<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
LucasVarity plc
(Name of Subject Company)
TRW Automotive UK
TRW Inc.
(Bidders)
Ordinary Shares of 25 pence each and American
Depositary Shares, each representing ten Ordinary Shares
and evidenced by American Depositary Receipts
(Title of Class of Securities)
G 56955100 (Ordinary Shares)
549395101 (American Depositary Shares)
(Cusip Number of Class of Securities)
William B. Lawrence, Esq.
Executive Vice President, General Counsel and Secretary
TRW Inc.
1900 Richmond Road
Cleveland, Ohio 44124
(216) 291-7230
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidders)
Copy to:
Robert A. Profusek, Esq.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
(212) 326-3800
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee**
---------------------- ----------------------
<S> <C>
$1,988,356,760 $397,672
-------------- --------
</TABLE>
* Estimated for purposes of calculating the filing fee only. This amount
assumes the purchase of 42,046,693 American Depositary Shares (each
representing ten Ordinary Shares) and 125,000 Ordinary Shares of 25 pence
each of LucasVarity plc ("LucasVarity Shares") held by U.S. residents at
pound sterling 28.80 per American Depositary Share and 288 pence per
LucasVarity Share and the multiplication of such aggregate purchase price
by the currency exchange rate of pound sterling 1 = $1.6415 (such currency
exchange rate being derived from The Wall Street Journal dated February 2,
1999). Such number of American Depositary Shares represents all American
Depositary Shares of LucasVarity outstanding as of February 2, 1999 and
such number of LucasVarity Shares which exceeds the estimate by LucasVarity
of the aggregate number of outstanding LucasVarity Shares held by United
States residents.
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: None Filing Party: Not applicable
Form or Registration No.: Not applicable Date Filed: Not applicable
<PAGE> 2
CUSIP NO. G 56955100 (ORDINARY SHARES)
CUSIP NO. 549395101 (AMERICAN DEPOSITARY SHARES)
1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
TRW Automotive UK
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3) SEC USE ONLY
4) SOURCE OF FUNDS
AF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(e) OR 2(f) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
England and Wales
7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,852,100* (Ordinary Shares, including Ordinary Shares represented by
American Depositary Shares)
8) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 0.13% of the Ordinary Shares (including Ordinary Shares
represented by American Depositary Shares) outstanding as of February
2, 1999.**
10) TYPE OF REPORTING PERSON
CO
-2-
<PAGE> 3
CUSIP NO. G 56955100 (ORDINARY SHARES)
CUSIP NO. 549395101 (AMERICAN DEPOSITARY SHARES)
1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
TRW Inc.
I.R.S. No. 34-0575430
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3) SEC USE ONLY
4) SOURCE OF FUNDS
BK
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(e) OR 2(f) [ ]
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,852,100* (Ordinary Shares, including Ordinary Shares represented by
American Depositary Shares)
8) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 0.13% of the Ordinary Shares (including Ordinary Shares
represented by American Depositary Shares) outstanding as of February
2, 1999.**
10) TYPE OF REPORTING PERSON
CO
________________________
* Irrevocable undertakings to accept the offer (the "Offer") by TRW Automotive
UK to purchase all of the outstanding (i) ordinary shares of 25 pence each of
LucasVarity plc ("LucasVarity Shares") and (ii) American Depositary Shares
("LucasVarity ADS"), each representing ten LucasVarity Shares and evidenced
by American Depositary Receipts, have been received from Directors of
LucasVarity in respect of their holdings of LucasVarity Shares and
LucasVarity ADSs. The irrevocable undertakings are described in Section 4
under the caption "Irrevocable undertakings" in the letter, dated February 6,
1999, from Morgan Guaranty Trust Company of New York in the Offer To
Purchase, dated February 6, 1999 (the "Offer to Purchase") and in Section 4
under the caption "Shareholdings and dealings" in Appendix VI to the Offer To
Purchase.
** Based on information provided in Section 15 of Appendix VI of the Offer to
Purchase.
-3-
<PAGE> 4
Item 1. Security and Subject Company.
(a) The name of the subject company is LucasVarity plc ("LucasVarity"),
a public limited company incorporated and registered in England and Wales. The
address of its principal executive offices is 46 Park Street, London W1Y 4DJ,
England.
(b) This Tender Offer Statement on Schedule 14D-1 relates to the offer
(the "Offer") by TRW Automotive UK, a private unlimited company registered in
England and Wales and a wholly owned subsidiary of TRW Inc. ("TRW"), an Ohio
corporation, to purchase all of the outstanding (i) ordinary shares of 25 pence
each of LucasVarity ("LucasVarity Shares") and (ii) American Depositary Shares
of LucasVarity ("LucasVarity ADSs"), each representing ten LucasVarity Shares
and evidenced by American Depositary Receipts. As of February 2, 1999,
1,398,603,762 LucasVarity Shares were issued and outstanding, including ordinary
shares represented by LucasVarity ADSs. The LucasVarity Shares and the
LucasVarity ADSs are collectively referred to herein as the "LucasVarity
Securities." The Offer is subject to the terms and conditions set forth in the
Offer To Purchase dated February 6, 1999 (the "Offer To Purchase"), a copy of
which is filed as Exhibit (a)(1) hereto, the related Letter of Transmittal, a
copy of which is filed as Exhibit (a)(2) hereto and the related Form of
Acceptance, Authority and Election Relating to the Offer, a copy of which is
filed as Exhibit (a)(3) hereto. Information concerning the number of outstanding
LucasVarity Securities is set forth in Section 15 under the caption "Sources of
Information and Bases of Calculation" in Appendix VI to the Offer To Purchase
and is incorporated herein by reference. Information concerning the
consideration being offered therefor and the conversion thereof from pounds
sterling to U.S. dollars is set forth in Section 2 under the caption "The Offer"
and in Section 18(f) under the caption "Currency of cash consideration" in the
letter, dated February 6, 1999 ("Letter"), from Morgan Guaranty Trust Company of
New York ("J.P. Morgan") in the Offer To Purchase and is incorporated herein by
reference.
(c) The information set forth in Appendix V entitled "Certain market,
dividend and exchange rate information" to the Offer To Purchase is incorporated
herein by reference.
Item 2. Identity and Background.
(a) through (d) and (g) This Statement is filed by TRW and TRW
Automotive UK. The principal offices of TRW are located at 1900 Richmond Road,
Cleveland, Ohio 44124. The registered office of TRW Automotive UK is 9
Cheapside, London, England EC2V 6AD. TRW is incorporated under the laws of the
State of Ohio and TRW Automotive UK is incorporated and registered in England
and Wales. The information set forth in Section 9 under the caption "Information
on the TRW Group" in the Letter and "Financial Information on TRW" in Appendix
IV of the Offer To Purchase and in Sections 2(a) and (b) under the caption
"Directors of the Offeror, TRW and of LucasVarity" in Appendix VI to the Offer
To Purchase is incorporated herein by reference.
(e) and (f) During the last five years, neither TRW, TRW Automotive UK
nor, to the best knowledge of TRW and TRW Automotive UK, none of the persons
listed in Sections 2(a) or (b) under the caption "Directors of the Offeror, TRW
and of LucasVarity" in Appendix VI to the Offer To Purchase, has been either (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a) Robert M. Gates is, and has been since 1996, a member of the Board
of Directors of LucasVarity. Mr. Gates also is, and has been since 1994, a
member of the Board of Directors of TRW. For his service on the Board of TRW,
Mr. Gates is paid a base annual retainer of $70,000, 50 percent of which is
automatically deferred in shares of TRW common stock. In addition, Mr. Gates
receives an annual stock option to purchase 1,500 shares of TRW common stock,
having an exercise price of not less than the fair market value of TRW common
stock on the date of grant.
-4-
<PAGE> 5
(b) The information set forth under the caption "Background to and
reasons for the Offer" in the Letter, dated February 6, 1999, from the Chairman
of LucasVarity contained in the Offer To Purchase (the "LucasVarity Letter"), in
Section 3 under the caption "Reasons for the Offer" in the Letter and in Section
6 under the caption "Background to the Offer" in Appendix VI to the Offer To
Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a) and (b) The information set forth in Section 7 under the caption
"Financing arrangements" in Appendix VI of the Offer To Purchase is incorporated
herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a) through (g) The information set forth under the captions
"Background to and reasons for the Offer" and "Directors, management and
employees" in the LucasVarity Letter; in Section 3 under the caption "Reasons
for the Offer," Section 5 under the caption "Terms and Conditions of the Offer"
and Section 12 under the caption "Employee matters and share schemes" in the
Letter; and in Section 6 under the caption "Background to the Offer," Section 8
under the caption "Compulsory Acquisition" and Section 9 under the caption
"Certain consequences of the Offer" in Appendix VI to the Offer To Purchase is
incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company.
(a) and (b) The information set forth in Section 4 under the caption
"Irrevocable undertakings" in the Letter and Section 4 under the caption
"Shareholdings and dealings" in Appendix VI to the Offer To Purchase is
incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
The information set forth under the captions "LucasVarity Share Option
Schemes" and "Recommendation" in the LucasVarity Letter; under the caption
"Irrevocable undertakings" in the Letter; in Section 6 under the caption
"Background to the Offer" and in Section 4 under the caption "Shareholdings and
dealings" in Appendix VI to the Offer To Purchase; and the caption "Rule 10b-13
Exemption" on page 3 of the Offer To Purchase is incorporated herein by
reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in Section 13 under the caption "Fees and
Expenses" in Appendix VI to the Offer to is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in Appendix IV entitled "Financial
Information on TRW" in the Offer To Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a stockholder of LucasVarity whether to sell, tender or hold
LucasVarity Securities being sought in the Offer.
Item 10. Additional Information.
(a) The information set forth under Section 5(a)(i) under the caption
"Material Contracts" in Appendix VI to the Offer To Purchase is incorporated
herein by reference.
-5-
<PAGE> 6
(b) and (c) The information set forth in Section 10 under the caption
"Legal and regulatory matters" in Appendix VI to the Offer To Purchase is
incorporated herein by reference.
(d) The information set forth in Section 9(c) under the caption
"Margin securities" in Appendix VI to the Offer To Purchase is incorporated
herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer To Purchase, the Letter of
Transmittal and the Form of Acceptance, Authority and Election Relating to the
Offer, which are attached hereto as Exhibits (a)(1), (a)(2) and (a)(3),
respectively, is incorporated herein by reference in its entirety.
Item 11. Material to be Filed as Exhibits.
(a) (1) Offer To Purchase dated February 6, 1999.
(2) Form of Letter of Transmittal.
(3) Form of Acceptance, Authority and Election Relating to the
Offer.
(4) Form of Notice of Guaranteed Delivery.
(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(6) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(7) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(8) Text of Press Announcement issued by TRW and LucasVarity,
dated January 28, 1999. (Incorporated by reference to Exhibit
99(b) to TRW's Current Report on Form 8-K dated January 28,
1999).
(9) Text of Press Release issued by TRW, dated January 28, 1999.
(Incorporated by reference to Exhibit 99(a) to TRW's Current
Report on Form 8-K dated January 28, 1999).
(10) Summary advertisement published in the U.S., dated February 6,
1999.
(11) Newspaper Advertisement published in the U.K., dated February
6, 1999.
(b) (1) Credit Agreement dated January 27, 1999 among TRW and
various financial institutions.
(c) (1) Form of Irrevocable Undertakings executed by each director
of LucasVarity.
(2) Break-up Fee Agreement, dated January 28, 1999 between TRW and
LucasVarity.
(d) Not applicable.
-6-
<PAGE> 7
(e) Not applicable.
(f) The Offer To Purchase, dated February 6, 1999, the Form of
Letter of Transmittal and the Form of Acceptance, Authority
and Election Relating to the Offer, are incorporated herein by
reference.
-7-
<PAGE> 8
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
TRW INC.
By: /s/ William B. Lawrence
---------------------------------
William B. Lawrence
Executive Vice President, General
Counsel and Secretary
TRW AUTOMOTIVE UK
By: /s/ William B. Lawrence
---------------------------------
William B. Lawrence
Secretary
Date: February 5, 1999
-8-
<PAGE> 9
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(a) (1) Offer To Purchase dated February 6, 1999.
(2) Form of Letter of Transmittal.
(3) Form of Acceptance, Authority and Election Relating to the
Offer.
(4) Form of Notice of Guaranteed Delivery.
(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(6) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(7) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(8) Text of Press Announcement issued by TRW and LucasVarity,
dated January 28, 1999. (Incorporated by reference to Exhibit
99(b) to TRW's Current Report on Form 8-K dated January 28,
1999).
(9) Text of Press Release issued by TRW, dated January 28, 1999.
(Incorporated by reference to Exhibit 99(a) to TRW's Current
Report on Form 8-K dated January 28, 1999).
(10) Summary Advertisement published in the U.S., dated February 6,
1999.
(11) Newspaper Advertisement published in the U.K., dated February
6, 1999.
(b) (1) Credit Agreement dated January 27, 1999 among TRW and
various financial institutions.
(c) (1) Form of Irrevocable Undertakings executed by each director
of LucasVarity.
(2) Break-up Fee Agreement, dated January 28, 1999 between TRW and
LucasVarity.
(d) Not applicable.
(e) Not applicable.
(f) The Offer To Purchase, dated February 6, 1999, the Form of
Letter of Transmittal and the Form of Acceptance, Authority
and Election Relating to the Offer, are incorporated herein by
reference.
-9-
<PAGE> 1
Exhibit (a)(1)
RECOMMENDED CASH OFFER
ON BEHALF OF
LOGO OF TRW
FOR
LOGO OF LUCASVARITY, PLC
<PAGE> 2
SUMMARY OF THE OFFER
THE OFFER
LUCASVARITY SHAREHOLDERS
FOR EACH LUCASVARITY SHARE 288 PENCE IN CASH
TO ACCEPT THE OFFER
1. Complete the Form of Acceptance in accordance with the instructions set out
on pages 12 and 13 and in paragraph 9 of Part B of Appendix I to this
document.
2. Return the completed Form of Acceptance (together with any appropriate
documents of title) using the enclosed reply-paid envelope as soon as
possible, but in any event so as to arrive by no later than 3.00 p.m.
(London time), 10 a.m. (New York City time) on 9 March, 1999.
LUCASVARITY ADS HOLDERS
FOR EACH LUCASVARITY ADS #28.80 IN CASH
TO ACCEPT THE OFFER
1. Complete the Letter of Transmittal in accordance with the instructions set
out on pages 13 and 14 and in paragraph 11 of Part B of Appendix I to this
document.
2. Return the completed Letter of Transmittal (together with any appropriate
documents of title) using the enclosed reply-paid envelope as soon as
possible, but in any event so as to arrive by no later than 3.00 p.m.
(London time), 10 a.m. (New York City time) on 9 March, 1999.
THE FIRST CLOSING DATE OF THE OFFER IS 9 MARCH, 1999.
If you require assistance, please telephone:
UK Receiving Agent:
Computershare Services PLC
+44 (0)117 305 1001
US Depositary:
Morgan Guaranty Trust Company of New York
1-800-428-4237
Information Agent:
Georgeson & Company Inc.
1-800-223-2064
This page should be read in conjunction with the rest of this document.
LucasVarity Shareholders are recommended to seek financial advice from their
independent financial adviser authorised under the Financial Services Act 1986.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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<S> <C>
Letter from the Chairman of LucasVarity..................... 4
Letter from J.P. Morgan..................................... 7
1. Introduction......................................... 7
2. The Offer............................................ 7
3. Reasons for the Offer................................ 8
4. Irrevocable undertakings............................. 8
5. Terms and Conditions of the Offer.................... 8
6. Loan Note Alternative................................ 8
7. Financial effects of acceptance of the Offer......... 9
8. Accounting treatment................................. 9
9. Information on the TRW Group......................... 9
10. Information on the LucasVarity Group.................. 10
11. Financing............................................. 10
12. Employee matters and share schemes.................... 10
13. UK taxation........................................... 11
14. US taxation........................................... 11
15. Overseas securityholders.............................. 11
16. Procedure for acceptance of the Offer................. 12
17. Rights of withdrawal.................................. 14
18. Settlement............................................ 14
19. Further information................................... 16
20. Action to be taken.................................... 16
Appendix I: Conditions and further terms of the Offer... I-1
Appendix II: Particulars of the Loan Notes.............. II-1
Appendix III: Financial information on the LucasVarity
Group.................................................. III-1
Appendix IV: Financial information on TRW................ IV-1
Appendix V: Certain market, dividend and exchange rate
information............................................ V-1
Appendix VI: Additional information...................... VI-1
1. Responsibility....................................... VI-1
2. Directors of the Offeror, TRW and of LucasVarity..... VI-1
3. Principal purchases.................................. VI-6
4. Shareholdings and dealings........................... VI-6
5. Material contracts................................... VI-11
6. Background to the Offer.............................. VI-13
7. Financing arrangements............................... VI-14
8. Compulsory acquisition............................... VI-15
9. Certain consequences of the Offer.................... VI-16
10. Legal and regulatory matters.......................... VI-17
11. UK taxation........................................... VI-19
12. US federal income taxation............................ VI-20
13. Fees and expenses..................................... VI-22
14. Cash confirmation..................................... VI-22
15. Sources and bases of information...................... VI-22
16. Service contracts..................................... VI-23
17. Other information..................................... VI-25
18. Documents available for inspection.................... VI-25
Appendix VII: Certain provisions of the Companies Act... VII-1
Appendix VIII: Definitions............................... VIII-1
</TABLE>
<PAGE> 4
OFFER TO PURCHASE DATED 6 FEBRUARY, 1999
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED IMMEDIATELY TO
SEEK YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT OR
OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES ACT
1986.
If you have sold or otherwise transferred all of your LucasVarity Securities,
please send this document, together with the accompanying documents, as soon as
possible, to the purchaser or transferee, or to the stockbroker, bank or other
agent through whom the sale or transfer was effected for onward transmission to
the purchaser or transferee. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE FORWARDED OR
TRANSMITTED IN OR INTO CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION IF
TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN SUCH
JURISDICTIONS. SEE PARAGRAPH 8 OF PART B OF APPENDIX I TO THIS DOCUMENT.
The Initial Offer Period will expire at 3.00 p.m. (London time), 10.00 a.m. (New
York City time) on 9 March, 1999, unless extended. At the conclusion of the
Initial Offer Period, including any extension thereof, if all the Conditions
have been satisfied, fulfilled or, where permitted, waived, the Offer will be
extended for a Subsequent Offer Period of at least 14 calendar days. LucasVarity
Securityholders will have withdrawal rights during the Initial Offer Period,
including any extension thereof, but not during the Subsequent Offer Period.
Completed Acceptance Forms should be returned as soon as possible, but in any
event so as to be received by no later than 3.00 p.m. (London time), 10.00 a.m.
(New York City time) on 9 March, 1999. The procedure for acceptance of the Offer
is set out on pages 12 to 14 and in paragraphs 9 and 11 of Part B of Appendix I
to this document and in the accompanying Acceptance Forms.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, neither this document nor the Acceptance Forms
are being mailed or otherwise distributed or sent into Canada, Australia or
Japan.
The Loan Notes which may be issued pursuant to the Offer have not been, and will
not be, registered under the US Securities Act, or under any relevant securities
laws of any state or jurisdiction of the US and, unless so registered, may not
be offered or sold, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the US Securities Act and any
relevant securities laws of any state or district of the US. The Loan Notes
which may be issued pursuant to the Offer will not be the subject of a
prospectus under the securities laws of any province of Canada and will not be
registered under any relevant securities laws of any country. The Loan Notes are
not being offered, sold or delivered, directly or indirectly, in or into the US,
Canada, Australia or Japan.
J.P. Morgan, which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for TRW and the Offeror and for no one else in
connection with the Offer and will not be responsible to anyone other than TRW
and the Offeror for providing the protections afforded to customers of J.P.
Morgan or for giving advice in relation to the Offer.
Lazard Brothers & Co., Limited, which is regulated in the UK by The Securities
and Futures Authority Limited, is acting for LucasVarity and for no one else in
connection with the Offer and will not be responsible to anyone other than
LucasVarity for providing the protections afforded to customers of Lazard
Brothers & Co., Limited or for giving advice in relation to the Offer.
1
<PAGE> 5
CERTAIN DEFINITIONS
The definitions of certain expressions used in this document are contained in
Appendix VIII.
APPLICABLE DISCLOSURE REQUIREMENTS
The Offer is being made for securities of a UK company and, while the Offer is
subject to UK and US disclosure requirements, US investors should be aware that
this document has been prepared primarily in accordance with UK format and
style, which differs from US format and style. In particular, the Appendices to
this document contain information concerning the Offer which is responsive to US
disclosure requirements and may be material, some of which is summarised in the
letter from J.P. Morgan set out on pages 7 to 16 of this document. In addition,
the summary financial statements of LucasVarity included in this document have
been prepared in accordance with UK GAAP, and thus may not be comparable to
financial statements of US companies.
