with the SEC:
o our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001;
o our Quarterly Report on Form 10-Q for the quarter ended March
31, 2002;
o our Current Reports on Form 8-K dated April 29, 2002, May 2,
2002, and May 20, 2002; and
o the description of our common stock on Form 8-A dated July 12,
1999.
Also incorporated by reference are all documents we file with the SEC after the
date of this prospectus and before the completion of this offering under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
Any statement contained in a document incorporated by reference, or
deemed to be incorporated by reference, in this prospectus shall be deemed to be
modified and superseded for purposes of this prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
incorporated by reference in this prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
Statements contained in this prospectus as to the contents of any contract or
other document referred to in this prospectus do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
42
You may also obtain a copy of our filings with the SEC as well as
copies of the indenture, registration rights agreement and other documents
described herein, other than an exhibit to those filings unless we have
specifically incorporated an exhibit by reference, at no cost, by writing to or
telephoning us at the following address:
Lennox International Inc.
2140 Lake Park Blvd.
Richardson, Texas 75080
(972) 497-5000
Attn: Investor Relations
The information in this prospectus may not contain all of the
information that may be important to you. You should read the entire prospectus,
as well as the documents incorporated by reference in the prospectus, before
making an investment decision.
43
[LENNOX LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by the Registrant (except expenses incurred
by the Selling Securityholders for brokerage fees, selling commissions and
expenses incurred by the Selling Securityholders for legal services). All
amounts shown are estimates except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission filing fee............................... $ 13,225
Legal fees and expenses..................................................... 50,000
Trustee fees and expenses................................................... 10,000
Transfer Agent Fees......................................................... 10,000
Accounting fees and expenses................................................ 10,000
Printing Expenses........................................................... 15,000
Miscellaneous Expenses...................................................... 6,775
---------
Total Expenses.............................................................. $ 115,000
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Set forth below is a description of certain provisions of the Restated
Certificate of Incorporation of the Company (the "Certificate"), the Amended and
Restated Bylaws of the Company (the "Bylaws"), Indemnification Agreements (the
"Indemnification Agreements") the Company has entered into with its directors
and certain of its officers (the "Indemnitees") and the Delaware General
Corporation Law (the "DGCL"). This description is intended as a summary only and
is qualified in its entirety by reference to the Certificate, the Bylaws, the
Indemnification Agreements and the DGCL.
Delaware General Corporation Law
Section 145 of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership or other enterprise, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by them in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interest of the corporation and,
with respect to any criminal action or proceeding, if he or she had no
reasonable cause to believe their conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of the action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made against
expenses in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
II-1
The Certificate
Article Eighth of the Certificate provides that a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereof is not permitted under the DGCL
as the same exists or may hereafter be amended. Any repeal or modification of
Article Eighth shall not adversely affect any right or protection of a director
of the Company existing thereunder with respect to any act or omission occurring
prior to such repeal or modification.
The Bylaws
Article VI of the Bylaws provides that each person who at any time
shall serve or shall have served as a director or officer of the Company, or any
person who, while a director or officer of the Company, is or was serving at the
request of the Company as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall be entitled to (a)
indemnification and (b) the advancement of expenses incurred by such person from
the Company as, and to the fullest extent, permitted by Section 145 of the DGCL
or any successor statutory provision, as from time to time amended. The Company
may indemnify any other person, to the same extent and subject to the same
limitations specified in the immediately preceding sentence, by reason of the
fact that such other person is or was an employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise.
The indemnification and advancement of expenses provided by, or granted
pursuant to, Article VI shall not be deemed exclusive of any other rights to
which any person seeking indemnification or advancement of expenses may be
entitled under any bylaw of the Company, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office. All rights to indemnification under Article VI shall be deemed to be
provided by a contract between the Company and the director, officer, employee
or agent who served in such capacity at any time while the bylaws of the Company
and other relevant provisions of the DGCL and other applicable law, if any, are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing. Without limiting the provisions of Article VI, the
Company is authorized from time to time, without further action by the
stockholders of the Company, to enter into agreements with any director or
officer of the Company providing such rights of indemnification as the Company
may deem appropriate, up to the maximum extent permitted by law. Any agreement
entered into by the Company with a director may be authorized by the other
directors, and such authorization shall not be invalid on the basis that similar
agreements may have been or may thereafter be entered into with other directors.