FORWARD-LOOKING STATEMENTS
TRW cautions that certain forward-looking statements contained in this document
including, without limitation, the effect of the combination of TRW and
LucasVarity on TRW's earnings and cash flows, are qualified by important factors
that could cause actual operating results to differ materially from those
described in this document, including, among others, the following, in addition
to factors that affect other companies in the businesses of TRW and LucasVarity
or that are referred to in their periodic reports to shareholders or public
filings: (i) unanticipated events and circumstances may occur rendering the
transaction less beneficial to TRW than anticipated, (ii) TRW and LucasVarity
face intense competition in their markets and there is, accordingly, no
guarantee that after consummation of the transaction TRW will achieve the
expected financial and operating results and synergies; and (iii) the ability of
TRW and LucasVarity to integrate successfully their operations and thereby
achieve the anticipated cost savings and be in a position to take advantage of
potential opportunities for growth. In addition, the factors that affect other
companies in the businesses of TRW and LucasVarity or that are referred to in
TRW's periodic reports to shareholders or public filings may also cause
operating results to differ materially from those described in this document.
Results actually achieved may differ materially from the expected results
described in this document. TRW hereby undertakes no obligation to update any
forward-looking statement.
REDUCTION OF THE ACCEPTANCE CONDITION
The Offer is conditional, amongst other things, on valid acceptances being
received (and not, where permitted, withdrawn) by the First Closing Date in
respect of not less than 90 per cent. in nominal value of the LucasVarity
Securities (comprising, in the case of LucasVarity ADSs, the underlying
LucasVarity Shares) to which the Offer relates, or such lower percentage as the
Offeror may decide, provided that such Condition (the "Acceptance Condition")
shall not be satisfied unless the Offeror and/or its wholly-owned subsidiaries
shall have acquired or agreed to acquire, whether pursuant to the Offer or
otherwise, LucasVarity Securities carrying in aggregate more than 50 per cent.
of the voting rights then exercisable at general meetings of LucasVarity and
provided further that the Acceptance Condition shall be capable of being
satisfied only at a time when all other Conditions have been satisfied,
fulfilled or waived unless the Offeror (with the consent of the Panel) otherwise
determines. The Offeror reserves the right to reduce the percentage of
LucasVarity Securities required to satisfy the Acceptance Condition at some time
prior to all the Conditions being satisfied, fulfilled or, where permitted,
waived. At least five business days prior to any such reduction, the Offeror
will announce that it has reserved the right to reduce the Acceptance Condition.
Such announcement will state the percentage to which the Acceptance Condition
may be reduced and will state that such a reduction is possible, but that the
Offeror need not declare its actual intentions until it is required to do so
under the City Code. The Offeror will not make such an announcement unless it
believes that there is a significant possibility that sufficient LucasVarity
Securities will be tendered to permit the Acceptance Condition to be satisfied
at such reduced level. LucasVarity Securityholders who are not willing to accept
the Offer, as the case may be, if the Acceptance Condition is reduced to a level
lower than 90 per cent. should either not accept the relevant Offer until the
Subsequent Offer Period or be prepared to
2
<PAGE> 6
withdraw their acceptances promptly following an announcement by the Offeror of
its reservation of the right to reduce the Acceptance Condition.
RULE 10B-13 EXEMPTION
In accordance with normal UK practice, the Offeror or its nominees or brokers
(acting as agents for the Offeror) may make certain purchases of LucasVarity
Securities outside the US during the period in which the Offer remains open for
acceptance pursuant to relief granted from Rule 10b-13 under the Exchange Act by
the SEC. In accordance with the terms of the SEC relief that has been granted,
amongst other things, (i) such purchases may not be effected within the US, (ii)
information regarding such purchases must be disclosed in the US to the extent
that disclosure is made public in the UK pursuant to the City Code and (iii) the
Offeror and any such other person must comply with any applicable rules of UK
regulatory organisations, including the rules of the London Stock Exchange and
the City Code.
CONVERSION OF CASH CONSIDERATION INTO US DOLLARS
LucasVarity Shareholders may receive US dollars instead of pounds sterling on
the basis described in paragraph 18(f) of the letter from J.P. Morgan included
in this document. HOLDERS OF LUCASVARITY ADSS, UNLESS THEY ELECT TO RECEIVE
POUNDS STERLING, WILL RECEIVE US DOLLARS ON THE BASIS DESCRIBED IN THAT
PARAGRAPH. THE ATTENTION OF ALL LUCASVARITY SECURITYHOLDERS IS DRAWN TO THE
DESCRIPTION IN THAT PARAGRAPH OF THE MECHANISM FOR CONVERTING POUNDS STERLING
INTO US DOLLARS AND OF THE EXCHANGE RATE RISKS ATTACHED THERETO. A TABLE SETTING
OUT CERTAIN HISTORICAL INFORMATION REGARDING THE EXCHANGE RATE FOR THE POUND
STERLING EXPRESSED IN US DOLLARS IS SET OUT IN APPENDIX V.
FINANCIAL INFORMATION
The extracts from the consolidated financial statements of, and other
information about, TRW appearing in this Offer Document are presented in US
dollars and have been prepared in accordance with US GAAP. The extracts from the
consolidated financial statements of, and other information about, LucasVarity
appearing in this Offer Document are presented in pounds sterling and have been
prepared in accordance with UK GAAP. US GAAP and UK GAAP differ in certain
significant respects.
RULE 8 NOTICES
Any person who owns or controls or becomes the owner or controller, directly or
indirectly, of 1 per cent. or more of any class of securities of LucasVarity is
generally required under the provisions of Rule 8 of the City Code to notify the
London Stock Exchange and the Panel of every dealing in such securities during
the Offer Period. Dealings by LucasVarity or by the Offeror or by their
respective "associates" (within the definition set out in the City Code) in any
class of securities of LucasVarity during the Offer Period must also be so
disclosed. Please consult your financial adviser immediately if you believe this
Rule may be applicable to you.
3
<PAGE> 7
LOGO
46 PARK STREET, LONDON, W1Y 4DJ, ENGLAND
REGISTERED IN ENGLAND NUMBER 3207774
To LucasVarity Securityholders and, for information only, to participants in the
LucasVarity Share Option Schemes.
6 February, 1999
Dear LucasVarity Securityholder,
RECOMMENDED CASH OFFER FOR LUCASVARITY
It was announced on 28 January, 1999 that the Board of Directors of TRW and of
LucasVarity had agreed the terms of a recommended cash offer to be made on
behalf of the Offeror for the entire issued and to be issued share capital of
LucasVarity.
I am writing to set out the background to and reasons for the Offer and to
explain why the Directors of LucasVarity (excluding Dr. R. M. Gates who, due to
his role as a Director of both LucasVarity and TRW, has not participated in any
discussions or decisions of the Boards of LucasVarity or TRW in relation to the
Offer) unanimously consider that the terms of the Offer are fair and reasonable
and are recommending that you accept the Offer.
THE OFFER
You will find set out on pages 7 to 16 of this document a letter from J.P.
Morgan containing the formal Offer.
The Offer, which is subject to the Conditions and further terms set out in
Appendix I, is being made on the following basis:
<TABLE>
<S> <C>
for each LucasVarity Share.................................. 288 pence in cash
for each LucasVarity ADS.................................... L28.80 in cash
</TABLE>
The Offer values the entire issued share capital of LucasVarity at L4,022
million and represents a premium of 1.6 per cent. over the Closing Price of
283.5 pence per LucasVarity Share on 27 January, 1999 (the last business day
prior to the announcement of the Offer), and a 33.8 per cent. premium over the
Closing Price of 215.3 pence per LucasVarity Share on 5 January, 1999 (the last
business day prior to the announcement by LucasVarity concerning a possible
business combination).
The attention of LucasVarity Securityholders is drawn to the further information
concerning the Offer set out in the letter from J.P. Morgan and the Appendices
to this document.
LOAN NOTE ALTERNATIVE
Instead of some or all of the cash consideration which would otherwise be
receivable under the Offer, accepting LucasVarity Shareholders (other than
LucasVarity Shareholders who are US Persons and certain other overseas persons)
will be entitled to elect to receive Loan Notes on the basis described in
paragraph 6 of the letter from J.P. Morgan contained in this document. Further
details of the Loan Notes are set out in Appendix II.
4
<PAGE> 8
BACKGROUND TO AND REASONS FOR THE OFFER
On 6 January, 1999, LucasVarity announced that, as part of the extensive
strategic review disclosed at the time of the LucasVarity Group's third quarter
results, preliminary discussions were taking place with a number of companies in
connection with a wide range of strategic alternatives, including joint
ventures, acquisitions, dispositions, alliances and mergers or other business
combinations.
As a result of these discussions, the Board of LucasVarity (excluding Dr. R. M.
Gates, for the reason set out above) concluded that a potential combination of
LucasVarity with TRW offered both the best value for LucasVarity Securityholders
and an opportunity for its employees to become part of a dynamic global leader
in automotive technology, manufacturing and service. This is reflected in the
Offer, which the Board of LucasVarity (excluding Dr. R. M. Gates) believes
represents a full and fair price for LucasVarity Securityholders.
In connection with the Offer, LucasVarity and TRW have entered into an agreement
under which LucasVarity has agreed to pay a fee of US$49.8 million (L30.0
million) to TRW in certain circumstances, including the lapse or withdrawal of
the Offer in the event a competing offer is made which is recommended by the
LucasVarity Directors. Further details of this agreement are set out in
paragraph 5(a)(i) of Appendix VI. The Directors of LucasVarity (excluding Dr. R.
M. Gates) are satisfied that entering into the agreement was essential in
concluding satisfactory negotiations with TRW so that the Offer would be made,
and is therefore in the best interests of LucasVarity Securityholders.
DIRECTORS, MANAGEMENT AND EMPLOYEES
Following completion of the Offer, Mr. Victor Rice, Chief Executive Officer of
LucasVarity, will be named Vice Chairman of TRW and head of the combined
automotive operations. He is expected to be elected a Director of TRW.
In addition, TRW intends to offer management positions to Mr. Tony Gilroy, Chief
Operating Officer of LucasVarity, and Mr. Neil Arnold, Group Finance Director of
LucasVarity. No specific terms or conditions have yet been agreed. Neither Mr.
Gilroy nor Mr. Arnold will enter into discussions with TRW (or any person acting
in concert with it) concerning their personal positions unless and until, at the
earliest, the Offer becomes or is declared unconditional in all respects.
TRW has confirmed that the existing employment rights, including pension rights,
of all employees of the LucasVarity Group will not be adversely affected by
reason of the Offer.
LUCASVARITY SHARE OPTION SCHEMES
The Offer extends to any LucasVarity Securities which are unconditionally
allotted or issued while the Offer remains open for acceptance (or until such
earlier date as TRW may, subject to the City Code, determine), including any
LucasVarity Securities unconditionally allotted or issued pursuant to the
exercise of options or vesting of awards under the LucasVarity Share Option
Schemes. Further information on the proposal to be put to optionholders is set
out in paragraph 12(b) of the letter from J.P. Morgan contained in this
document. A formal proposal will be sent to optionholders in due course.
IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to accept the Offer have been received from Directors
of LucasVarity in respect of their holdings amounting in aggregate to 1,852,100
LucasVarity Shares, representing 0.13 per cent. of LucasVarity's issued share
capital as of 28 January, 1999.
5
<PAGE> 9
ACTION TO BE TAKEN
The procedure for acceptance of the Offer is set out on pages 12 to 14 and in
Part B of Appendix I and in the enclosed Acceptance Forms. Please return all
required documents to the UK Receiving Agent or the US Depositary, as
appropriate, in accordance with the instructions set out in paragraph 16 of the
letter from J.P. Morgan in this document as soon as possible and in any event so
as to be received by no later than 3.00 p.m. (London time), 10.00 a.m. (New York
City time) on 9 March, 1999.
RECOMMENDATION
The Directors of LucasVarity (other than Dr. R. M. Gates), who have been so
advised by Lazard Brothers & Co., Limited, consider the terms of the Offer to be
fair and reasonable and those Directors unanimously recommend that LucasVarity
Securityholders accept the Offer. In providing advice to the Directors of
LucasVarity, Lazard Brothers & Co., Limited has taken into account such
Directors' commercial assessments.
Yours sincerely,
Ed Wallis
Chairman
6
<PAGE> 10
LOGO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
PO BOX 161, 60 VICTORIA EMBANKMENT, LONDON EC4Y 0JP
6 February, 1999
To LucasVarity Securityholders and, for information only, to participants in the
LucasVarity Share Option Schemes.
Dear LucasVarity Securityholder,
RECOMMENDED CASH OFFER FOR LUCASVARITY
1. INTRODUCTION
This letter contains the formal Offer which we are making on behalf of the
Offeror, a wholly-owned subsidiary of TRW. The Offer and this document are
subject to the applicable requirements of both the City Code and US federal
securities laws, subject to customary exemptions granted by the SEC in relation
to the Offer.
Your attention is drawn to the letter from the Chairman of LucasVarity on pages
4 to 6 of this document, from which you will see that the Directors of
LucasVarity (other than Dr. R. M. Gates, for the reason stated in that letter),
who have been so advised by Lazard Brothers & Co., Limited, consider the terms
of the Offer to be fair and reasonable and that those Directors unanimously
recommend LucasVarity Securityholders to accept the Offer. In providing advice
to Directors of LucasVarity, Lazard Brothers & Co., Limited has taken into
account the commercial assessments of such Directors.
LucasVarity Directors have irrevocably undertaken to accept the Offer, as
described in paragraph 4 of this letter.
2. THE OFFER
On behalf of the Offeror, we hereby offer to acquire, upon the terms and subject
to the conditions set out in Appendix I to this document and in the relevant
Acceptance Forms, all the issued and to be issued LucasVarity Shares (including
those represented by LucasVarity ADSs) on the basis set out below:
<TABLE>
<S> <C>
for each LucasVarity Share.................................. 288 pence in cash
for each LucasVarity ADS.................................... L28.80 in cash
</TABLE>
The Offer values the entire issued share capital of LucasVarity at L4,022
million and represents a premium of 1.6 per cent. over the Closing Price of
283.5 pence per LucasVarity Share on 27 January, 1999 (the last business day
prior to the announcement of the Offer), and a 33.8 per cent. premium over the
Closing Price of 215.3 pence per LucasVarity Share on 5 January, 1999 (the last
business day prior to the announcement by LucasVarity concerning a possible
business combination).
LucasVarity Securities will be acquired under the Offer fully paid and free from
all liens, equities, charges, encumbrances and other interests and together with
all rights attaching thereto including, without limitation, the right to receive
and retain all dividends, interest and other distributions declared, made or
paid on or after 28 January, 1999, the date on which the Offer was announced.
TO ACCEPT THE OFFER, YOU SHOULD RETURN THE RELEVANT ACCEPTANCE FORMS, TOGETHER
WITH ALL OTHER REQUIRED DOCUMENTS, AS SOON AS POSSIBLE AND, IN ANY EVENT, SO AS
TO BE RECEIVED BY THE UK RECEIVING AGENT (IF YOU ARE A NON-US HOLDER) OR THE US
DEPOSITARY (IF YOU ARE A US HOLDER) BY NO LATER THAN 3.00 P.M. (LONDON TIME),
10.00 A.M. (NEW YORK CITY TIME) ON 9 MARCH, 1999. THE PROCEDURE FOR ACCEPTANCE
OF THE OFFER IS SET OUT IN PARAGRAPH 16 ("PROCEDURE FOR ACCEPTANCE OF THE
OFFER") BELOW AND IN PARAGRAPHS 9 AND 11 OF PART B OF APPENDIX I, AND IN THE
ACCOMPANYING ACCEPTANCE FORMS.
A SUBSIDIARY OF J.P. MORGAN & CO. INCORPORATED. REGISTERED AS A BRANCH IN
ENGLAND. BRANCH NO. 001366. REGISTERED
NO. FC000297. A LIMITED LIABILITY PRIVATE COMPANY. REGISTERED WITH THE
SUPERINTENDENT OF BANKS IN THE STATE OF NEW YORK,
U.S.A. INCORPORATED WITH LIMITED LIABILITY IN THE STATE OF NEW YORK, U.S.A.
REGULATED BY SFA AND IMRO.
7
<PAGE> 11
3. REASONS FOR THE OFFER
The automotive components industry is consolidating rapidly and TRW believes
that the leading participants in the industry will be those capable of
delivering superior technology and systems on a global basis to customers who
increasingly require total systems solutions. TRW believes that the combination
of TRW and LucasVarity creates one of the world's pre-eminent automotive
organisations, capable of providing its customers globally with state-of-the-art
engineering and manufacturing capabilities. In TRW's view, the combination of
TRW and LucasVarity offers a presence in a broad range of vehicle safety
systems, including steering, brakes, occupant restraints and related
electronics, that is unparalleled. TRW also believes that LucasVarity's position
in aerospace systems in Europe and North America complements TRW's position in
space, defense and information systems and offers substantial cross-selling
opportunities. TRW expects to achieve in excess of US$200 million in annual cost
saving synergies by 2001 in the combined automotive business and expects the
transaction to be immediately accretive to TRW's earnings per share.
4. IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to accept, or procure the acceptance of, the Offer have
been received from Directors of LucasVarity in respect of their holdings
amounting in aggregate to 1,852,100 LucasVarity Shares, representing in
aggregate 0.13 per cent. of LucasVarity's issued share capital as of 28 January,
1999.
5. TERMS AND CONDITIONS OF THE OFFER
The Offer (including the Loan Note Alternative) is subject to the Conditions and
further terms set out in Appendix I.
6. LOAN NOTE ALTERNATIVE
A Loan Note Alternative is available to LucasVarity Shareholders (other than
LucasVarity Shareholders who are US Persons and certain other overseas persons)
who validly accept the Offer instead of some or all of the cash consideration,
on the basis of L1 nominal of Loan Notes issued by the Offeror for every L1 of
cash that they would otherwise receive under the Offer, subject to aggregate
valid elections being received on or before the date on which the Offer becomes
or is declared unconditional in all respects for at least L10 million nominal
value of Loan Notes. If insufficient elections are received, LucasVarity
Shareholders who validly accept the Offer and elect for the Loan Note
Alternative will instead receive cash in accordance with the terms of the Offer.
Subject as aforesaid, the Loan Note Alternative will remain open as long as the
Offer is open for acceptance. Fractional entitlements to Loan Notes will be
disregarded.
J.P. Morgan has advised that, based on market conditions on 5 February, 1999
(the latest practicable date prior to the publication of this document), in its
opinion, if the Loan Notes had then been in issue, the value of each L1 nominal
of Loan Notes would have been approximately 98.5 pence.
The obligations of the Offeror under the Loan Notes are guaranteed by TRW, but
are not further guaranteed or secured.
The Loan Note Alternative is conditional on the Offer becoming or being declared
unconditional in all respects. A summary of the terms of the Loan Notes,
including provisions relating to the calculation of the interest rate on the
Loan Notes, is set out in Appendix II.
8
<PAGE> 12
7. FINANCIAL EFFECTS OF ACCEPTANCE OF THE OFFER
The following table shows, for illustrative purposes only, and on the bases and
assumptions set out in the notes below, the financial effects of acceptance of
the Offer on capital value and income for a holder of 100 LucasVarity Shares, if
the Offer becomes or is declared unconditional in all respects:
<TABLE>
<CAPTION>
OFFER
-----
#
<S> <C>
(A) CAPITAL VALUE
Cash consideration of 288 pence per LucasVarity Share....... 288.0
Market value of 100 LucasVarity Shares (based on the Closing
Price on 5 January, 1999)................................. 215.3(i)
Increase in capital value................................... 72.7
Representing an increase of................................. 33.8%
Market value of 100 LucasVarity Shares (based on the Closing
Price on 27 January, 1999)................................ 283.5(ii)
Increase in capital value................................... 4.5
Representing an increase of................................. 1.6%
(B) INCOME
Income from cash consideration.............................. 12.5
Gross dividend income on 100 LucasVarity Shares............. 5.9
Increase in income.......................................... 6.6
Representing an increase of................................. 111.9%
</TABLE>
- ---------------
NOTES:
(i) The market value of a LucasVarity Share is based on the Closing Price of
215.3 pence on 5 January, 1999, being the last business day prior to the
announcement by LucasVarity concerning a possible business combination.
(ii) The market value of a LucasVarity Share is based on the Closing Price of
283.5 pence on 27 January, 1999, being the last business day prior to the
announcement of the Offer.
The income from the cash consideration has been calculated on the assumption
that the cash is re-invested in UK Government securities so as to achieve an
income of 4.34 per cent. per annum, being the average gross redemption yield on
medium coupon UK Government fixed interest rate securities of maturities of 5 to
15 years, as derived from the FT Actuaries Index as at 3 February, 1999, as
published in the Financial Times on 4 February, 1999, the latest practicable
date prior to the publication of this document.
The dividend income on a LucasVarity Share is based upon the final dividend for
the year ended 31 January, 1998 of 2.25 pence (net) together with the interim
dividend for the six months ended 31 July, 1998 of 2.5 pence (net), grossed up
by a factor of 100/80.
8. ACCOUNTING TREATMENT
The acquisition will be accounted for by TRW as a "purchase" for financial
accounting purposes in accordance with US GAAP. The purchase price (i.e. the
consideration) will be allocated based on the fair value of LucasVarity's assets
acquired and liabilities assumed. Such allocations will be made based upon
valuations and other studies that have not been finalised as at the date of this
document. The excess of the purchase price of the acquisition over the amounts
so allocated will be allocated to goodwill.
9. INFORMATION ON THE TRW GROUP
TRW is an international company that provides advanced technology products and
services. The principal businesses of TRW and its subsidiaries are the design,
manufacture and sale of products and the performance of systems engineering,
research and technical services for industry and the US Government in two
industry segments: Automotive and Space, Defense & Information Systems. TRW's
principal products and services
9
<PAGE> 13
include: automotive systems and components; spacecraft; software and systems
engineering support services; and electronic systems, equipment and services.
TRW's Automotive segment designs, manufactures and sells a broad range of
steering, suspension, engine, safety, engineered fastening, electronic,
electromechanical and other components and systems for passenger cars and
commercial vehicles.
TRW's Space, Defense & Information Systems segment includes spacecraft software
and systems engineering and integration support services and electronic systems,
equipment and services.
TRW net sales in 1998 were US$11.9 billion, a 10 per cent. increase over 1997
sales. Space, Defense & Information Systems sales for 1998 increased 23 per
cent. to US$4.7 billion. Automotive sales for 1998 increased 2 per cent. to
US$7.2 billion. As at 31 December, 1998, TRW had total assets, under US GAAP, of
US$7,169 million. TRW's world headquarters are at 1900 Richmond Road, Cleveland,
Ohio 44124.
TRW's common stock is listed on the New York, Chicago, Pacific, Philadelphia,
London and Frankfurt stock exchanges. As at the close of trading on the NYSE on
4 February, 1999 the latest practicable day prior to the publication of this
document, TRW had a market capitalisation of US$6.1 billion.
10. INFORMATION ON THE LUCASVARITY GROUP
The LucasVarity Group designs, manufactures and supplies advanced technology
systems, products and services in the world's automotive and aerospace
industries. It is one of the ten largest independent automotive suppliers in the
world by turnover.
It is a major producer of braking systems and components for cars and light
trucks and of fuel injection systems for the diesel engine industry including
cars, vans, trucks and off-highway and industrial applications. It is also a
major producer of electrical and electronic systems for the automotive industry
and has a significant position in after-market operations and services.
The LucasVarity Group's aerospace division provides the global aerospace
industry with high integrity systems in engine controls, electrical power
generation and management, flight controls and cargo handling, all backed by a
worldwide customer support operation.
For the year ended 31 January, 1998, the LucasVarity Group reported profit
before tax and exceptional items of L329 million on turnover of L4,681 million.
The LucasVarity Group's net income for the year was L209 million under UK GAAP,
and L180 million under US GAAP. As at 31 January, 1998, the LucasVarity Group
had shareholders' equity of L458 million under UK GAAP and L2,099 million under
US GAAP. As at 31 December, 1998, LucasVarity and its subsidiaries employed
approximately 51,000 employees. For the quarter ended 31 October, 1998, the
LucasVarity Group reported turnover of L1,033 million and profit before tax of
L71 million. Under UK GAAP, net income for the quarter was L42 million, and
under US GAAP net income was L57 million. Shareholders' equity under UK GAAP was
L1,048 million, and was L2,286 million under US GAAP.
Based on a Closing Price of 291.8p on 4 February, 1999 (the latest practicable
day prior to the publication of this document), LucasVarity had a market
capitalisation on that date of L4.1 billion.
11. FINANCING
TRW has arranged appropriate financing in connection with the Offer. Additional
information regarding the financing arrangements for the Offer are set out in
paragraph 7 of Appendix VI.
12. EMPLOYEE MATTERS AND SHARE SCHEMES
(A) MANAGEMENT AND EMPLOYEES
Following completion of the Offer, Mr. Victor Rice, Chief Executive Officer of
LucasVarity, will be named Vice Chairman of TRW and head of the combined
automotive operations. He is also expected to be elected a Director of TRW.
10
<PAGE> 14
In addition, TRW intends to offer management positions to Mr. Tony Gilroy, Chief
Operating Officer of LucasVarity, and Mr. Neil Arnold, Group Finance Director of
LucasVarity. No specific terms or conditions have yet been agreed. Neither Mr.
Gilroy nor Mr. Arnold will enter into discussions with TRW (or any person acting
in concert with it) concerning their personal positions unless and until, at the
earliest, the Offer becomes or is declared unconditional in all respects.
TRW has confirmed that the existing employment rights, including pension rights,
of all employees of the LucasVarity Group will not be adversely affected by
reason of the Offer.
(B) LUCASVARITY SHARE OPTION SCHEMES
The Offer will extend to any LucasVarity Securities which are unconditionally
allotted or issued while the Offer is open for acceptance (or until such earlier
date as TRW may, subject to the City Code, determine), including LucasVarity
Securities unconditionally allotted or issued pursuant to the exercise of
options granted under the LucasVarity Share Option Schemes.
Optionholders will be able to exercise their options in accordance with the
rules of the relevant LucasVarity Share Option Scheme and, subject to the terms
and Conditions of the Offer, accept the Offer and elect to receive cash and/or
Loan Notes for the LucasVarity Securities that they receive as a result of
exercise.
To the extent that options are not exercised, a formal proposal will be made in
due course to the optionholders. Under the proposal, it is intended that
optionholders may cancel their subsisting options over LucasVarity Shares in
return for an appropriate cash payment.
13. UK TAXATION
Information on UK tax law and Inland Revenue practice applicable to LucasVarity
Securityholders who accept the Offer is contained in paragraph 11 of Appendix
VI.
EACH LUCASVARITY SHAREHOLDER IS URGED TO CONSULT HIS INDEPENDENT PROFESSIONAL
ADVISER IMMEDIATELY REGARDING THE TAX CONSEQUENCES OF ACCEPTANCE OF THE OFFER.
14. US TAXATION
Information on certain US federal income tax consequences applicable to holders
of LucasVarity Securityholders who accept the Offer is contained in paragraph 12
of Appendix VI.
EACH LUCASVARITY SECURITYHOLDER IS URGED TO CONSULT HIS INDEPENDENT PROFESSIONAL
ADVISER IMMEDIATELY REGARDING THE TAX CONSEQUENCES OF ACCEPTANCE OF THE OFFER.
15. OVERSEAS SECURITYHOLDERS
The attention of LucasVarity Securityholders who are citizens or residents of
jurisdictions outside the UK or the US is drawn to paragraph 8 of Part B of
Appendix I and to the relevant provisions of the Acceptance Forms.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan.
The Loan Notes which may be issued pursuant to the Offer have not been, and will
not be, registered under the US Securities Act, or under any relevant securities
laws of any state or jurisdiction of the US and, unless so registered, may not
be offered or sold, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the US Securities Act and any
relevant securities laws of any state or jurisdiction of the US. The Loan Notes
which may be issued pursuant to the Offer will not be the subject of a
prospectus under the securities laws of any province of Canada and will not be
registered under any relevant securities laws of any country. The Loan Notes are
not being offered, sold or delivered, directly or indirectly, in or into the US,
Canada, Australia or Japan.
11
<PAGE> 15
16. PROCEDURE FOR ACCEPTANCE OF THE OFFER
(A) LUCASVARITY SHAREHOLDERS
The attention of holders of LucasVarity Shares is drawn to paragraph 9 of Part B
of Appendix I and to the relevant provisions of the Form of Acceptance.
You should note that, if you hold LucasVarity Shares in both certificated and
uncertificated form (that is, in CREST), you should complete a separate Form of
Acceptance for each holding. If you hold LucasVarity Shares in uncertificated
form, but under different member account IDs, you should complete a separate
Form of Acceptance in respect of each member account ID. Similarly, if you hold
LucasVarity Shares in certificated form, but under different designations, you
should complete a separate Form of Acceptance in respect of each designation.
(I) TO ACCEPT THE OFFER COMPLETE THE FORM OF ACCEPTANCE
To accept the Offer, you should complete Box 1 and (if your LucasVarity
Shares are in CREST) Box 5, 6 and/or 7 and sign Box 8 of the Form of
Acceptance in accordance with the instructions printed on it. ALL HOLDERS
OF LUCASVARITY SHARES WHO ARE INDIVIDUALS SHOULD SIGN THE FORM OF
ACCEPTANCE IN THE PRESENCE OF A WITNESS, WHO SHOULD ALSO SIGN BOX 8 IN
ACCORDANCE WITH THE INSTRUCTIONS PRINTED ON IT.
(II) TO ELECT FOR THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative in respect of some or all of the
LucasVarity Shares for which you are accepting the Offer, you should
complete Box 2 in addition to taking the actions described in paragraph
(i) above. The attention of those holders of LucasVarity Shares
considering accepting the Loan Note Alternative is drawn to paragraph 6
above and to paragraphs 5 and 8 of Part B of Appendix I.
(III) RETURN OF FORMS OF ACCEPTANCE
To accept the Offer, the Forms of Acceptance must be completed and
returned, whether or not your LucasVarity Shares are in CREST. The
completed, signed and (if you are an individual) witnessed Forms of
Acceptance, together with, if your LucasVarity Shares are not in CREST,
the share certificate(s) and/or other document(s) of title for your
LucasVarity Shares, should be returned (if you are a non-US Holder) by
post or by hand to the UK Receiving Agent, Computershare Services PLC, PO
Box 859, The Pavilions, Bridgwater Road, Bristol, BS99 1XZ, or by hand,
during normal business hours only, to Computershare Services PLC, 7(th)
Floor, Jupiter House, Triton Court, 14 Finsbury Square, London EC2A 1BR or
(if you are a US Holder) by post to the US Depositary, Morgan Guaranty
Trust Company of New York, P.O. Box 8216, Boston, Massachusetts 02266-8216
by courier to Morgan Guaranty Trust Company of New York, Corporate
Reorganization, 40 Campanelli Drive, Braintree, MA 02184, or by hand,
during normal business hours only, to Morgan Guaranty Trust Company of New
York, Securities Transfer & Reporting Services, 100 William Street
Galleria, New York, New York 10038, as soon as possible but, in any event,
so as to be received no later than 3.00 p.m. (London time), 10.00 a.m.
(New York City time) on 9 March, 1999. A reply-paid envelope is enclosed
for your convenience and may be used by LucasVarity Shareholders for
returning completed Forms of Acceptance within the UK and the US only. The
instructions printed on the Forms of Acceptance shall be deemed to form
part of the terms of the Offer.
Any Form of Acceptance received in an envelope postmarked in Canada,
Australia or Japan or otherwise appearing to the Offeror or its agents to
have been sent from Canada, Australia or Japan may be rejected as an
invalid acceptance of the Offer. For further information for overseas
shareholders, see paragraph 15 above and paragraph 8 of Part B of Appendix
I.
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<PAGE> 16
(IV) LUCASVARITY SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
If your LucasVarity Shares are in uncertificated form (that is, if you do
not have a share certificate because your shares are held in CREST), you
should read carefully paragraph 9 of Part B of Appendix I, which sets out
the acceptance procedures for holders of LucasVarity Shares in
uncertificated form.
If you are a CREST sponsored member, you should refer to your CREST
sponsor before taking any action.
(V) CERTIFICATES NOT READILY AVAILABLE OR LOST
If your LucasVarity Shares are in certificated form, but your
certificate(s) and/or other document(s) of title is/are not readily
available or is/are lost, the Form of Acceptance should nevertheless be
completed, signed and returned, as stated in paragraph (iii) above, so as
to arrive no later than 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on 9 March, 1999, together with any certificate(s) and/or other
document(s) of title that you have available, accompanied by a letter
stating that the balance will follow (and, if applicable, that you have
lost one or more of your certificates). You should then arrange for the
relevant certificate(s) and/or other document(s) of title to be forwarded
as soon as possible thereafter. No acknowledgement of receipt of documents
will be given. In the case of loss, you should write as soon as possible
to Lloyds TSB Registrars, 54 Pershore Road South, Kings Norton, Birmingham
B22 1AD for a letter of indemnity for lost certificate(s) and/or other
document(s) of title which, when completed in accordance with the
instructions given, should be returned to the UK Receiving Agent,
Computershare Services PLC, at either of its addresses stated in paragraph
(iii) above.
(VI) DEPOSIT OF LUCASVARITY SHARES INTO, AND WITHDRAWAL OF LUCASVARITY SHARES
FROM, CREST
Normal CREST procedures (including timings) apply in relation to any
LucasVarity Shares that are, or are to be, converted from uncertificated
to certificated form, or from certificated to uncertificated form, during
the course of the Offer (whether any such conversion arises as a result of
a transfer of LucasVarity Shares or otherwise). LucasVarity Shareholders
who are proposing to convert any such shares are recommended to ensure
that the conversion procedures are implemented in sufficient time to
enable the person holding or acquiring the shares as a result of the
conversion to take all necessary steps in connection with an acceptance of
the Offer (in particular, as regards delivery of share certificate(s)
and/or other document(s) of title or transfers to an escrow balance as
described above) prior to 3.00 p.m. (London time), 10.00 a.m. (New York
City time) on 9 March, 1999.
(B) HOLDERS OF LUCASVARITY ADSS
The attention of holders of LucasVarity ADSs is drawn to paragraph 11 of Part B
of Appendix I and to the relevant provisions of the Letter of Transmittal.
To accept the Offer, holders of LucasVarity ADSs must complete the Letter of
Transmittal in accordance with the instructions printed on it or comply with the
instructions in such Letter of Transmittal applicable to Book-Entry Transfers.
The completed Letter of Transmittal should be sent in the accompanying
reply-paid envelope or delivered by hand together with the required signature
guarantees and any other required documents to the US Depositary at one of its
addresses set out at the end of this document and LucasVarity ADRs must be
either received by the US Depositary at one of such addresses or delivered in
accordance with paragraph 11 of Part B of Appendix I.
(C) VALIDITY OF ACCEPTANCE
Subject to the City Code, the Offeror reserves the right to treat as valid in
whole or in part any acceptance of the Offer which is not entirely in order or
which is not accompanied (as applicable) by the relevant transfer to escrow or
the relevant share certificate(s) and/or other required documents or which is
received by it in a form or at a place or places other than set out in this
document or the Acceptance Forms. In that event, no payment of cash or issue of
Loan Notes under the Offer will be made until after (as applicable) the relevant
transfer to escrow has
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<PAGE> 17
settled or the relevant share certificate(s) and/or other required documents of
title or indemnities satisfactory to the Offeror have been received.
(D) GENERAL
No acknowledgement of receipt of Acceptance Forms, share certificates,
LucasVarity ADRs or other documents will be given.
IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURE FOR ACCEPTANCE, PLEASE CONTACT THE
UK RECEIVING AGENT, COMPUTERSHARE SERVICES PLC, BY TELEPHONE ON
+44 (0)117 305 1001 OR AT EITHER OF ITS ADDRESSES STATED IN PARAGRAPH 16(A)(III)
ABOVE OR THE US DEPOSITARY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, ON (800)
428-4237, OR THE INFORMATION AGENT, GEORGESON & COMPANY INC., ON (800) 223-2064.
YOU ARE REMINDED THAT, IF YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD CONTACT
YOUR CREST SPONSOR BEFORE TAKING ANY ACTION.
17. RIGHTS OF WITHDRAWAL
With certain customary exceptions granted pursuant to a SEC exemptive order, the
Offer is subject to the US tender offer rules applicable to securities
registered under the Exchange Act, as well as to the City Code. This fact has
necessitated a number of changes from the procedures which normally apply to
offers for UK companies, including those applicable to the rights of LucasVarity
Securityholders to withdraw their acceptance of the Offer.
Under the Offer, LucasVarity Securityholders will be able to withdraw their
acceptances at any time prior to the First Closing Date (including any extension
of that date) and in certain other circumstances. There are no withdrawal rights
during the Subsequent Offer Period. The Offer will not be deemed to have been
accepted in respect of any LucasVarity Securities which have been validly
withdrawn during the Initial Offer Period.
However, the Offer may be accepted again in respect of the withdrawn LucasVarity
Securities by following one of the procedures described in paragraph 16 above at
any time prior to the expiry or lapse of the Offer.
Further details of these rights of withdrawal and the procedure for effecting
withdrawals are set out in paragraph 4 of Part B of Appendix I.
18. SETTLEMENT
(A) DATE OF PAYMENT
The settlement procedure with respect to the Offer will be consistent with UK
practice, which differs from the US tender offer rules in certain material
respects, particularly with regard to the date of payment.
Subject to the satisfaction, fulfilment or, where permitted, waiver of all the
Conditions, settlement of acceptances from LucasVarity Shareholders and
accepting holders of LucasVarity ADSs or other designated agents will be
effected:
(i) in the case of acceptances received complete in all respects by the
First Closing Date, within 14 calendar days of such date; or
(ii) in the case of acceptances received complete in all respects after
such date, but while the Offer remains open for acceptance, within 14
calendar days of such receipt.
(B) LUCASVARITY SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
Where an acceptance relates to LucasVarity Shares in uncertificated form, (i)
the cash consideration to which accepting LucasVarity Shareholders are entitled
will be paid by means of CREST by the Offeror procuring the creation of an
assured payment obligation in favour of the accepting shareholders' payment bank
in respect of the cash consideration due, in accordance with the CREST assured
payment arrangement and (ii) definitive certificates for any Loan Notes will be
despatched by post (or by such other method as may be approved by the Panel).
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<PAGE> 18
The Offeror reserves the right to settle all or any part of the cash
consideration referred to above, for all or any accepting shareholder(s), in the
manner referred to in paragraph (f) below, if, for any reason, it wishes to do
so.
(C) LUCASVARITY SHARES IN CERTIFICATED FORM AND LUCASVARITY ADSS
Where an acceptance relates to LucasVarity Shares in certificated form or
LucasVarity ADSs evidenced by LucasVarity ADRs, cheques for cash due and, where
applicable, definitive certificates for any Loan Notes will be despatched by
post (or by such other method as may be approved by the Panel).
(D) LAPSING OF THE OFFER
If the Conditions are not satisfied, fulfilled or, where permitted, waived, (i)
in respect of LucasVarity Shares in certificated form and LucasVarity ADRs in
certificated form, the relevant certificate(s) and/or other documents of title
will be returned by post (or by such other method as may be approved by the
Panel) within 14 calendar days of the Offer lapsing, (ii) in respect of
LucasVarity Shares in uncertificated form (that is, in CREST) the UK Receiving
Agent, Computershare Services PLC, will, immediately after the lapsing of the
Offer (or within such longer period as the Panel may permit, not exceeding 14
calendar days of the lapsing of the Offer), give TTE Instructions to CRESTCo to
transfer all relevant LucasVarity Shares held in escrow balances and in relation
to which it is the escrow agent for the purposes of the Offer to the original
available balances of the LucasVarity Shareholders concerned and (iii) in
respect of LucasVarity ADRs in book-entry form, the US Depositary will return
such LucasVarity ADRs to the tendering holders unless otherwise instructed by
such holder.
(E) GENERAL
All documents and remittances sent by, to, or from LucasVarity Securityholders
or their appointed agents will be sent at their own risk.
(F) CURRENCY OF CASH CONSIDERATION
Instead of receiving cash consideration in pounds sterling under the Offer,
LucasVarity Shareholders who so wish may elect to receive US dollars on the
following basis: the cash amount payable in pounds sterling to which such holder
would otherwise be entitled pursuant to the terms of the Offer will be
converted, without charge, from pounds sterling to US dollars at the exchange
rate obtainable by the relevant payment agent (either the UK Receiving Agent or
the US Depositary) on the spot market in London at approximately 12.00 noon
(London time) on the date the cash consideration is made available by the
Offeror to the relevant payment agent for delivery in respect of the relevant
LucasVarity Shares. A LucasVarity Shareholder may receive such amount in US
dollars on the basis set out above only in respect of the whole of his holding
of LucasVarity Shares in respect of which he accepts the Offer, and in respect
of which he is entitled to receive cash consideration. LucasVarity Shareholders
may not elect to receive both pounds sterling and US dollars. UNLESS THEY ELECT
TO RECEIVE POUNDS STERLING, HOLDERS OF LUCASVARITY ADSS WILL RECEIVE ANY SUCH
CASH CONSIDERATION CONVERTED INTO US DOLLARS AS DESCRIBED ABOVE, AS IF SUCH
HOLDERS OF LUCASVARITY ADSS HAD ELECTED TO RECEIVE US DOLLARS. Consideration in
US dollars may be inappropriate for LucasVarity Securityholders other than US
Persons and holders of LucasVarity ADSs.