Insurance
The Company may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Company would have the power to indemnify such person
against such liability under the applicable provisions of Article VI of the
Bylaws or the DGCL.
Indemnification Agreements
The Company has entered into indemnification agreements (the
"Indemnification Agreements") with its directors and certain of its executive
officers (collectively, the "Indemnitees"). Under the terms of the
Indemnification Agreements, the Company has generally agreed to indemnify, and
advance expenses to, each Indemnitee to the fullest extent permitted by
applicable law on the date of the agreements and to such greater extent as
applicable law may thereafter permit. In addition, the Indemnification
Agreements contain specific provisions pursuant to which the Company has agreed
to indemnify each Indemnitee (i) if such person is, by reason of his or her
status as a director, nominee for director, officer, agent or fiduciary of the
Company or of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise with which such person was serving at the
request of the Company (any such status being referred to as a "Corporate
Status")
II-2
made or threatened to be made a party to any threatened, pending or completed
action, suit, arbitration, alternative dispute resolution mechanism,
investigation or other proceeding (each, a "Proceeding"), other than a
proceeding by or in the right of the Company; (ii) if such person is, by reason
of his or her Corporate Status, made or threatened to be made a party to any
Proceeding brought by or in the right of the Company to procure a judgment in
its favor, except that no indemnification shall be made in respect of any claim,
issue or matter in such Proceeding as to which such Indemnitee shall have been
adjudged to be liable to the Company if applicable law prohibits such
indemnification, unless and only to the extent that a court shall otherwise
determine; (iii) against expenses actually and reasonably incurred by such
person or on his or her behalf in connection with any Proceeding to which such
Indemnitee was or is a party by reason of his or her Corporate Status and in
which such Indemnitee is successful, on the merits or otherwise; (iv) against
expenses actually and reasonably incurred by such person or on his or her behalf
in connection with a Proceeding to the extent that such Indemnitee is, by reason
of his or her Corporate Status, a witness or otherwise participates in any
Proceeding at a time when such person is not a party in the Proceeding; and (v)
against expenses actually and reasonably incurred by such person in any judicial
adjudication of or any award in arbitration to enforce his or her rights under
the Indemnification Agreements.
In addition, under the terms of the Indemnification Agreements, the
Company has agreed to pay all reasonable expenses incurred by or on behalf of an
Indemnitee in connection with any Proceeding, whether brought by or in the right
of the Company or otherwise, in advance of any determination with respect to
entitlement to indemnification and within 15 days after the receipt by the
Company of a written request from such Indemnitee for such payment. In the
Indemnification Agreements, each Indemnitee has agreed that he or she will
reimburse and repay the Company for any expenses so advanced to the extent that
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company against such expenses.
The Indemnification Agreements also include provisions that specify the
procedures and presumptions which are to be employed to determine whether an
Indemnitee is entitled to indemnification thereunder. In some cases, the nature
of the procedures specified in the Indemnification Agreements varies depending
on whether there has occurred a "Change in Control" (as defined in the
Indemnification Agreements) of the Company.
ITEM 16. EXHIBITS
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Registration No.
333-75725)).
3.2 Amended and Restated Bylaws of the Company (incorporated
herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No.
333-75725)).
4.1 Indenture dated as of May 8, 2002 between the Company and The
Bank of New York, as Trustee (incorporated herein by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002).
4.2 Form of 6 1/4% Convertible Subordinated Note due 2009
(included in Exhibit 4.1).
4.3 Specimen stock certificate for the Common Stock, par value
$.01 per share, of the Company (incorporated herein by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-75725)).