If you are a LucasVarity Shareholder and you wish to elect to receive cash
consideration in US dollars instead of pounds sterling under the Offer, you
should complete Box 3 of the relevant Acceptance Form in addition to taking the
actions described in paragraph 16 above.
If you are a LucasVarity ADS holder and you wish to elect to receive cash
consideration in pounds sterling instead of US dollars under the Offer, you
should complete the appropriate box of your Letter of Transmittal in addition to
taking the actions described in paragraph 16 above.
THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY THE OFFEROR. LUCASVARITY SECURITYHOLDERS SHOULD BE AWARE THAT
THE US DOLLAR/POUNDS STERLING EXCHANGE RATE WHICH IS PREVAILING AT THE DATE ON
WHICH AN ELECTION IS MADE OR DEEMED TO BE MADE TO RECEIVE US DOLLARS AND ON THE
DATES OF
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<PAGE> 19
DESPATCH AND RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT PREVAILING ON THE
BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY
THE OFFEROR. IN ALL CASES, FLUCTUATIONS IN THE US DOLLAR/ POUNDS STERLING
EXCHANGE RATE ARE AT THE RISK OF ACCEPTING LUCASVARITY SECURITYHOLDERS WHO ELECT
OR ARE TREATED AS HAVING ELECTED TO RECEIVE THEIR CONSIDERATION IN US DOLLARS.
NEITHER THE OFFEROR NOR ANY OF ITS ADVISERS OR AGENTS SHALL HAVE RESPONSIBILITY
WITH RESPECT TO THE ACTUAL AMOUNT OF CASH CONSIDERATION PAYABLE OTHER THAN IN
POUNDS STERLING.
19. FURTHER INFORMATION
Your attention is drawn to Appendix I to this document, which contains the
Conditions and further terms of the Offer and which forms part of this document,
and to the other Appendices to this document which contain important information
in connection with the Offer and which form part of this document, and to the
accompanying Acceptance Forms.
20. ACTION TO BE TAKEN
YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE RELEVANT ACCEPTANCE FORM AND
OTHER REQUIRED DOCUMENTS AS SOON AS POSSIBLE, BUT IN ANY EVENT SO AS TO BE
RECEIVED BY NO LATER THAN 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY
TIME) ON 9 MARCH, 1999, TO THE UK RECEIVING AGENT OR THE US DEPOSITARY, AS
APPROPRIATE.
Yours sincerely,
DANIEL CHAMIER
Morgan Guaranty Trust
Company of New York
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<PAGE> 20
APPENDIX I -- CONDITIONS AND FURTHER TERMS OF THE OFFER
PART A: CONDITIONS OF THE OFFER
The Offer, which is being made by J.P. Morgan on behalf of the Offeror, complies
with the applicable rules and regulations of the London Stock Exchange and the
City Code and with US federal securities laws (except to the extent that
exemptive relief has been granted by the SEC). In addition, the Offer is
governed by English law and is subject to the jurisdiction of the courts of
England and is made on the terms and conditions set out in this document and
related Acceptance Forms.
The Offer is subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
the First Closing Date of the Offer (or such later time(s) and/or date(s)
as the Offeror may, with the consent of the Panel or in accordance with
the rules of the City Code, decide) in respect of not less than 90 per
cent. (or such lower percentage as the Offeror may decide) in nominal
value of LucasVarity Securities to which the Offer relates, provided that
this condition will not be satisfied unless the Offeror and/or its
wholly-owned subsidiaries shall have acquired or agreed (unconditionally
or subject only to conditions which will be fulfilled upon the Offer
becoming or being declared unconditional in all respects) to acquire
(whether pursuant to the Offer or otherwise) LucasVarity Securities
carrying, in aggregate, more than 50 per cent. of the voting rights then
normally exercisable at general meetings of LucasVarity, including for
this purpose (to the extent, if any, required by the Panel) any such
voting rights attaching to any LucasVarity Securities that are
unconditionally allotted or issued before the Offer becomes or is declared
unconditional as to acceptances, whether pursuant to the exercise of any
outstanding subscription or conversion rights or otherwise, and for this
purpose:
(i) the expression "LucasVarity Securities to which the Offer relates"
shall be construed in accordance with sections 428 to 430F of the
Companies Act 1985;
(ii) LucasVarity Securities which have been unconditionally allotted
shall be deemed to carry the voting rights which they will carry upon
their being entered in the register of members of LucasVarity; and
(iii) valid acceptances shall be treated as having been received in
respect of any LucasVarity Securities which the Offeror shall,
pursuant to section 429(8) of the Companies Act 1985, be treated as
having acquired or contracted to acquire by virtue of acceptances of
the Offer,
provided that, unless the Offeror otherwise determines, this condition (a)
can only be treated as satisfied at a time when all of the other
conditions in paragraphs (b) to (i) inclusive are either satisfied or (if
capable of waiver) waived;
(b) no Relevant Authority having intervened in a manner which would or might
reasonably be expected to:
(i) make the Offer, its implementation or the acquisition or proposed
acquisition by the Offeror or any member of the Wider TRW Group of any
shares or other securities in, or control of, LucasVarity void,
illegal and/or unenforceable in or under the laws of any relevant
jurisdiction, or otherwise directly or indirectly materially restrain,
prevent, prohibit, restrict or delay the Offer or such acquisition or
impose additional materially adverse conditions or obligations with
respect to the Offer or such acquisition, or otherwise materially
impede, challenge or interfere with the Offer or such acquisition, or
require material amendment to the terms of the Offer or the proposed
acquisition of any LucasVarity Securities or the acquisition of
control of LucasVarity by the Offeror;
(ii) require, restrain, prevent, prohibit, restrict or delay the
divestiture by any member of the Wider TRW Group of any shares or
other securities (or the equivalent) in LucasVarity where the same is
materially adverse to the TRW Group;
(iii) require, restrain, prevent, prohibit, restrict or delay the
divestiture by any member of the Wider TRW Group or by any member of
the Wider LucasVarity Group of all or any portion of their respective
businesses, assets or properties or impose any limitation on the
ability of any of them to
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conduct any of their respective businesses or to own any of their
respective assets or properties or any part thereof (in any case to an
extent which is material in the context of the TRW Group or the
LucasVarity Group, as the case may be, taken as a whole);
(iv) impose any limitation on, or result in a delay in, the ability of
any member of the Wider TRW Group or any member of the Wider
LucasVarity Group to acquire or to hold or to exercise effectively,
directly or indirectly, all or any rights of ownership in respect of
shares or other securities (or the equivalent) in, or to exercise
management control over, any member of the Wider TRW Group or any
member of the Wider LucasVarity Group (in any case to an extent which
is material in the context of the TRW Group or the LucasVarity Group,
as the case may be, taken as a whole);
(v) save pursuant to the Offer or Part XIII of the Companies Act,
require any member of the Wider TRW Group or the Wider LucasVarity
Group to acquire, or to offer to acquire, any shares or other
securities (or the equivalent) in any member of the Wider TRW Group or
any member of the Wider LucasVarity Group owned by any third party (in
any case to an extent which is material in the context of the TRW
Group or the LucasVarity Group, as the case may be, taken as a whole);
(vi) impose any limitation on the ability of any member of the Wider TRW
Group or any member of the Wider LucasVarity Group to integrate or
co-ordinate its business, or any material part of it, with the
businesses of any other member of the Wider TRW Group or the Wider
LucasVarity Group (in any case to an extent which is material in the
context of the TRW Group or the LucasVarity Group, as the case may be,
taken as a whole);
(vii) result in any member of the Wider TRW Group or the Wider LucasVarity
Group ceasing to be able to carry on business under any name under
which it presently does so (the consequences of which would be
material in the context of the TRW Group or the LucasVarity Group, as
the case may be, taken as a whole); or
(viii) otherwise adversely affect any or all of the businesses, assets,
profits or prospects of any member of the Wider LucasVarity Group or
any member of the Wider TRW Group (in any case to an extent which is
material in the context of the TRW Group or the LucasVarity Group, as
the case may be, taken as a whole),
and all applicable waiting and other time periods during which any
Relevant Authority could intervene in such a way under the laws of any
relevant jurisdiction having expired, lapsed or been terminated;
(c) (i) the European Commission indicating in terms satisfactory to the
Offeror that it does not intend to initiate proceedings under Article
6(1)(c) of Council Regulation (EEC) 4064/89, as amended (the "Merger
Regulation") in respect of the proposed acquisition of LucasVarity by
the Offeror or any matters arising therefrom and that in any event
there will not be a referral to a competent authority or a dealing
with the proposed acquisition of LucasVarity by the Offeror by the
European Commission pursuant to Article 9(3) of the Merger Regulation;
and
(ii) all necessary filings having been made and all or any applicable
waiting periods (including any extensions thereof) under the US
Hart-Scott-Rodino Antitrust Improvements Act 1976 and the regulations
thereunder having expired, lapsed or been terminated as appropriate in
each case in respect of the proposed acquisition of LucasVarity by the
Offeror or any matters arising therefrom;
(d) (i) all necessary notifications and filings having been made, all
necessary waiting and other time periods under any applicable
legislation or regulation of any relevant jurisdiction having expired,
lapsed or been terminated, all necessary governmental approvals or
authorizations under any applicable legislation or regulation of any
relevant jurisdiction having been obtained, and all statutory or
regulatory obligations in any relevant jurisdiction having been
complied with in each case in connection with the Offer or the
acquisition of any shares or other securities (or the equivalent) in,
or control of, LucasVarity or any other member of the Wider
LucasVarity Group by any member of the Wider TRW Group; and
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<PAGE> 22
(ii) all Authorizations necessary in any relevant jurisdiction for or in
respect of the Offer or the acquisition or proposed acquisition of any
shares or other securities (or the equivalent) in, or control of,
LucasVarity or any other member of the Wider LucasVarity Group by any
member of the Wider TRW Group or the carrying on by any member of the
Wider LucasVarity Group of its business (where the absence of such
Authorization would have an adverse effect which is material to the
LucasVarity Group taken as a whole) having been obtained, in terms and
in a form reasonably satisfactory to the Offeror, from all appropriate
Relevant Authorities and all such Authorizations remaining in full
force and effect at the time when the Offer becomes otherwise
unconditional in all respects and there being no notice or intimation
of any intention to revoke or not to renew any of the same;
(e) there being no provision of any arrangement, agreement, licence, permit,
franchise or other instrument to which any member of the Wider LucasVarity
Group is a party, or by or to which any such member or any of its assets
is or are or may be bound, entitled or subject or any circumstance, which,
in each case in consequence of the Offer or the acquisition or proposed
acquisition of any shares or other securities (or the equivalent) in, or
control of, LucasVarity or any other member of the Wider LucasVarity Group
by any member of the Wider TRW Group or otherwise, would or might
reasonably be expected to result in any of the following (which, in any
case, would be material in the context of the LucasVarity Group taken as a
whole):
(i) any monies borrowed by or any other indebtedness or liabilities,
actual or contingent, of, or grant available to, any member of the
Wider LucasVarity Group being or becoming repayable or capable of
being declared repayable immediately or prior to its stated repayment
date, or the ability of any member of the Wider LucasVarity Group to
borrow monies or to incur any indebtedness being withdrawn or
inhibited or becoming capable of being withdrawn;
(ii) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business,
property, assets or interests of any member of the Wider LucasVarity
Group or any such mortgage, charge or other security interest becoming
enforceable;
(iii) any such arrangement, agreement, licence, permit, franchise or
instrument which is, or the rights, liabilities, obligations or
interests of any member of the Wider LucasVarity Group thereunder,
being, or becoming capable of being, terminated or adversely modified
or affected or any adverse action being taken or any obligation or
liability arising thereunder;
(iv) any asset or interest of any member of the Wider LucasVarity Group
being or falling to be disposed of or charged or any right arising
under which any such asset or interest could be required to be
disposed of or charged, in each case otherwise than in the ordinary
course of business;
(v) any member of the Wider LucasVarity Group ceasing to be able to
carry on business under any name under which it presently does so;
(vi) the creation of liabilities actual or contingent by any such member,
otherwise than in the ordinary course of business;
(vii) the rights, liabilities or interests of any member of the Wider
LucasVarity Group under any such arrangement, agreement, licence,
permit, franchise or other instrument or the interests or business of
any such member in or with any other person, firm, company or body (or
any arrangement or arrangements relating to any such interests or
business) being terminated, adversely modified or affected; or
(viii) the financial or trading position of any member of the Wider
LucasVarity Group being materially adversely prejudiced or affected;
and no event having occurred which, under any provision of any such
arrangement, agreement, licence, permit or other instrument, would or
might reasonably be expected to result in any of the events or
circumstances which are referred to in paragraphs (i) to (viii) of this
condition (e);
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(f) since 31 January, 1998 and except as disclosed in LucasVarity's annual
report and accounts for the year then ended or as disclosed in the
quarterly statement of LucasVarity for the nine months ended on 31
October, 1998 or as otherwise publicly announced by LucasVarity (by the
delivery of an announcement to the Company Announcements Office of the
London Stock Exchange or by filing with the SEC) prior to 27 January, 1999
no member of the Wider LucasVarity Group having:
(i) issued or agreed to issue additional shares of any class, or
securities convertible into, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible securities
(save as between LucasVarity and wholly-owned subsidiaries of
LucasVarity and except for any options granted under the LucasVarity
Share Option Schemes prior to 27 January, 1999);
(ii) recommended, declared, paid or made any bonus issue of securities,
dividend or other distribution (save as between LucasVarity and
wholly-owned subsidiaries of LucasVarity) whether in cash or
otherwise;
(iii) made or committed to make any change in its share or (save as
between LucasVarity and wholly-owned subsidiaries of LucasVarity) loan
capital;
(iv) other than in the ordinary course of business, merged with or
demerged or acquired any body corporate or acquired or disposed of or
transferred, mortgaged or charged or created any security interest
over any assets or any right, title or interest in any assets
(including shares and trade investments);
(v) issued or agreed to issue any debentures or (save in the ordinary
course of business) incurred or increased any indebtedness or
contingent liability (save as between LucasVarity and wholly-owned
subsidiaries of LucasVarity) which, in any such case, is material in
the context of the LucasVarity Group taken as a whole;
(vi) purchased, redeemed or repaid any of its own shares or other
securities or reduced or made any other change to any part of its
share capital;
(vii) entered into or varied any contract, transaction, arrangement or
commitment (whether in respect of capital expenditure or otherwise)
which:
(A) is of a long term, onerous or unusual nature or magnitude; or
(B) could reasonably be expected to be restrictive on the business of
any member of the Wider LucasVarity Group or any member of the
Wider TRW Group which, in any such case, is material in the
context of the LucasVarity Group taken as a whole; or
(C) involves or would involve an obligation of a long term, onerous
or unusual nature or magnitude or which could be restrictive on
the business of any member of the Wider LucasVarity Group or any
member of the Wider TRW Group which, in any such case, is
material in the context of the LucasVarity Group taken as a
whole;
(viii) entered into or varied or made any offer (which remains open for
acceptance) to enter into or vary the terms of any contract with any
of the Directors or senior executives of LucasVarity;
(ix) taken or proposed any corporate action or had any legal proceedings
instituted or threatened against it or petition (not of a frivolous or
vexatious nature) presented for its winding-up (voluntarily or
otherwise), dissolution or reorganisation or for the appointment of a
receiver, administrator, administrative receiver, trustee or similar
officer of all or any of its assets and revenues or for any analogous
proceedings or steps in any jurisdiction or for the appointment of any
analogous person in any jurisdiction which in any case is material in
the context of the LucasVarity Group taken as a whole;
(x) been unable or admitted in writing that it is unable to pay its
debts or having stopped or suspended (or threatened to stop or
suspend) payment of its debts generally or ceased or threatened to
cease
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carrying on all or a substantial part of its business which in any
case is material in the context of the LucasVarity Group taken as a
whole;
(xi) waived or compromised any material claim in the context of the Wider
LucasVarity Group taken as a whole;
(xii) made any alteration to its memorandum or articles of association, or
other incorporation documents which is material in the context of the
LucasVarity Group taken as a whole; or
(xiii) entered into any agreement, contract or commitment or made any
offer (which remains open for acceptance) with respect to any of the
transactions, matters or events referred to in this condition (f);
(g) since 31 January, 1998 and except as disclosed in LucasVarity's annual
report and accounts for the year then ended or as disclosed in the
quarterly statement of LucasVarity for the nine months ended on 31
October, 1998 or as otherwise publicly announced by LucasVarity (by the
delivery of an announcement to the Company Announcements Office of the
London Stock Exchange or by filing with the SEC) prior to 27 January,
1999:
(i) there having been no adverse change or deterioration or development
involving a prospective adverse change in the financial or trading
position or profits of any material member of the Wider LucasVarity
Group which is material in the context of the LucasVarity Group taken
as a whole;
(ii) no litigation, arbitration proceedings, prosecution or other legal
proceedings to which any member of the Wider LucasVarity Group is or
may become a party (whether as plaintiff or defendant or otherwise) or
any investigation (save as a result of the Offer) by any Relevant
Authority having been threatened, announced or instituted by or
against or in respect of any member of the Wider LucasVarity Group or
remaining outstanding against or in respect of any member of the Wider
LucasVarity Group which, in any such case, is material in the context
of the LucasVarity Group taken as a whole;
(iii) no contingent or other liability having arisen or become apparent
or increased which would or could reasonably be expected materially
and adversely to affect the LucasVarity Group taken as a whole; and
(iv) there having been no inquiry or investigation (save as a result of
the Offer) by, or complaint, or reference to, any Relevant Authority
of a material nature to LucasVarity in respect of any member of the
Wider LucasVarity Group and no such enquiry, investigation, complaint
or reference having been threatened, announced, implemented,
instituted or remaining outstanding which, in any such case, is
material in the context of the LucasVarity Group taken as a whole;
(h) except as disclosed in LucasVarity's annual report and accounts for the
financial year ended 31 January, 1998 or as disclosed in the quarterly
statement for the nine months ended 31 October, 1998 or as otherwise
publicly announced by LucasVarity (by delivery of an announcement to the
Company Announcements Office of the London Stock Exchange or by filing
with the SEC) prior to 27 January, 1999, the Offeror not having discovered
that any material financial or business or other information concerning
the Wider LucasVarity Group disclosed at any time by or on behalf of any
member of the Wider LucasVarity Group, whether publicly, to any member of
the Wider TRW Group or otherwise, is materially misleading or contains a
misrepresentation of fact or omits to state a fact necessary to make any
information contained therein not misleading in any case which has not
subsequently been corrected by such disclosure and which, in any such
case, is material in the context of the LucasVarity Group taken as a
whole; or
(i) the Offeror not having discovered:
(i) that any past or present member of the Wider LucasVarity Group has
not complied with all applicable legislation or regulations of any
jurisdiction with regard to the disposal, discharge, spillage, leak or
emission of any waste or hazardous substance or any substance likely
to impair the
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<PAGE> 25
environment or harm human health, or otherwise relating to
environmental matters, or that there has otherwise been any such
disposal, discharge, spillage, leak or emission (whether or not the
same constituted a non-compliance by any person with any such
legislation or regulations and wherever the same may have taken place)
which, in any such case, would be likely to give rise to any material
liability (whether actual or contingent) on the part of any member of
the Wider LucasVarity Group which, in any such case, is material in
the context of the LucasVarity Group taken as a whole;
(ii) that there is, or is likely to be, any material liability, whether
actual or contingent, to make good, repair, reinstate or clean up any
property now or previously owned, occupied or made use of by any past
or present member of the Wider LucasVarity Group or in which any such
member may have or previously have had or be deemed to have had an
interest under any environmental legislation, regulation, notice,
circular or order of any relevant authority or Relevant Authority or
otherwise which, in any such case, would be material in the context of
the LucasVarity Group taken as a whole; or
(iii) that there has occurred (1) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the US, (2) any
material limitation (whether or not mandatory) by any government or
governmental, administrative or regulatory authority or agency,
domestic or foreign, on, the extension of credit by banks or other
lending institutions or, (3) a commencement of a war or outbreak or
escalation of armed hostilities or other national calamity directly
involving the US and there being a reasonable likelihood that such
event would or might reasonably be expected to have an adverse effect
which is material in the context of the LucasVarity Group taken as a
whole.