4.4 Registration Right Agreement dated as of May 8, 2002 by and
between the Company and UBS Warburg LLC and the other initial
purchasers (incorporated herein by reference to Exhibit 10.3
to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2002).
4.5 Rights Agreement dated as of July 27, 2000 between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
which includes as Exhibit A the form of Certificate of
Designations of Series A Junior Participating Preferred Stock
setting forth the
II-3
terms of the Preferred Stock, as Exhibit B the form of Rights
Certificate and as Exhibit C the Summary of Rights to Purchase
Preferred Stock (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated July 27, 2001).
5.1 Opinion of Baker Botts L.L.P.
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed
Charges.
23.1 Consent of Baker Botts L.L.P. (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page to this
registration statement).
25.1 Statement of Eligibility of Trustee on Form T-1.
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof),
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement. Notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar
value of securities offered would not exceed
that which was registered) and any deviation
from the low or high end of the estimated
maximum offering range may be reflected in
the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and
price represent no more than a 20% change in
the maximum aggregate offering price set
forth in the "Calculation of Registration
Fee" table in the effective Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this Registration
Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section
13(a) or Section
II-4
15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such
issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on behalf by the undersigned, thereunto duly authorized,
in the City of Richardson, State of Texas, on this 25th day of June, 2002.
LENNOX INTERNATIONAL INC.
By: /s/ RICHARD A. SMITH
----------------------------------------
Richard A. Smith
Executive Vice President, Chief
Financial Officer and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and officers of Lennox International Inc., a Delaware corporation, which is
filing a Registration Statement on Form S-3 with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), hereby constitutes and appoints Richard A. Smith and Carl E.
Edwards, Jr., and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, and in any and all capacities, to sign and
file (i) any and all amendments (including post-effective amendments) to this
registration statement, with all exhibits thereto, and other documents in
connection therewith, and (ii) a registration statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act, with the Securities and Exchange
Commission, it being understood that said attorneys-in-fact and agents, and each
of them, shall have full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person and
that each of the undersigned hereby ratifies and confirms all that said
attorneys-in-fact as agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ JOHN W. NORRIS, JR. Chairman of the Board and Director June 20, 2002
---------------------------
John W. Norris, Jr.
/s/ ROBERT E. SCHJERVEN Chief Executive Officer and Director June 18, 2002
--------------------------- (Principal executive officer)
Robert E. Schjerven
/s/ RICHARD A. SMITH Executive Vice President, Chief June 19, 2002
--------------------------- Financial Officer and Treasurer
Richard A. Smith (Principal financial officer)
/s/ DAVID L. INMAN Vice President, Controller and Chief June 20, 2002
--------------------------- Accounting Officer
David L. Inman (Principal accounting officer)
Director
---------------------------
Linda G. Alvarado
II-6
Director
---------------------------
David H. Anderson
/s/ STEVEN R. BOOTH Director June 18, 2002
---------------------------
Steven R. Booth
/s/ THOMAS W. BOOTH Director June 18, 2002
---------------------------
Thomas W. Booth
Director
---------------------------
David V. Brown
/s/ JAMES J. BYRNE Director June 18, 2002
---------------------------
James J. Byrne
Director
---------------------------
Janet K. Cooper
/s/ C.L. HENRY Director June 20, 2002
---------------------------
C. L. (Jerry) Henry
/s/ JOHN E. MAJOR Director June 18, 2002
---------------------------
John E. Major
/s/ JOHN W. NORRIS III Director June 18, 2002
---------------------------
John W. Norris III
/s/ WILLIAM G. ROTH Director June 18, 2002
---------------------------
William G. Roth
/s/ TERRY D. STINSON Director June 19, 2002
---------------------------
Terry D. Stinson
Director
---------------------------
Richard L. Thompson
II-7
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
5.1 Opinion of Baker Botts L.L.P.
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed
Charges.
25.1 Statement of Eligibility of Trustee on Form T-1.