For the purpose of these Conditions:
(a) "Authorizations" means authorizations, orders, grants, recognitions,
determinations, certificates, confirmations, consents, licences,
clearances, permissions, exemptions and approvals; and
(b) "Relevant Authority" means any government, government department or
governmental, quasi-governmental, supranational, statutory, regulatory,
administrative or investigative body, authority (including any national or
supranational anti-trust or merger control authorities), court, trade
agency, association, institution or professional or environmental body or
any other person or body whatsoever in any relevant jurisdiction;
(c) a Relevant Authority shall be regarded as having "intervened" if it has
decided to take, institute, implement or threaten any action, proceedings,
suit, investigation, inquiry or reference or made, proposed or enacted any
statute, regulation, decision or order or taken any measures or other
steps or required any action to be taken or information to be provided or
otherwise having done anything and "intervene" shall be construed
accordingly;
(d) "the Wider LucasVarity Group" means LucasVarity and its subsidiary
undertakings and any other undertakings in which LucasVarity and such
undertakings (aggregating their interests) have a substantial interest and
"the Wider TRW Group" means TRW and its subsidiary undertakings and any
other undertakings in which TRW and such undertakings (aggregating their
interests) have a substantial interest and, for these purposes,
"subsidiary undertaking" and "undertaking" have the meanings given by the
Companies Act 1985 and "substantial interest" means a direct or indirect
interest in 20 per cent. or more of the equity capital of an undertaking.
Subject to the requirements of the Panel, the Offeror reserves the right to
waive all or any of the above Conditions, in whole or in part, except Condition
(a).
The Offeror reserves the right, subject to the consent of the Panel, to extend
the time allowed under the City Code for satisfaction of Condition (a) until
such time as Conditions (b) to (i) inclusive have been satisfied, fulfilled or,
to the extent permitted, waived. The Offeror shall be under no obligation to
waive (if capable of waiver) or treat as fulfilled any of Conditions (b) to (i)
(inclusive) by a date earlier than the latest date for the fulfilment thereof
notwithstanding that the other Conditions of the Offer may at such earlier date
have been waived or fulfilled and
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<PAGE> 26
that there are at such earlier date no circumstances indicating that any of such
Conditions may not be capable of fulfilment.
The Offeror will not invoke any of the Conditions (e) to (i) in relation to
circumstances which would otherwise give rise to the right to invoke such
Condition where there has been fair disclosure in writing of such circumstances
to TRW or its advisers prior to 28 January, 1999.
If the Offeror is required by the Panel to make an offer for LucasVarity
Securities under the provisions of Rule 9 of the City Code, the Offeror may make
such alterations to the conditions of the Offer, including Condition (a), as are
necessary to comply with the provisions of that Rule.
The Offer will lapse either (i) if the European Commission initiates proceedings
under Article 6(1)(c) of the Merger Regulation or (ii) if there is a reference
to the Monopolies and Mergers Commission following a referral to a competent
authority of the UK under Article 9(1) of the Merger Regulation before, in each
case, the later of 3.00 p.m. (London time) on 9 March, 1999 and the date when
the Offer becomes or is declared unconditional as to acceptances.
If the Offer lapses, the Offer will cease to be capable of further acceptance
and holders of LucasVarity Securities accepting the Offer and the Offeror shall,
upon the Offer lapsing, cease to be bound by acceptances delivered on or before
the date on which the Offer lapses.
The Offer and all contracts arising under it are governed by English law.
PART B: FURTHER TERMS OF THE OFFER
The following further terms apply, unless the context requires otherwise, to the
Offer and the Loan Note Alternative. Unless the context requires otherwise, any
reference in this Part B of Appendix I and in the Acceptance Forms to the Offer
becoming "unconditional" includes the Offer being declared unconditional in all
respects.
1. ACCEPTANCE PERIOD
(a) The Offer is initially open for acceptance until 3.00 p.m. (London time),
10.00 a.m. (New York City time) on 9 March, 1999. The Offeror reserves the
right (but will not be obliged, other than as may be required by the City
Code or US federal securities laws and the rules and regulations
thereunder) at any time or from time to time to extend the Offer after
such time and, in such event, will make a public announcement of such
extension in the manner described in paragraph 3 below and give oral or
written notice of such extension to the UK Receiving Agent and the US
Depositary. If all Conditions have not been satisfied, fulfilled or, to
the extent permitted, waived by the Offeror by the First Closing Date, the
Offeror currently intends to extend the Offer until such time as all
Conditions have been satisfied, fulfilled or, to the extent permitted,
waived. There can be no assurance, however, that the Offeror will, in such
circumstances, extend the Offer and, if no such extension is made, the
Offer will lapse on the First Closing Date and no LucasVarity Securities
will be purchased pursuant to the Offer.
(b) Although no revision is envisaged, if the Offer is revised, the Initial
Offer Period will be extended, if necessary, for a period of at least 14
calendar days from the date on which the revised Offer Document is posted
to LucasVarity Securityholders. Except with the consent of the Panel, no
revision of the Offer may be made after 24 March, 1999.
(c) The Initial Offer Period is not (except with the consent of the Panel)
capable of being extended after midnight (London time), 7.00 p.m. (New
York City time) on 7 April, 1999 (or any other earlier time or date beyond
which the Offeror has stated that the Offer will not be extended and has
not withdrawn that statement). If all Conditions are not satisfied,
fulfilled or, to the extent permitted, waived at such time (taking account
of any prescribed extension of the Initial Offer Period), the Offer will
lapse in the absence of a competing bid and/or unless the Panel agrees
otherwise. If the Offer lapses for any reason, the Offer shall cease to be
capable of further acceptance and the Offeror and LucasVarity
Securityholders shall cease to be bound by prior acceptances. The Offeror
reserves the right, with the permission of the Panel,
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<PAGE> 27
to extend the final date for the expiry of the Initial Offer Period to 28
April, 1999 or such later time as the Panel may agree. Except with the
consent of the Panel, the Offeror may not, for the purposes of determining
whether the Acceptance Condition has been satisfied, take into account
acceptances received or purchases of LucasVarity Securities made after
1.00 p.m. (London time), 8.00 a.m. (New York City time) on 7 April, 1999
(or any time and/or date beyond which the Offeror has stated that the
Offer will not be extended and in respect of which it has not withdrawn
that statement) or such later time(s) and/or date(s) as the Offeror may,
with the permission of the Panel, determine.
(d) If all Conditions are satisfied, fulfilled or, to the extent permitted,
waived and the Initial Offer Period expires, the Offer will remain open
for acceptance for the Subsequent Offer Period of not less than 14
calendar days from the expiry of the Initial Offer Period. If the Offeror
states that the Offer will remain open until further notice, the Offeror
will give not less than 14 calendar days' notice before closing the
Subsequent Offer Period.
(e) If a competitive situation arises after a "no increase" and/or "no
extension" statement has been made by or on behalf of the Offeror in
relation to the Offer, the Offeror may, if it has specifically reserved
the right to do so at the time the statement is made (or otherwise with
the consent of the Panel), withdraw the statement and be free to increase
or, as the case may be, extend the Offer if it complies with the
requirements of the City Code and, in particular, if:
(i) it announces the withdrawal as soon as possible and in any event
within four business days after the date of the announcement of the
competing offer or other competitive situation; and
(ii) it notifies LucasVarity Securityholders in writing of the
withdrawal (or, in the case of LucasVarity Securityholders with
registered addresses outside the United Kingdom or United States or
persons whom the Offeror knows to be nominees, trustees or custodians
holding LucasVarity Securities for such persons, by announcement in
the United Kingdom and United States) at the earliest opportunity.
The Offeror may, if it has specifically reserved the right to do so at the
time the statement is made, choose not to be bound by the terms of a "no
increase" and/or "no extension" statement and may post an increased or
improved offer if it is recommended for acceptance by the Board of
Directors of LucasVarity, or in other circumstances with the consent of
the Panel. Under such conditions, the Offer may be extended to comply with
US federal securities laws.
2. ACCEPTANCE CONDITION
(a) For the purposes of determining whether the Acceptance Condition has been
satisfied, the Offeror may, except as otherwise agreed by the Panel, only
take into account acceptances received or purchases of LucasVarity
Securities made in respect of which all relevant documents are received by
the UK Receiving Agent or the US Depositary:
(i) by 1.00 p.m. (London time), 8.00 a.m. (New York City time) on 7
April, 1999 (or any other date beyond which the Offeror has stated
that the Initial Offer Period will not be extended and has not
withdrawn that statement); or
(ii) if the Initial Offer Period is extended with the consent of the
Panel, such later time(s) or date(s) as the Panel may agree.
If the latest time at which the Offer may become unconditional is extended
beyond midnight (London time), 7.00 p.m. (New York City time) on 7 April,
1999, acceptances received and purchases made in respect of which the
relevant documents are received by the UK Receiving Agent or the US
Depositary after 1.00 p.m. (London time), 8.00 a.m. (New York City time)
on that date may only be taken into account with the agreement of the
Panel, except where the City Code permits otherwise.
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(b) Except as otherwise agreed by the Panel:
(i) an acceptance of the Offer will only be treated as valid for the
purposes of the Acceptance Condition if the requirements of Note 4
and, if applicable, Note 6 to Rule 10 of the City Code are satisfied
in respect of it;
(ii) a purchase of LucasVarity Securities by the Offeror or its nominee
or (if the Offeror is required by the Panel to make an offer for
LucasVarity Shares under Rule 9 of the Code) by a person acting in
concert with the Offeror or its nominee, will only be treated as valid
for the purposes of the Acceptance Condition if the requirements of
Note 5 and, if applicable, Note 6 to Rule 10 of the Code are satisfied
in respect of it; and
(iii) before the Offer may become unconditional, the UK Receiving Agent
must issue a certificate to the Offeror or J.P. Morgan which states
the number of LucasVarity Securities in respect of which acceptances
have been received and not validly withdrawn and the number of
LucasVarity Securities otherwise acquired, whether before or during
the Offer Period, which comply with the provisions of this paragraph
2(b). Copies of such certificate will be sent to the Panel as soon as
possible after it is issued.
(c) For the purpose of determining whether the Acceptance Condition has been
satisfied, the Offeror is not bound (unless required by the Panel) to take
into account any LucasVarity Securities which have been unconditionally
allotted or issued or which arise as a result of the exercise of
conversion rights before the determination takes place unless LucasVarity
or its agent has given written notice to the Offeror, the UK Receiving
Agent or the US Depositary on behalf of the Offeror at one of the
addresses specified at the end of this document containing relevant
details of the allotment, issue or conversion. Notification by e-mail,
telex or facsimile transmission does not constitute written notice for
this purpose.
(d) For the purposes of the Acceptance Condition, references to "LucasVarity
Securities", to the extent they relate to LucasVarity ADSs, shall mean the
LucasVarity Shares represented by such LucasVarity ADSs.
(e) In accordance with a SEC exemptive order received by the Offeror, the
Offeror will announce that it has reserved the right to reduce the
Acceptance Condition at least five business days prior to any reduction in
the percentage of LucasVarity Securities required to satisfy the
Acceptance Condition. The announcement will be made through a press
release and such other methods reasonably designed to inform LucasVarity
Securityholders, including placing an advertisement in a newspaper of
national circulation in the United States. Such announcement will state
the percentage to which the Acceptance Condition may be reduced and state
that such a reduction is possible but that the Offeror need not declare
its actual intentions until it is required to do so under the City Code.
The Offeror will not make such an announcement unless it determines that
there is a significant possibility that sufficient LucasVarity Securities
will be tendered to permit the Acceptance Condition to be satisfied at
such reduced level. Such announcement will also state that LucasVarity
Securityholders who are not willing to accept the Offer if the Acceptance
Condition is reduced to a level lower than 90 per cent. should either not
accept the Offer until the Subsequent Offer Period or be prepared to
withdraw their acceptances promptly following an announcement by the
Offeror of its reservation of the right to reduce the Acceptance
Condition.
3. ANNOUNCEMENTS
(a) Without prejudice to paragraph 4 below, by 8.30 a.m. (London time) in the
United Kingdom and 8.30 a.m. (New York City time) in the United States on
the business day (the "relevant day") after the day on which the Offer is
due to expire or on which all Conditions become or are declared to have
been satisfied, fulfilled or, to the extent permitted, waived or on which
the Offer is revised or is extended (or such later time or date as the
Panel may agree), the Offeror will make an appropriate announcement and
inform the London Stock Exchange and the Dow Jones News Service,
respectively, of the position regarding the
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<PAGE> 29
Offer. In the announcement, the Offeror will state (unless otherwise
permitted by the Panel) the total number of LucasVarity Securities and
rights over LucasVarity Securities (as nearly as practicable):
(i) for which acceptances of the Offer have been received, showing the
extent, if any, to which such acceptances have been received from
persons acting or deemed to be acting in concert with the Offeror;
(ii) held by or on behalf of the Offeror or any person acting or deemed
to be acting in concert with the Offeror before the Offer Period;
(iii) acquired or agreed to be acquired by or on behalf of the Offeror or
any person acting or deemed to be acting in concert with the Offeror
for the purposes of the Offer during the Offer Period; and
(iv) for which acceptances of the Offer have been received from a person
acting or deemed to be acting in concert with the Offeror for the
purposes of the Offer,
and the announcement will specify the percentage of the issued share
capital of LucasVarity represented by each of these figures.
(b) In calculating the number of LucasVarity Securities represented by
acceptances and/or purchases, the Offeror may only include acceptances
and/or purchases if they could be counted towards fulfilling the
Acceptance Condition under Notes 4, 5 and 6 to Rule 10 of the City Code,
unless the Panel agrees otherwise. Subject to this, the Offeror may
include or exclude, for announcement purposes, acceptances and purchases
not in all respects in order or which are subject to verification.
(c) Any decision to extend the Initial Offer Period may be made at any time
up to, and will be announced by, 8.30 a.m. (London time) in the United
Kingdom and 8.30 a.m. (New York City time) in the United States on the
relevant day (or such later time or date as the Panel may agree). The
announcement will state the next expiry date of the Initial Offer Period.
(d) In this Appendix, a reference to the making of an announcement or the
giving of notice by or on behalf of the Offeror includes the release of an
announcement by the Offeror's public relations consultants or by J.P.
Morgan, in each case on behalf of the Offeror, to the press and delivery
by hand or telephone, telex or facsimile or other electronic transmission
of an announcement to the London Stock Exchange and the Dow Jones News
Service, as the case may be. An announcement made otherwise than to the
London Stock Exchange and the Dow Jones News Service will be notified
simultaneously to the London Stock Exchange and the Dow Jones News
Service.
4. RIGHTS OF WITHDRAWAL
(a) Except as provided in this paragraph 4, acceptances and elections are
irrevocable.
(b) LucasVarity Securities tendered pursuant to the Offer may be withdrawn
pursuant to the procedures set out below at any time during the Initial
Offer Period and in certain other circumstances described below.
LucasVarity Securities tendered during the Initial Offer Period and not
validly withdrawn prior to the First Closing Date, and LucasVarity
Securities tendered during the Subsequent Offer Period, may not be
withdrawn except in certain limited circumstances described below.
(c) If the Offeror announces that the Acceptance Condition has been satisfied
and then fails to comply by 3.30 p.m. (London time), 10.30 a.m. (New York
City time) on the relevant day (or such later time and/or date as the
Panel may agree) with any of the other requirements specified in paragraph
3(a) of Part B of this Appendix, a person may withdraw his acceptance by
written notice given by post or by hand to the UK Receiving Agent or the
US Depositary at the addresses set out at the end of this document.
Subject to paragraph 1(c) of Part B of this Appendix, this right of
withdrawal may be terminated not less than eight days after the relevant
day by the Offeror confirming, if such is the case, that the Offer is
still unconditional, and complying with the other requirements specified
in paragraph 3(a) of Part B of this Appendix. If that confirmation is
given, the first period of 14 days referred to in paragraph 1(d) of Part B
of this Appendix will start on the date of that confirmation.
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<PAGE> 30
(d) If a "no increase" and/or "no extension" statement is withdrawn in
accordance with paragraph 1(e) of Part B of this Appendix, a person who
accepts the Offer after the date of the statement may withdraw his
acceptance in the manner set out in paragraph (c) for a period of eight
days after the date on which the Offeror posts the notice of the
withdrawal of that statement to LucasVarity Securityholders.
(e) To be effective, a written notice of withdrawal must be received on a
timely basis by the party (either the UK Receiving Agent or the US
Depositary) to whom the Acceptance Form was originally sent and must
specify the name of the person who has tendered the LucasVarity
Securities, the number of LucasVarity Securities to be withdrawn and (if
certificates or LucasVarity ADRs, as the case may be, have been tendered)
the name of the registered holder of the relevant LucasVarity Securities,
if different from the name of the person who tendered such LucasVarity
Securities.
(f) In respect of LucasVarity ADSs, if LucasVarity ADRs have been delivered
or otherwise identified to the US Depositary, then, prior to the physical
release of such LucasVarity ADRs, the serial numbers shown on such
LucasVarity ADRs must be submitted and, unless the LucasVarity ADSs
evidenced by such LucasVarity ADRs have been delivered by an Eligible
Institution or by means of a Letter of Transmittal, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If
interests in LucasVarity ADSs evidenced by LucasVarity ADRs have been
delivered pursuant to the procedures for book-entry transfer set out in
paragraph 11(c) of Part B of this Appendix, any notice of withdrawal must
also specify the name and number of the account at the appropriate
Book-Entry Transfer Facility to be credited with the withdrawn LucasVarity
ADSs and must otherwise comply with such Book-Entry Transfer Facility's
procedures.
(g) Withdrawals of tendered LucasVarity Securities may not be rescinded
(without the Offeror's consent) and any LucasVarity Securities properly
withdrawn and not properly re-tendered will thereafter be deemed not
validly tendered for the purposes of the Offer. Withdrawn LucasVarity
Securities may be subsequently re-tendered, however, by following one of
the procedures described in either paragraph 9 or 11 of Part B of this
Appendix, as the case may be, at any time prior to the expiry of the
Subsequent Offer Period.
(h) All questions as to the validity (including time of receipt) of any
notice of withdrawal will be determined by the Offeror, whose
determination (except as required by the Panel) will be final and binding.
None of the Offeror, LucasVarity, J.P. Morgan, the US Depositary, the UK
Receiving Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give such notification.
5. THE LOAN NOTE ALTERNATIVE
(a) The Loan Note Alternative is conditional upon all of the Conditions
becoming or being declared satisfied, fulfilled or, to the extent
permitted, waived and will remain open for as long as the Offer remains
open for acceptances. No Loan Notes will be issued unless valid elections
for the Loan Note Alternative are received on or before the date on which
the Offer becomes or is declared unconditional in all respects for at
least L10 million nominal value of Loan Notes. If insufficient elections
are received, LucasVarity Shareholders who validly accept the Offer and
elect for the Loan Note Alternative will instead receive cash in
accordance with the terms of the Offer. Subject as aforesaid, the Loan
Note Alternative will remain open as long as the Offer is open for
acceptance.
(b) No election for the Loan Note Alternative will be valid unless both a
valid acceptance of the Offer and a valid election for the Loan Note
Alternative, duly complete in all respects and accompanied by, if
appropriate, all relevant share certificates and/or other document(s) of
title, are duly received by the time and date on which the Loan Note
Alternative closes.
(c) If any acceptance of the Offer which includes an election for the Loan
Note Alternative is not, and is not deemed to be, valid or complete in all
respects at such time, such election shall for all purposes be void and
the holder(s) of LucasVarity Shares purporting to make such election shall
not, for any purpose, be entitled to receive the Loan Note Alternative,
but any such acceptance which is otherwise valid shall be deemed to be an
acceptance of the Offer (without the Loan Note Alternative) for the number
of
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LucasVarity Shares which are the subject of the acceptance and the
holder(s) of LucasVarity Shares will, on the Offer becoming unconditional,
be entitled to receive the cash consideration due under the Offer.
(d) The insertion of a number in Box 2 on the Form of Acceptance shall,
subject to the other terms of the Offer, be treated in respect of that
number of LucasVarity Shares, as an election for the Loan Note
Alternative.
(e) An election for the Loan Note Alternative will not be valid unless the
Form of Acceptance is completed correctly in all respects and is received
in accordance with paragraph 9 below.
(f) The Loan Notes will be issued in multiples of L1 and fractional
entitlements will be disregarded.
(g) The Loan Note Alternative is not available to any holder of LucasVarity
Shares who is a US Person.
6. REVISED OFFER
(a) Although no revision is envisaged, if the Offer is revised (either in
terms or conditions or in the value or form of the consideration offered
or otherwise), the benefit of the revised Offer will be made available to
a LucasVarity Securityholder who has accepted the Offer (in its original
or any revised form(s)) and not validly withdrawn such acceptance (a
"Previous Acceptor") if the revised Offer represents, on the date on which
it is announced (on such basis as J.P. Morgan may reasonably consider
appropriate), an improvement, or no diminution, in the value of the
consideration offered compared with the consideration previously offered.
The acceptance by or on behalf of a Previous Acceptor of the Offer (in its
original or any revised form(s)) will, subject as provided in paragraphs
6(b), 6(c) and 8, be deemed an acceptance of the revised Offer and will
constitute the appointment of any Director of the Offeror as his attorney
and/or agent with authority:
(i) to accept the revised Offer on his behalf;
(ii) if the revised Offer includes alternative forms of consideration,
to make such elections as those made by the Previous Acceptor or
accept the alternative forms of consideration on his behalf in the
proportions the attorney and/or agent in his absolute discretion
thinks fit; and
(iii) to execute on his behalf in his name any further documents and take
such further actions (if any) as may be required to give effect to
those elections or acceptances.
In making any election or acceptance, the attorney and/or agent will take
into account the nature of any previous acceptance or election made by or
on behalf of the Previous Acceptor and such other facts or matters as he
may reasonably consider relevant.
(b) The deemed acceptance and/or election referred to in paragraph 6(a) will
not apply, and the power of attorney and authorities conferred by that
paragraph will not be exercised if, as a result, the Previous Acceptor
would (on such basis as J.P. Morgan may reasonably consider appropriate)
receive less in aggregate in consideration under the revised Offer than he
would have received in aggregate in consideration as a result of his
acceptance of the Offer in the form originally accepted by him or on his
behalf.
(c) The deemed acceptance and/or election referred to in paragraph 6(a) will
not apply and the power of attorney and the authorities conferred by that
paragraph will be ineffective in the case of a Previous Acceptor who
lodges, within 14 calendar days of the posting of the document containing
the revised Offer, an Acceptance Form (or any other form issued on behalf
of the Offeror) in which he validly elects to receive consideration under
the revised Offer in some other manner.
(d) Subject to paragraph (b), the Offeror and J.P. Morgan reserve the right
to treat an executed Acceptance Form relating to the Offer (in its
original or any previously revised form(s)) which is received (or dated)
after the announcement of any revised Offer as a valid acceptance of the
revised Offer (and where applicable a valid election for the alternative
forms of consideration). That acceptance will constitute an authority in
the terms of paragraph 6(a) on behalf of the relevant LucasVarity
Securityholder.
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7. GENERAL
(a) If the Offer lapses, neither the Offeror nor any person acting, or deemed
to be acting, in concert with the Offeror for the purposes of the Offer
may, pursuant to the City Code, make an offer (whether inside or outside
the United Kingdom) for LucasVarity Securities for a period of one year
following the date of such lapse, except with the permission of the Panel.
(b) If the Offer lapses or is withdrawn, Acceptance Forms, share
certificates, LucasVarity ADRs and other documents of title will be
returned by post (or by such other method as the Panel may approve) within
14 calendar days of the Offer lapsing, at the risk of the LucasVarity
Securityholder in question, to the person or agent whose name is set out
in the relevant box on the Acceptance Form or, if none is set out, to the
first-named holder at his registered address or, in the case of
LucasVarity ADSs, delivered by book-entry transfer into the US
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set out in paragraph 11(c) (such LucasVarity ADSs will be
credited within such period to an account maintained at the appropriate
Book-Entry Transfer Facility).
(c) The UK Receiving Agent will, immediately after the Offer lapses (or
within such longer period as the Panel may permit, not exceeding 14 days
of the Offer lapsing), instruct CRESTCo to transfer all LucasVarity Shares
held in escrow balances and in relation to which it is the escrow agent
for the purposes of the Offer to the original available balances of the
relevant LucasVarity Shareholders.
(d) Except with the consent of the Panel:
(i) settlement of the consideration to which any LucasVarity
Securityholder is entitled under the Offer will be fully implemented
in accordance with the terms of the Offer without regard to any lien,
right of set-off, counterclaim or other analogous right to which the
Offeror may otherwise be, or claim to be, entitled against that
LucasVarity Securityholder; and
(ii) settlement of the consideration will be effected in the manner
prescribed in paragraph 18 of the letter from J.P. Morgan contained in
this document not later than 14 calendar days after the later of the
First Closing Date and the date of receipt of a valid and complete
Acceptance Form from such holder of LucasVarity Securities.
(e) The terms, provisions, instructions and authorities contained in the
Acceptance Forms also constitute part of the terms of the Offer. A word or
expression defined in this document has the same meaning when used in the
Acceptance Forms, unless the context requires otherwise.
(f) Any accidental omission or failure to dispatch this document, the
Acceptance Forms, any other documents relating to the Offer or any notice
required to be dispatched under the terms of the Offer to, or any failure
to receive the same by, any person to whom the Offer is, or should be,
made will not in any way invalidate the Offer. Subject to the provisions
of paragraph 8, the Offer is made to any LucasVarity Securityholder to
whom this document and the Acceptance Forms or any related document may
not have been dispatched or who may not receive such documents, and these
persons may collect the relevant documents from the UK Receiving Agent,
the US Depositary, the Information Agent or J.P. Morgan.
(g) Subject to the City Code, the Offeror and J.P. Morgan reserve the right
to treat as valid in whole or in part any acceptance of the Offer if
received by the UK Receiving Agent or US Depositary or otherwise on behalf
of the Offeror which is not entirely in order or in the correct form or
which is not accompanied by (as applicable) the relevant transfer to
escrow or the relevant share certificates and/or other documents of title
or which is received by it in a form or at a place or places other than as
set out in this document or the relevant Acceptance Form. In that event,
no payment of cash, or, if applicable, issue of Loan Notes under the Offer
will be made until after the acceptance is entirely in order and (as
applicable) the relevant transfer to escrow has settled or the relevant
share certificate(s) and/or other document(s) of title or indemnities
satisfactory to the Offeror have been received by the UK Receiving Agent
or the US Depositary, as the case may be.
(h) If all Conditions are satisfied, fulfilled or, to the extent permitted,
waived, and sufficient acceptances are received and/or sufficient
LucasVarity Securities are otherwise acquired, the Offeror intends to
apply the
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provisions of sections 428-430F of the Companies Act to acquire
compulsorily any outstanding LucasVarity Securities to which the Offer
relates (as defined in the Acceptance Condition). The Offeror also intends
that LucasVarity shall apply for cancellation of the listing of the
LucasVarity Shares on the London Stock Exchange and the listing of the
LucasVarity ADSs on the NYSE and that LucasVarity shall terminate the
LucasVarity ADR facility in accordance with the deposit agreement relating
thereto.
(i) All powers of attorney, appointments of agents and authorities on the
terms conferred by or referred to in this Appendix or in the Acceptance
Forms are given by way of security for the performance of the obligations
of the LucasVarity Securityholder and are irrevocable in accordance with
section 4 of the Powers of Attorney Act 1971, except in the circumstances
where the donor of the power of attorney or authority validly withdraws
his acceptance in accordance with paragraph 4.
(j) No acknowledgement of receipt of any Acceptance Form, share certificate,
LucasVarity ADR or other document of title will be given. All
communications, notices, certificates, LucasVarity ADRs, documents of
title and remittances to be delivered by, and sent to or from, LucasVarity
Securityholders (or their designated agent(s)) will be delivered or sent
at their own risk.
(k) If the Offer becomes unconditional, all mandates and other instructions
or notices recorded by the LucasVarity Securityholder immediately before
the Offer becomes unconditional relating to holdings of LucasVarity
Securities will, where relevant and until revoked, continue in force in
relation to Loan Notes issued under the Offer.
(l) The Offeror and J.P. Morgan reserve the right to notify any matter,
including the making of the Offer, to all or any LucasVarity
Securityholders:
(i) with a registered address outside the United Kingdom or the United
States; or
(ii) whom the Offeror or J.P. Morgan knows to be a custodian, trustee or
nominee holding LucasVarity Securities for persons who are citizens,
residents or nationals or jurisdictions outside the United Kingdom or
the United States,
by announcement in the United Kingdom to the London Stock Exchange and in
the United States to the Dow Jones News Services or in any other
appropriate manner or by paid advertisement in a newspaper published and
circulated in each of the United Kingdom and the United States. Such
notice will be deemed to have been sufficiently given, despite any failure
by LucasVarity Securityholders to receive or see that notice. A reference
in this document to a notice or the provision of information in writing by
or on behalf of the Offeror is to be construed accordingly. No such
document will be sent to an address in Canada, Australia or Japan.
(m) The Offer is made at 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on 6 February, 1999 and is capable of acceptance from and after that
time. Acceptance Forms and copies of this document may be collected from
the UK Receiving Agent, the US Depositary, the Information Agent or J.P.
Morgan at one of the addresses specified at the end of this document. The
Offer is made by means of this document.
(n) This Offer is being extended by means of an advertisement to be inserted
in the Financial Times (United Kingdom edition only) on 6 February 1999
and The New York Times on 6 February, 1999 to all persons to whom this
document or an Acceptance Form may not be dispatched (or by whom such
documents may not be received) who hold or are entitled to have allotted
or issued to them LucasVarity Securities.
(o) The Offer, all acceptances of the Offer and all elections in respect of
it, are governed by and will be construed in accordance with English law.
Execution by or on behalf of a LucasVarity Securityholder of an Acceptance
Form constitutes his irrevocable submission to the jurisdiction of the
courts of England in relation to all matters arising in connection with
the Offer. However, the conduct of the Offer is also subject to US federal
securities laws and the securities laws of the states and other
jurisdictions in the US in which the Offer is being made if, and to the
extent, applicable to the Offer.
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<PAGE> 34
8. OVERSEAS LUCASVARITY SECURITYHOLDERS
(a) The making of the Offer (including the Loan Note Alternative) in, or to
certain persons resident in, or nationals or citizens of, jurisdictions
outside the United Kingdom or the United States (and the availability of
Loan Notes to such persons or US Persons) or to their nominees or trustees
may be prohibited or affected by the laws of the relevant jurisdiction.
LucasVarity Securityholders who are persons, citizens, residents or
nationals of jurisdictions outside the United Kingdom and the United
States (or, in the case of Loan Notes, the United Kingdom only) should
inform themselves about and observe any applicable legal requirements. It
is the responsibility of such LucasVarity Securityholders wishing to
accept the Offer or the Loan Note Alternative to satisfy themselves as to
the full observance of the laws of the relevant jurisdiction in connection
with the Offer. This includes the obtaining of any governmental, exchange
control or other consents which may be required, compliance with other
necessary formalities needing to be observed and the payment of any issue,
transfer or other taxes due in that jurisdiction by whomsoever payable and
the Offeror and J.P. Morgan will be fully indemnified and held harmless by
any LucasVarity Securityholder for whom the Offeror or J.P. Morgan are
required to pay any issue, transfer or other taxes. Loan Notes are not
being offered to LucasVarity Securityholders who are US Persons, or to
certain other overseas persons.
(b) The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan by use of the mails of, or by any means or
instrumentality of interstate or foreign commerce of, or of any facility
of a national securities exchange of Canada, Australia or Japan. This
includes, but is not limited to, facsimile transmission, e-mail, telex and
telephone. Accordingly, copies of this document, the Acceptance Forms, and
any related offer documents are not being, and must not be mailed, or
otherwise distributed or sent in, into or from Canada, Australia or Japan.
Persons receiving such documents (including, without limitation,
custodians, nominees and trustees) must not distribute, mail or send them
in, into or from Canada, Australia or Japan, use the Canadian, Australian
or Japanese mails or any such means, instrumentality or facility in
connection with the Offer, and so doing may invalidate any related
purported acceptance of the Offer. Persons wishing to accept the Offer
must not use the Canadian, Australian or Japanese mails or any such means,
instrumentality or facility for any purpose directly or indirectly
relating to acceptance of the Offer. Envelopes containing Acceptance Forms
in respect of the Offer must not be postmarked in Canada, Australia or
Japan (and, if electing for the Loan Note Alternative, the US) or
otherwise despatched from those jurisdictions and all acceptors must
provide addresses outside Canada, Australia or Japan for the receipt of
the consideration to which they are entitled under the Offer or for the
return of Acceptance Forms and/or other documents of title.
(c) Subject as provided below, a LucasVarity Securityholder will be deemed
not have accepted the Offer if:
(i) he cannot give the representations and warranties set out in
paragraph 10(b) and 11(i)(ii)(dd);
(ii) he completes the relevant box of the Acceptance Form with an
address in Canada, Australia or Japan or has a registered address in
Canada, Australia or Japan and in either case he does not insert in
the relevant Box of the Acceptance Form the name and address of a
person or agent outside Canada, Australia or Japan to whom he wishes
the consideration to which he is entitled under the Offer to be sent;
(iii) he inserts in the relevant Box of the Acceptance Form the name and
address of a person or agent in Canada, Australia or Japan to whom he
wishes the consideration to which he is entitled under the Offer to be
sent; or
(iv) the Acceptance Form received from him is in an envelope postmarked
in, or which otherwise appears to the Offeror or its agents to have
been sent from, Canada, Australia or Japan.
(d) If any person, despite the restrictions referred to in paragraph 8(b) and
whether pursuant to a contractual or legal obligation or otherwise,
forwards this document, the Acceptance Form or any related offering
document in, into or from Canada, Australia or Japan or uses the mails or
any means or instrumentality (including, without limitation, facsimile
transmission, e-mail, telex and telephones) of interstate or foreign
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<PAGE> 35
commerce of, or any facilities of a national securities exchange of,
Canada, Australia or Japan in connection with that forwarding, that person
should:
(i) inform the recipient of that fact;
(ii) explain to the recipient that such action may invalidate any
purported acceptance by the recipient; and
(iii) draw the attention of the recipient to this paragraph 8.
(e) If any written notice from a LucasVarity Securityholder withdrawing his
acceptance in accordance with paragraph 4 is received in an envelope
postmarked in, or which otherwise appears to the Offeror or its agents to
have been sent from Canada, Australia or Japan, the Offeror reserves the
right, in its absolute discretion, to treat that notice as invalid.
(f) The provisions of this paragraph 8 and any other terms of the Offer
relating to overseas holders of LucasVarity Securities may be waived,
varied or modified as regards specific LucasVarity Securityholders or on a
general basis by the Offeror in its sole discretion. Subject to this
discretion, the provisions of this paragraph 8 supersede any terms of the
Offer inconsistent with them. A reference in this paragraph 8 to a
LucasVarity Securityholder includes the person or persons executing the
Acceptance Form and, in the event of more than one person executing the
Acceptance Form, the provisions of this paragraph 8 apply to them jointly
and severally.
(g) The Loan Notes which may be issued pursuant to the Offer have not been,
and will not be, registered under the US Securities Act, or under the
securities laws of any State of the United States and the relevant
clearances have not been, and will not be, obtained from the regulatory
authority of any province or territory of Canada. In addition, no
prospectus in relation to the Loan Notes has been, or will be, lodged
with, or registered by, the Australian Securities and Investments
Commission and no steps have been taken, nor will any be taken, to enable
the Loan Notes to be offered in compliance with applicable securities laws
of Japan. The Loan Notes may therefore not be offered, sold, resold,
delivered or distributed, directly or indirectly, in or into the United
States or to US Persons or in or into Canada, Australia or Japan, or any
other jurisdiction if to do so would constitute a violation of the
relevant laws in such jurisdiction. If, in respect of an Acceptance Form
from any LucasVarity Shareholder, the holder is unable to make the
representations and warranties set out in paragraph 10(b) and
11(i)(ii)(dd), the Offeror reserves the right, in its absolute discretion,
to ignore any election in that Acceptance Form to receive Loan Notes and
to treat it instead as an acceptance of the Offer for cash.
9. PROCEDURES FOR TENDERING LUCASVARITY SHARES
(a) Holders of LucasVarity Shares will have received with this document a
Form of Acceptance. This section should be read together with the Form of
Acceptance. The provisions of this section shall be deemed to be
incorporated in, and to form a part of, the Form of Acceptance. The
instructions printed on the Form of Acceptance shall be deemed to form
part of the terms of the Offer.
If a holder of LucasVarity Shares holds LucasVarity Shares in both
certificated and uncertificated form, he should complete a separate Form
of Acceptance for each holding. Similarly, such holder should complete a
separate Form of Acceptance for LucasVarity Shares held in uncertificated
form, but under different member account IDs, and for LucasVarity Shares
held in certificated form, but under different designations.
(b) To accept the Offer, any LucasVarity Shareholder, including any person in
the US who holds LucasVarity Shares, wishing to accept the Offer in
respect of all or any portion of such holder's LucasVarity Shares, should
complete Box 1 and, if such holder's LucasVarity Shares are in CREST, Box
5, and sign Box 8 on the Form of Acceptance in accordance with the
instructions printed on it. ALL LUCASVARITY SHAREHOLDERS WHO ARE
INDIVIDUALS SHOULD SIGN THE FORM OF ACCEPTANCE IN THE PRESENCE OF A
WITNESS WHO SHOULD ALSO SIGN BOX 8 IN ACCORDANCE WITH THE INSTRUCTIONS
PRINTED ON IT. UNLESS WITNESSED, AN ACCEPTANCE WILL NOT BE VALID.
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<PAGE> 36
(c) An accepting LucasVarity Shareholder should return the completed, signed
and witnessed Form of Acceptance, whether or not such LucasVarity Shares
are in CREST, to the UK Receiving Agent or the US Depositary. The
completed Form of Acceptance, together, if such holder's LucasVarity
Shares are in certificated form, with his share certificate(s) and/or
other document(s) of title, must be lodged with the UK Receiving Agent or
the US Depositary, as soon as possible, but in any event so as to arrive
not later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on
9 March, 1999. If you have any questions as to how to complete the Form of
Acceptance, please contact the UK Receiving Agent on +44 (0) 117 305 1001
or the US Depositary on (800) 428-4237 or the Information Agent on (212)
440-9800 or (800) 223-2064.
A person in the US who holds LucasVarity Shares may submit the Form of
Acceptance, together with his share certificate(s) and/or other
document(s) of title, to the US Depositary, who will receive such Form(s)
of Acceptance and certificate(s) and/or other document(s) of title on
behalf of the UK Receiving Agent. A Form of Acceptance contained in an
envelope postmarked Canada, Australia or Japan or otherwise appearing to
the Offeror or its agents to have been sent from Canada, Australia or
Japan may be rejected as invalid.
(d) If LucasVarity Shares are in uncertificated form, the holder should
insert in Box 5 of the Form of Acceptance the participant ID and member
account ID under which such LucasVarity Shares are held by him in CREST
and otherwise complete and return the Form of Acceptance as described
above. In addition, such holders should take (or procure to be taken) the
action set out below to transfer the LucasVarity Shares in respect of
which he wishes to accept the Offer to an escrow balance, specifying the
UK Receiving Agent (in its capacity as a CREST participant under the
participant ID referred to below) as the escrow agent, as soon as possible
but in any event so that the transfer to escrow settles no later than 3.00
p.m. (London time), 10.00 a.m. (New York City time) on 9 March, 1999.
(e) If the LucasVarity Shareholder is a CREST sponsored member, he should
refer to his CREST sponsor before taking any action. Such holder's sponsor
will be able to confirm details of his participant ID and the member
account ID under which his LucasVarity Shares are held. In addition, only
his CREST sponsor will be able to send the TTE Instruction to CRESTCo in
relation to his LucasVarity Shares.
(f) The holder of such LucasVarity Shares should send (or, if he is a CREST
sponsored member, procure that his CREST sponsor sends) a TTE Instruction
to CRESTCo which must be properly authenticated in accordance with
CRESTCo's specifications and which must contain, in addition to the other
information that is required for a TTE Instruction to settle in CREST, the
following details:
(i) the number of LucasVarity Shares to be transferred to an escrow
balance;
(ii) the member account ID of such LucasVarity Shareholder. This must be
the same member account ID as the member account ID that is inserted
in Box 5 of the Form of Acceptance;
(iii) the participant ID of such LucasVarity Shareholder. This must be
the same participant ID as the participant ID that is inserted in Box
5 of the Form of Acceptance;
(iv) the participant ID of the escrow agent (the UK Receiving Agent in
its capacity as a CREST receiving agent). This is 3RA39;
(v) the member account ID of the escrow agent. This is LUCAS;
(vi) the Form of Acceptance Reference Number. This is the Form of
Acceptance Reference Number that appears next to Box 5 on page 3 of
the Form of Acceptance. This Reference Number should be inserted in
the first eight characters of the shared note field on the TTE
Instruction. Such insertion will enable the UK Receiving Agent to
match the transfer to escrow to your Form of Acceptance. The holder of
such shares should keep a separate record of this Form of Acceptance
Reference Number for future reference;
(vii) the Intended Settlement Date. This should be as soon as possible and
in any event not later than 3.00 p.m. (London time), 10.00 a.m. (New
York City time) on 9 March, 1999;
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(viii) the Corporate Action ISIN. This is GB0005386866; and
(ix) the Corporate Action Number for the Offer. This is allocated by
CRESTCo and can be found by viewing the relevant Corporate Action
Details in CREST.
(g) After settlement of the TTE Instruction, such LucasVarity Shareholder
will not be able to access the LucasVarity Shares concerned in CREST for
any transaction or charging purposes. If the Conditions are satisfied,
fulfilled or, to the extent permitted, waived, the escrow agent will
transfer the LucasVarity Shares concerned to the Offeror in accordance
with paragraph 10(d).
(h) Such LucasVarity Shareholder is recommended to refer to the CREST Manual
published by CRESTCo for further information on the CREST procedures
outlined above. For ease of processing, such holder is requested, wherever
possible, to ensure that a Form of Acceptance relates to only one transfer
to escrow.
(i) If no Form of Acceptance Reference Number, or an incorrect Form of
Acceptance Reference Number, is included on the TTE Instruction, the
Offeror may treat any amount of LucasVarity Shares transferred to an
escrow balance in favour of the escrow agent specified above from the
participant ID and member account ID identified in the TTE Instruction as
relating to any Form(s) of Acceptance which relate(s) to the same member
account ID and participant ID (up to the amount of LucasVarity Shares
inserted or deemed to be inserted on the Form(s) of Acceptance concerned).
(j) Such LucasVarity Shareholder should note that CRESTCo does not make
available special procedures, in CREST, for any particular corporate
action. Normal system timings and limitations will therefore apply in
connection with a TTE Instruction and its settlement. Such holder should
therefore ensure that all necessary action is taken by him (or by his
CREST sponsor) to enable a TTE Instruction relating to his LucasVarity
Shares to settle prior to 3.00 p.m. (London time), 10.00 a.m. (New York
City time) on 9 March, 1999. In this connection, such holder is referred
in particular to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
(k) The Offeror will make an appropriate announcement if any of the details
contained in this paragraph 9 alter for any reason.
(l) Normal CREST procedures (including timings) apply in relation to any
LucasVarity Shares that are, or are to be, converted from uncertificated
to certificated form, or from certificated to uncertificated form, during
the course of the Offer (whether any such conversion arises as a result of
a transfer of LucasVarity Shares or otherwise). LucasVarity Shareholders
who are proposing so to convert any LucasVarity Shares are recommended to
ensure that the conversion procedures are implemented in sufficient time
to enable the person holding or acquiring the LucasVarity Shares as a
result of the conversion to take all necessary steps in connection with an
acceptance of the Offer (in particular, as regards delivery of share
certificates or other documents of title or transfers to an escrow balance
as described above) prior to 3.00 p.m. (London time), 10.00 a.m. (New York
City time) on 9 March, 1999.
(m) If the share certificate(s) and/or other document(s) of title is/are not
readily available or is/are lost, the Form of Acceptance should
nevertheless be completed, signed and returned as stated above to the UK
Receiving Agent or the US Depositary so as to be received as soon as
possible, but in any event no later than 3.00 p.m. (London time), 10.00
a.m. (New York City time) on 9 March, 1999, together with any share
certificate(s) and/or other document(s) of title that is/are available,
accompanied by a letter stating that the balance will follow or that the
accepting holder has lost one or more of his share certificate(s) and/or
other documents of title. If the share certificate(s) and/or other
document(s) of title are lost, the accepting holder should request the
registrar of LucasVarity, Lloyds TSB Registrars, to send him a letter of
indemnity for completion in accordance with the instructions given. When
completed, the letter of indemnity must be lodged with the UK Receiving
Agent or the US Depositary, in accordance with the instructions given, in
support of the Form of Acceptance.
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10. FORM OF ACCEPTANCE FOR LUCASVARITY SHAREHOLDERS
Each holder of LucasVarity Shares who executes and lodges or has executed and
lodged on his behalf a Form of Acceptance with the UK Receiving Agent or the US
Depositary, subject to the rights of withdrawal set out in this document,
irrevocably (and so as to bind himself, his heirs, successors and assigns and
his personal or legal representatives):
(a) (i) accepts the Offer in respect of the number of LucasVarity Shares
inserted or deemed to be inserted in Box 1 of the Form of Acceptance;
(ii) if applicable, elects for the Loan Note Alternative in respect of
such amount of cash as would otherwise fall to be paid under the Offer
in respect of the number of LucasVarity Shares inserted, or deemed to
be inserted, in Box 2 of the Form of Acceptance; and
(iii) agrees to execute any further documents and give any further
assurances which may be required to enable the Offeror to obtain the
full benefit of paragraph 9 and this paragraph 10 and/or to perfect
any of the authorities expressed to be given hereunder,
in each case on and subject to the terms and Conditions set out or
referred to in this document and the Form of Acceptance;
(b) represents and warrants to the Offeror and J.P. Morgan that:
(i) he has not received or sent copies or originals of this document,
the Acceptance Forms or any related offer documentation in, into or
from Canada, Australia or Japan;
(ii) he has not used in connection with the Offer or the execution or
delivery of the Acceptance Forms, directly or indirectly, the mails
of, or any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) of interstate or foreign
commerce of, or of any facility of a national securities exchange of
Canada, Australia or Japan;
(iii) he is accepting the Offer from outside Canada, Australia or Japan;
(iv) if he is electing for the Loan Note Alternative, he is not a US
Person and he is not accepting the Offer with a view to the offer,
sale or delivery, directly or indirectly, of any Loan Notes in or into
the United States, Canada, Australia or Japan and will not hold or
acquire any Loan Notes for any other person who he has reason to
believe is purchasing for the purpose of that offer, sale or delivery;
and
(v) he is not an agent or fiduciary acting on a non-discretionary basis
for a principal, unless such agent or fiduciary is an authorized
employee of such principal or such principal has given any
instructions with respect to the Offer from outside Canada, Australia
or Japan;
(c) appoints, in accordance with section 4 of the Powers of Attorney Act
1971, any Director of, or any person authorised by, the Offeror or J.P.
Morgan as his agent and/or attorney (subject to the Offer becoming
unconditional and him not having validly withdrawn his acceptance) with an
irrevocable instruction and authorisation to:
(i) complete and execute any form of transfer, renunciation or other
document in relation to the LucasVarity Shares referred to in
paragraph (a)(i) in favour of the Offeror or as it may direct;
(ii) deliver any form of transfer, renunciation or other document with
any certificate or other document of title for registration within six
months of the Offer becoming unconditional; and
(iii) take any other action as the agent and/or attorney may think
necessary or expedient in connection with his acceptance of the Offer
and to vest in the Offeror (or as it may direct) the LucasVarity
Shares referred to in paragraph (a)(i);
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(d) undertakes that the execution of the Form of Acceptance and its delivery
to the UK Receiving Agent or the US Depositary constitutes an irrevocable
instruction and authority:
(i) subject to the Offer becoming unconditional and him not having
validly withdrawn his acceptance, to transfer to the Offeror (or to
such other person or persons as the Offeror or its agent may direct)
by means of CREST all or any of the Relevant LucasVarity Shares (but
not exceeding the number of LucasVarity Shares in respect of which the
Offer is accepted or deemed to be accepted); and
(ii) if the Offer does not become unconditional, to give instructions to
CRESTCo immediately after the Offer lapses (or within such longer
period as the Panel may permit, not exceeding 14 days of the Offer
lapsing) to transfer all Relevant LucasVarity Shares to the original
available balance of the accepting LucasVarity Shareholder.
In this paragraph, "Relevant LucasVarity Shares" means uncertificated
LucasVarity Shares in respect of which a transfer or transfers to escrow
has or have been effected in accordance with the procedures described in
paragraph 9 and where the transfer or transfers to escrow was or were made
in respect of LucasVarity Shares held under the same member account ID and
participant ID as the member account ID and participant ID relating to the
relevant Form of Acceptance (but irrespective of whether or not any Form
of Acceptance Reference Number, or a Form of Acceptance Reference Number
corresponding to that appearing on the relevant Form of Acceptance, was
included in the relevant transfer to escrow instruction);
(e) authorises and requests (subject to the Offer becoming unconditional and
him not having validly withdrawn his acceptance):
(i) LucasVarity or its agents to procure the registration of the
transfer of the LucasVarity Shares referred to in paragraph (a)(i)
that are in certificated form and the delivery of the share
certificate(s) and other document(s) of title in respect of the
LucasVarity Shares to the Offeror or as it may direct;
(ii) if the LucasVarity Shares referred to in paragraph (a)(i) are in
certificated form or paragraph (f) applies, the Offeror or its agents
to procure the despatch by post (or by such other method as may be
approved by the Panel) of the consideration to which he is entitled
under the Offer, together with documents of title for any Loan Note in
respect of his election for the Loan Note Alternative, at his risk to
the person or agent whose name and address is set out in Box 7 of the
Form of Acceptance or, if no person or agent's name and address is set
out, to the first-named holder at his registered address;
(iii) if the LucasVarity Shares referred to in paragraph (a)(i) are in
uncertificated form, the Offeror or its agents to ensure that an
assured payment obligation is created in favour of the LucasVarity
Shareholder's payment bank in accordance with the CREST assured
payment arrangements in respect of any cash consideration to which
that shareholder is entitled; and
(iv) the Offeror, LucasVarity or their respective agents to record and
act on any instructions with regard to payments or notices which have
been entered in the records of LucasVarity in respect of his holding
of LucasVarity Shares;
(f) agrees that:
(i) the Offeror may decide to despatch all or part of the consideration
payable to a shareholder whose LucasVarity Shares are in
uncertificated form in accordance with paragraph (e)(ii); and
(ii) the consideration payable to a shareholder whose LucasVarity Shares
are in uncertificated form will be despatched in accordance with
paragraph (e)(ii) if the shareholder is a CREST member whose
registered address is in Canada, Australia or Japan;
(g) gives authority to any Director of, or person authorised by, the Offeror
or J.P. Morgan within the terms of paragraph 6;
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<PAGE> 40
(h) subject to the Offer becoming unconditional and him not having validly
withdrawn his acceptance (or if the Offer will become unconditional or
lapse on the outcome of the resolution in question or if the Panel gives
its consent) and pending registration:
(i) authorises the Offeror or its agent to direct the exercise of any
votes and any other rights and privileges (including the right to
requisition the convening of a general or separate class meeting of
LucasVarity) attaching to the LucasVarity Shares referred to in
paragraph (a)(i);
(ii) authorises LucasVarity or its agent to send any notice, circular,
warrant or other document or communication which may be required to be
sent to him as a member of LucasVarity to the Offeror, care of the UK
Receiving Agent;
(iii) authorises any Director of, or person authorised by, the Offeror or
J.P. Morgan to sign any document and do such things as may in the
opinion of that agent and/or attorney seem necessary or desirable in
connection with the exercise of any votes or other rights or
privileges attaching to the LucasVarity Shares held by him (including,
without limitation, signing any consent to short notice of a general
or separate class meeting as his agent and/or attorney and on his
behalf and executing a form of proxy appointing any person nominated
by the Offeror to attend general and separate class meetings of
LucasVarity and attending any such meeting and exercising the votes
attaching to the LucasVarity Shares referred to in paragraph (a)(i) on
his behalf, where relevant, such votes to be cast so far as possible
to satisfy any outstanding condition of the Offer); and
(iv) agrees not to exercise any such rights without the consent of the
Offeror and irrevocably undertakes not to appoint a proxy for or to
attend such general or separate class meetings of LucasVarity.
This authority will cease to be valid if the acceptance is validly
withdrawn in accordance with paragraph 4;
(i) agrees that he will deliver to the UK Receiving Agent or the US
Depositary, or procure the delivery to the UK Receiving Agent or the US
Depositary of, his certificate(s) and/or other document(s) of title in
respect of those LucasVarity Shares referred to in paragraph (a)(i) that
are in certificated form, or an indemnity acceptable to the Offeror, as
soon as possible and in any event within two months of the Offer becoming
unconditional in all respects;
(j) agrees that he will take (or procure to be taken) the necessary action
to transfer all those LucasVarity Shares referred to in paragraph (a)(i)
that are in uncertificated form to an escrow balance as soon as possible
and in any event so that the transfer to escrow settles within two months
of the Offer becoming unconditional;
(k) agrees that if, for any reason, any LucasVarity Shares in respect of
which a transfer to an escrow balance has been effected are converted to
certificated form, he will immediately deliver or ensure the immediate
delivery of the share certificates or other documents of title in respect
of all those LucasVarity Shares that are converted to the UK Receiving
Agent or the US Depositary at the relevant address specified at the end of
this document;
(l) agrees that the creation of an assured payment obligation in favour of
his payment bank in accordance with the CREST assured payment arrangements
as referred to in paragraph (e)(iii) will, to the extent of the obligation
so created, discharge fully any obligation of the Offeror or J.P. Morgan
to pay to him the cash consideration to which he is entitled under the
Offer;
(m) agrees that he will do everything necessary or expedient to vest in the
Offeror or its nominees the LucasVarity Shares referred to in paragraph
(a)(i) and to enable the UK Receiving Agent or the US Depositary to
perform its functions as escrow agent for the purposes of the Offer;
(n) agrees to ratify everything which may be done or effected by any Director
of, or person authorised by, the Offeror, J.P. Morgan, the UK Receiving
Agent or the US Depositary in exercise of any of the powers and/or
authorities under Part B of this Appendix;
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<PAGE> 41
(o) agrees that, if the provisions of Part B of this Appendix will be
unenforceable or invalid or will not operate so as to afford the Offeror,
J.P. Morgan, the UK Receiving Agent or the US Depositary or any of their
respective Directors or persons authorised by them, the benefit of any
authority expressed to be given in Part B of this Appendix, he will, with
all practicable speed, do everything that may be required or desirable to
enable the Offeror, J.P. Morgan, the UK Receiving Agent and the US
Depositary and any of their respective Directors or persons authorised by
them to secure the full benefit of Part B of this Appendix;
(p) represents and warrants that he is entitled to sell and transfer the
beneficial ownership of the LucasVarity Shares referred to in paragraph
(a)(i) and that such shares are sold fully paid and free from all liens,
equities, charges, encumbrances and other interests and together with all
rights attaching to them on or after 27 January, 1999 including, without
limitation, the right to receive and retain all dividends and other
distributions declared, paid or made on or after that date;
(q) agrees that the terms of the Offer and the Conditions are deemed to be
incorporated in, and form part of, the Form of Acceptance;
(r) agrees that on execution the Form of Acceptance takes effect as a deed;
(s) agrees that the execution of the Form of Acceptance constitutes his
submission to the jurisdiction of the courts of England in relation to all
matters arising in connection with the Offer and the Form of Acceptance;
and
(t) agrees and acknowledges that he is not a customer (as defined in the
rules of The Securities and Futures Authority Limited) of J.P. Morgan in
connection with the Offer.
A reference in this paragraph 10 to a holder of LucasVarity Shares includes a
reference to the person or persons executing the Form of Acceptance and, in the
event of more than one person executing a Form of Acceptance, the provisions of
this paragraph 10 will apply to them jointly and to each of them.
11. PROCEDURES FOR TENDERING LUCASVARITY ADSS
(a) If you are a holder of LucasVarity ADSs evidenced by LucasVarity ADRs,
you will have also received a Letter of Transmittal and Notice of
Guaranteed Delivery for use in connection with the Offer. This section
should be read together with the instructions on the Letter of
Transmittal. The provisions of this section are incorporated into, and
form a part of, the relevant Letter of Transmittal. The instructions
printed on the relevant Letter of Transmittal shall be deemed to form part
of the terms of the Offer.
(b) For a holder of LucasVarity ADSs evidenced by LucasVarity ADRs to tender
such LucasVarity ADSs validly pursuant to the Offer, either:
(i) a properly completed and duly executed Letter of Transmittal,
together with any required signature guarantees and any other required
documents, must be received by the US Depositary at one of its
addresses set out at the end of this document, and the LucasVarity
ADRs evidencing such LucasVarity ADSs must be either received by the
US Depository at one of such addresses or delivered pursuant to the
procedures for book-entry transfer set out below (and a Book-Entry
Confirmation received by the US Depositary in accordance with such
procedures); or
(ii) such holder must comply with the Guaranteed Delivery Procedures set
out in paragraph (h) below.
The Offer in respect of LucasVarity ADSs evidenced by LucasVarity ADRs
(which for this purpose includes the LucasVarity Shares represented by the
LucasVarity ADSs) shall be validly accepted by delivery of a Letter of
Transmittal, the relevant LucasVarity ADRs evidencing LucasVarity ADSs and
other required documents to the US Depositary by a LucasVarity ADS holder
(without any further action by the US Depositary) subject to the terms and
Conditions set out in this document and the Letter of Transmittal. The
acceptance of the Offer by a tendering holder of LucasVarity ADSs
evidenced by LucasVarity ADRs pursuant to the procedures described above,
subject to the withdrawal rights described below, will be deemed to
constitute a binding agreement between such tendering holder of
LucasVarity
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<PAGE> 42
ADSs and the Offeror upon the terms and subject to the Conditions. If a
LucasVarity ADR evidencing a LucasVarity ADS has been tendered by a holder
of LucasVarity ADSs, the LucasVarity Shares represented by such
LucasVarity ADSs may not be tendered independently. A Letter of
Transmittal and other required documents contained in an envelope
postmarked Canada, Australia or Japan or otherwise appearing to the
Offeror or its agents to have been sent from Canada, Australia or Japan
may be rejected as invalid.
(c) Book-entry transfer
The US Depositary will establish an account at the Book-Entry Transfer
Facility with respect to interests in LucasVarity ADSs evidenced by
LucasVarity ADRs held in book-entry form for the purposes of the Offer
within two business days from the date of this document. Any financial
institution that is a participant in any of the Book-Entry Transfer
Facility's systems may make book-entry delivery of interests in
LucasVarity ADSs by causing the Book-Entry Transfer Facility to transfer
such interests in LucasVarity ADSs into the US Depositary's account at the
Book-Entry Transfer Facility in accordance with that Book-Entry Transfer
Facility's procedure for such transfer.
Although delivery of interests in LucasVarity ADSs evidenced by
LucasVarity ADRs may be effected through book-entry transfer into the US
Depositary's account of the Book-Entry Transfer Facility, either:
(i) the Letter of Transmittal, properly completed and duly executed,
together with any required signature guarantees; or
(ii) an Agent's Message (as defined below),
and, in either case, any other required documents must in any case be
transmitted to, and received by, the US Depositary at one of its addresses
set out at the end of this document before LucasVarity ADSs evidenced by
LucasVarity ADRs will be either counted as a valid acceptance, or
purchased, or such holder must comply with the Guaranteed Delivery
Procedures described below. The term "Agent's Message" means a message
transmitted by the Book-Entry Transfer Facility to, and received by, the
US Depositary and forming part of a Book-Entry Confirmation that states
that such Book-Entry Transfer Facility has received an express
acknowledgement from the participant in such Book-Entry Transfer Facility
tendering the interests in LucasVarity ADSs that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal
and that the Offeror may enforce such agreement against that participant.
Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the US Depositary.
(d) Method of delivery
The method of delivery of LucasVarity ADRs, Letters of Transmittal and all
other required documents is at the option and risk of the tendering holder
of LucasVarity ADSs. LucasVarity ADSs will be deemed delivered only when
the LucasVarity ADRs representing such LucasVarity ADSs are actually
received by the US Depositary (including in the case of a book-entry
transfer, by Book-Entry Confirmation). If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In
all cases, sufficient time should be allowed to ensure timely delivery. No
acknowledgement of receipt of documents will be given by, or on behalf of,
the Offeror.
(e) Signature guarantees
No signature guarantee is required on the Letter of Transmittal if:
(i) the Letter of Transmittal is signed by the registered holder of the
LucasVarity ADSs tendered therewith and such registered holder has not
completed either the Box entitled "Special Delivery Instructions" or
the Box entitled "Special Payment Instructions" in the Letter of
Transmittal; or
(ii) such LucasVarity ADSs are tendered for the account of an Eligible
Institution.
In all other cases, all signatures on Letters of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
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<PAGE> 43
(f) LucasVarity ADSs and ADRs
If the LucasVarity ADSs are registered in the name of a person other than
the person who signs the Letter of Transmittal, then the tendered
LucasVarity ADRs must be endorsed or accompanied by appropriate stock
powers, signed exactly as the name or names of the registered owner or
owners appear on the LucasVarity ADRs, with the signatures on the
LucasVarity ADRs or stock powers guaranteed as aforesaid. See Instructions
1 and 5 to the Letter of Transmittal.
(g) Partial acceptances
If fewer than all of the LucasVarity ADSs evidenced by any LucasVarity
ADRs delivered to the US Depositary are to be tendered, the holder thereof
should so indicate in the Letter of Transmittal by filling in the number
of LucasVarity ADSs which are tendered in the Box entitled "Number of ADSs
Tendered". In such case, a new LucasVarity ADR for the remainder of the
LucasVarity ADSs represented by the former LucasVarity ADR will be sent to
the person(s) signing such Letter of Transmittal (or as such person
properly indicates thereon) as promptly as practicable following the date
the tendered LucasVarity ADSs are purchased. All LucasVarity ADSs
delivered to the US Depositary will be deemed to have been tendered unless
otherwise indicated. See Instruction 4 to the Letter of Transmittal. In
the case of partial tenders, LucasVarity ADSs not tendered will not be
reissued to a person other than the registered holder.
(h) Guaranteed Delivery Procedures
(i) If a holder of LucasVarity ADSs evidenced by LucasVarity ADRs wishes
to tender LucasVarity ADSs pursuant to the Offer and the LucasVarity
ADRs evidencing such LucasVarity ADSs are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely
basis, or if time will not permit all required documents to reach the
US Depositary prior to the expiry of the Subsequent Offer Period, such
holder's tender of LucasVarity ADSs may be effected if all of the
following conditions are satisfied (the "Guaranteed Delivery
Procedures"):
(aa) such tender is made by or through an Eligible Institution;
(bb) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Offeror is
received by the US Depositary, as provided below, prior to the
expiry of the Subsequent Offer Period; and
(cc) the LucasVarity ADRs evidencing all tendered LucasVarity ADSs
(or, in the case of LucasVarity ADSs held in book-entry form,
timely confirmation of the book-entry transfer of such interests
in LucasVarity ADSs into the US Depositary's account at a
Book-Entry Transfer Facility as described above) together with a
properly completed and duly executed Letter of Transmittal with
any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the US
Depositary within three NYSE business days after the date of
execution of such Notice of Guaranteed Delivery.
(ii) The Notice of Guaranteed Delivery may be delivered by hand,
transmitted facsimile transmission or mailed to the US Depositary and
must include a signature guarantee by an Eligible Institution in the
form set out in such Notice of Guaranteed Delivery.
(iii) Receipt of a Notice of Guaranteed Delivery will not be treated as a
valid acceptance for the purpose of satisfying the Acceptance
Condition. To be counted towards satisfaction of this requirement,
prior to the First Closing Date, the LucasVarity ADRs evidencing
LucasVarity ADSs referred to in the Notice of Guaranteed Delivery must
be received by the US Depositary (or, in the case of interests in
LucasVarity ADSs evidenced by LucasVarity ADRs held in book-entry
form, timely confirmation of a book-entry transfer of such interests
in LucasVarity ADSs into the US Depositary's account at the Book-Entry
Transfer Facility pursuant to the procedures set out above) together
with a duly executed Letter of Transmittal with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and any other required documents.
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<PAGE> 44
(i) Other requirements
By executing the Letter of Transmittal as set out above, the tendering
holder of LucasVarity ADSs evidenced by LucasVarity ADRs will agree that,
effective from and after the date all Conditions are satisfied, fulfilled
or, to the extent permitted, waived:
(i) the Offeror shall be entitled to direct the exercise of any votes
attaching to any LucasVarity Shares represented by LucasVarity ADSs,
in respect of which the Offer has been accepted or is deemed to have
been accepted (the "Accepted ADSs") and any other rights and
privileges attaching to such LucasVarity ADSs, including any right to
requisition a general or separate class meeting of LucasVarity
Securityholders; and
(ii) the execution of the Letter of Transmittal and its delivery to the
US Depositary shall constitute:
(aa) an authority to LucasVarity or its agents from the tendering
holder of Accepted ADSs to send any notice, circular, warrant,
document or other communication which may be required to be sent
to him as a holder of LucasVarity ADSs, to the Offeror care of
the UK Receiving Agent;
(bb) an authority to the Offeror or its agent to sign any consent to
short notice of a general meeting or separate class meeting on
behalf of the tendering holder of Accepted ADSs and/or to execute
a form of proxy in respect of such Accepted ADSs appointing any
person nominated by the Offeror to attend general meetings or
separate class meetings of LucasVarity and any adjournment
thereof and to exercise the votes attaching to the LucasVarity
Shares represented by such Accepted ADSs on his behalf;
(cc) the agreement of such tendering holder of Accepted ADSs not to
exercise any of such rights without the consent of the Offeror
and the irrevocable undertaking of such tendering holder of
Accepted ADSs not to appoint a proxy for or to attend any such
general meetings or separate class meetings;
(dd) a representation and warranty that such LucasVarity
Securityholder (i) has not received or sent copies of this
document or any Letter of Transmittal or any related documents
in, into or from Australia, Canada or Japan; (ii) is accepting
the offer from outside Australia, Canada or Japan; and (iii) is
not an agent or fiduciary acting on a non-discretionary basis for
a principal, unless such agent or fiduciary is an authorised
employee of such principal or such principal has given any
instructions with respect to the Offer from outside Australia,
Canada and Japan; and
(ee) confirmation that such LucasVarity Securityholder is entitled to
sell and transfer the beneficial ownership of the Accepted ADSs
and that such Accepted ADSs are sold fully paid and free from all
liens, equitable interests, charges and encumbrances and together
with all rights attaching thereto including voting rights and the
right to all dividends and other distributions declared, made or
paid; and
(iii) the execution of the Letter of Transmittal (together with any
signature guarantees) and its delivery to the US Depositary shall
constitute an authority to any Director of the Offeror or J.P. Morgan
and to the Offeror or J.P. Morgan and/or their respective agents in
accordance with the terms of paragraph 6(a).
References in this paragraph 11 to a LucasVarity Securityholder shall
include references to the person or persons executing a Letter of
Transmittal and in the event of more than one person executing a Letter of
Transmittal the provisions of this Part B shall apply to them jointly and
to each of them.
12. CURRENCY OF CASH CONSIDERATION
Instead of receiving cash consideration in pounds sterling, LucasVarity
Shareholders who so wish may elect to receive US dollars on the basis that the
cash amount payable in pounds sterling to which such holder would otherwise be
entitled pursuant to the terms of the Offer will be converted, without charge,
from pounds sterling to
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<PAGE> 45
US dollars at the exchange rate obtainable by the relevant payment agent (either
the UK Receiving Agent or the US Depositary) on the spot market in London at
approximately noon (London time) on the date the cash consideration is made
available by the Offeror to the relevant payment agent for delivery in respect
of the relevant LucasVarity Shares. A LucasVarity Shareholder may receive such
amount in US dollars on the basis set out above only in respect of the whole of
his holding of LucasVarity Shares in respect of which he accepts the Offer, and
in respect of which he is entitled to receive cash consideration. LucasVarity
Shareholders may not elect to receive both pounds sterling and US dollars.
UNLESS THEY ELECT TO RECEIVE POUNDS STERLING, HOLDERS OF LUCASVARITY ADSS WILL
RECEIVE CONSIDERATION CONVERTED INTO US DOLLARS AS DESCRIBED ABOVE, AS IF SUCH
HOLDERS OF LUCASVARITY ADSS HAD ELECTED TO RECEIVE US DOLLARS. CONSIDERATION IN
US DOLLARS MAY BE INAPPROPRIATE FOR LUCASVARITY SECURITYHOLDERS OTHER THAN US
PERSONS AND HOLDERS OF LUCASVARITY ADSS.
THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY THE OFFEROR. LUCASVARITY SECURITYHOLDERS SHOULD BE AWARE THAT
THE US DOLLAR/POUNDS STERLING EXCHANGE RATE WHICH IS PREVAILING AT THE DATE ON
WHICH AN ELECTION IS MADE TO RECEIVE DOLLARS AND ON THE DATES OF DESPATCH AND
RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT PREVAILING ON THE BUSINESS DAY ON
WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY THE OFFEROR. IN
ALL CASES, FLUCTUATIONS IN THE US DOLLAR/POUNDS STERLING EXCHANGE RATE ARE AT
THE RISK OF ACCEPTING LUCASVARITY SECURITYHOLDERS WHO ELECT OR ARE TREATED AS
HAVING ELECTED TO RECEIVE THEIR CONSIDERATION IN US DOLLARS. NEITHER THE OFFEROR
NOR ANY OF ITS ADVISERS OR AGENTS SHALL HAVE ANY RESPONSIBILITY WITH RESPECT TO
THE ACTUAL AMOUNT OF CASH CONSIDERATION PAYABLE OTHER THAN IN POUNDS STERLING.
13. SUBSTITUTE ACCEPTANCE FORMS
Holders of LucasVarity Securities have been sent with this document a Form of
Acceptance and/or Letter of Transmittal (accompanied by a Notice of Guaranteed
Delivery). All holders of LucasVarity Shares, including persons in the US who
hold LucasVarity Shares, have been sent a Form of Acceptance, which they must
use to tender their LucasVarity Shares and accept the Offer. All holders of
LucasVarity ADSs have been sent a Letter of Transmittal and a Notice of
Guaranteed Delivery which they must use to tender their LucasVarity ADSs and
accept the Offer. Should any holder of LucasVarity Securities receive an
incorrect form with which to accept the Offer or require any additional forms,
that person should contact the UK Receiving Agent, the US Depositary or the
Information Agent at the addresses set out at the end of this document, who will
provide the appropriate forms.
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APPENDIX II -- PARTICULARS OF THE LOAN NOTES
The Loan Notes are to be issued pursuant to a resolution of the Board of
Directors of the Offeror and will be constituted by the Loan Note Instrument.
The issue of the Loan Notes will be conditional on the Offer becoming or being
declared unconditional in all respects. If valid elections for the Loan Note
Alternative have not been received in respect of at least L10 million nominal
value of Loan Notes on or before the date on which the Offer becomes or is
declared unconditional in all respects, no Loan Notes will be issued, in which
event all LucasVarity Shareholders accepting the Offer including those electing
for the Loan Note Alternative will receive cash in accordance with the terms of
the Offer. The Loan Notes have not been, and will not be, registered under the
US Securities Act. The Loan Note Alternative is not available to any person who
is a citizen or resident of the US, Canada, Australia or Japan or certain other
jurisdictions, and no prospectus in relation to the Loan Notes has been, or will
be, lodged with or, registered by, the Australian Securities and Investments
Commission. The Loan Note Instrument contains provisions, among other things, to
the effect set out below.
1. FORM AND STATUS
The Loan Notes will be issued by the Offeror in amounts and integral multiples
of L1 and will constitute unsecured obligations of the Offeror. The Loan Note
Instrument does not contain any restrictions on borrowing, disposals or charging
of assets by the Offeror, or TRW as guarantor.
2. INTEREST
(a) Interest on the Loan Notes will accrue from day to day and will be
payable (subject to any requirement to deduct tax therefrom) in arrears on
30 June and 31 December in each year (or, if such a day is not a business
day, on the next following business day) ("interest payment dates") in
respect of the interest periods (as defined below) at a rate calculated as
provided in paragraph (b) below, except that the first payment of interest
on the Loan Notes, which will be made on 31 December, 1999, will be in
respect of the period from (and including) the first date of issue of any
of the Loan Notes to (and including) 31 December, 1999. The period from
(and including) the first date of issue of any of the Loan Notes to (and
including) 31 December, 1999 and the period from (but excluding) 31
December, 1999, or any subsequent interest payment date, to (and
including) the next following interest payment date, is referred to as an
"interest period".
(b) The rate of interest on the Loan Notes for each interest period will be
the rate per annum calculated by the Offeror to be 1 per cent. below LIBOR
at or about 11.00 a.m. (London time) on the first business day of the
relevant interest period.
(c) If a rate of interest cannot be established in accordance with the
provisions of this paragraph 2 for any interest period, then the rate of
interest on the Loan Notes for such interest period shall be calculated by
reference to such rate as the Offeror shall reasonably determine on the
basis of quotations made for six month sterling deposits of similar size
in any other appropriate inter-bank market or markets as the Offeror may
reasonably select.
(d) Each instalment of interest shall be calculated on the basis of a 365 day
year and the actual number of days elapsed in the relevant interest
period.
3. REPAYMENT AND REDEMPTION
(a) A holder of Loan Notes ("Noteholder") shall be entitled to require the
Offeror to repay the whole (whatever the amount) or any part (being L100
nominal amount or any integral multiple thereof) of the principal amount
of his Loan Notes at par, together with accrued interest thereon (subject
to any requirement to deduct tax therefrom) up to (and including) the date
of repayment, on any interest payment date falling on or after 30 June,
2000, by giving not less than 30 days' prior notice in writing to the
Registrars accompanied by certificate(s) for all the Loan Notes to be
repaid and a notice of redemption (duly completed) in the prescribed form
endorsed on the Loan Notes to be repaid.
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<PAGE> 47
(b) If, at any time, the principal amount of the Loan Notes outstanding is 20
per cent. or less of the total nominal amount of Loan Notes which have
been issued prior to that time, the Offeror shall have the right, on
giving to the remaining Noteholders not less than 30 days' notice in
writing expiring on 30 June, 2000 or on any subsequent interest payment
date, to redeem all (but not some only) of the Loan Notes at their
principal amount together with accrued interest thereon (subject to any
requirement to deduct tax therefrom) up to (and including) the date of
redemption.
(c) The Offeror will have the right to redeem on any interest payment date
the Loan Notes at par together with accrued interest up to (and including)
the date of redemption (subject to any requirement to deduct tax
therefrom) on 30 days' written notice to the Noteholders if the Offeror is
advised by legal counsel that interest payable under the Loan Notes will
fail to be treated as non-deductible for US federal income tax purposes
due to a change in law after the date on which the Offer is made.
(d) Any Loan Notes not previously repaid, redeemed or purchased will be
repaid in full at par on 31 December, 2003 together with accrued interest
thereon (subject to any requirement to deduct tax therefrom) up to (and
including) that date.
(e) Each Noteholder shall have the right to acquire (by subscription at
nominal value of an amount up to or equal to such Noteholder's holding of
Loan Notes, such amount to be payable in full on subscription) additional
loan notes to be issued by a subsidiary of the Offeror ("Additional
Notes") on terms and conditions substantially the same as those applicable
to the Loan Notes, except as follows:
(i) the rate of interest on the Additional Notes shall be one half of
one per cent. below the rate per annum referred to in paragraph 2
above; and
(ii) the Additional Notes shall not carry any rights to acquire
additional securities.
(f) A Noteholder may require the Offeror to repay at par all of the Notes
held by him, together with accrued interest, if any of the following
events occurs:
(i) the Offeror fails to pay within 21 days of the due date any
principal or interest payable in respect of the Notes;
(ii) an order is made by a competent court or an effective resolution is
passed for winding-up the Offeror or the Guarantor (as defined in the
Loan Note Instrument) (other than a voluntary winding-up for the
purposes of an amalgamation, reconstruction or merger on terms
previously approved by an Extraordinary Resolution); or
(iii) an encumbrancer takes possession of, or an administrator or
administrative receiver or manager or a receiver is appointed of or
over, the whole (or substantially the whole) of the undertaking or
property of the Offeror or the Guarantor, unless the same is removed,
stayed, paid out or discharged within 60 days.
4. PURCHASE OF LOAN NOTES
The Offeror will be entitled at any time to purchase any Loan Notes at any price
by tender (available to all Noteholders alike), private treaty or otherwise by
agreement with the relevant Noteholder(s).
5. CANCELLATION
Any Loan Notes repaid or redeemed under paragraph 3 above or purchased under
paragraph 4 above shall be cancelled and shall not be available for re-issue.
6. SUBSTITUTION AND EXCHANGE
The Loan Note Instrument contains provisions entitling the Offeror to substitute
any other member of the TRW Group as the principal debtor under the Loan Notes,
or to require Noteholders to exchange the Loan Notes for loan notes issued on
the same terms, mutatis mutandis, by one or more of such members provided that
(a) TRW guarantees such member's obligations thereunder and (b) the Offeror's
right to require substitution by such
II-2
<PAGE> 48
member as a principal debtor will be exercisable only if prior clearance has
been obtained from the Inland Revenue to the effect that the substitution will
not be treated as a disposal of the Loan Notes for the purpose of UK taxation of
chargeable gains. References to the Offeror in this Appendix shall be construed
to apply to the substitute or substitutes (if any) from time to time of the
Offeror.
7. MODIFICATIONS
The provisions of the Loan Note Instrument and the rights of the Noteholders are
subject to modification, abrogation or compromise in any respect with the
sanction of an Extraordinary Resolution (as defined in the Loan Note Instrument)
of the Noteholders, and the consent of the Offeror. The Offeror may amend the
provisions of the Loan Note Instrument without such sanction or consent if such
amendment is of a formal, minor or technical nature and such amendment would not
be materially prejudicial to Noteholders or is to correct a manifest error.
8. REGISTRATION AND TRANSFER
The Loan Notes will be in registered form and transferable, except into certain
overseas jurisdictions, in amounts or integral multiples of L100 or of the
entire holding of the Noteholder, provided that transfers will not be registered
during the 21 days immediately preceding an interest payment date.
9. PRESCRIPTION
Noteholders will cease to be entitled to amounts in respect of interest which
remain unclaimed for a period of five years and to amounts due in respect of
principal which remain unclaimed for a period of ten years, in each case from
the date on which the relevant payment first becomes due, and such amounts shall
revert to the Offeror upon the giving of 30 days' written notice to a
Noteholder.
10. RESTRICTIONS ON OWNERSHIP AND TRANSFER
The Loan Notes have not been, and will not be, registered under the US
Securities Act and no steps have been taken to qualify the Loan Notes for
distribution in any province or territory of Canada and no prospectus in
relation to the Loan Notes has been, or will be, lodged with or registered by
the Australian Securities and Investments Commission. Accordingly, unless an
exemption under the US Securities Act or other applicable securities laws is
available, the Loan Note Alternative is not available in the US, Canada,
Australia or Japan or to Restricted Overseas Persons and the Loan Notes may not
be directly or indirectly offered, sold or delivered in or into the US, Canada,
Australia or Japan or to or for the account or benefit of any Restricted
Overseas Persons.
For these purposes, "Restricted Overseas Person" means either a person
(including an individual, partnership, unincorporated syndicate, limited
liability company, unlimited liability company, joint venture, unincorporated
organisation, trust, trustee, administrator or other legal representative) in or
resident in the US, Canada, Australia or Japan, or a US Person.
11. NO LISTING
No application has been made or is intended to be made to any stock exchange for
the Loan Notes to be listed or otherwise traded.
12. GUARANTEE
The Loan Notes are guaranteed by TRW.
13. GOVERNING LAW
The Loan Notes and the Loan Note Instrument are governed by, and shall be
construed in accordance with, the laws of England.
II-3
<PAGE> 49
APPENDIX III -- FINANCIAL INFORMATION ON THE LUCASVARITY GROUP
PART A: AUDITED FINANCIAL INFORMATION
THE LUCASVARITY GROUP'S AUDITED CONSOLIDATED ACCOUNTS FOR THE FINANCIAL YEAR
ENDED 31 JANUARY, 1998 AND THE EIGHT MONTHS ENDED 31 JANUARY, 1997
The following financial information for the year ended 31 January, 1998 and the
eight months ended 31 January, 1997 relating to the LucasVarity Group has been
extracted without material adjustment from the audited consolidated accounts for
each of those periods. Definitions used in the following financial information
have not been conformed for insertion into this document. LucasVarity was
incorporated as a public limited company on 30 May 1996. No financial statements
were prepared in respect of any period prior to the date of incorporation.
The financial information contained in this Part A for the LucasVarity Group's
financial year ended 31 January, 1998 and the eight months ended 31 January,
1997 are not the LucasVarity Group's statutory accounts for those financial
years. Statutory accounts for the financial year ended 31 January, 1998 and the
eight months ended 31 January, 1997 have been delivered to the Registrar of
Companies in England and Wales.
KPMG Audit Plc, Chartered Accountants and Registered Auditor, of 8 Salisbury
Square, Blackfriars, London EC4Y 8BB, have audited the statutory accounts of
LucasVarity for the financial year ended 31 January, 1998 and, as joint
auditors, with Ernst & Young Chartered Accountants and Registered Auditors, of 1
Colmore Row, Birmingham, for the eight months ended 31 January, 1997. The audit
reports on such annual accounts were unqualified and did not contain a statement
under subsections 237(2) or (3) of the Companies Act.
"ACCOUNTING POLICIES
Basis of consolidation
The consolidated accounts include the accounts of LucasVarity and all subsidiary
undertakings, together with the LucasVarity Group's share of post-acquisition
earnings and reserves of associated undertakings. The accounting date of all
principal subsidiary undertakings is the same as that of LucasVarity.
In accordance with the exemptions permitted by the Companies Act 1985, the
separate profit and loss account of LucasVarity has not been presented.
Basis of accounting
The accounts are prepared under the historical cost convention adjusted for the
revaluation of certain fixed assets and in accordance with applicable accounting
standards.
Comparative accounting period
On 6 September 1996 LucasVarity merged by a Scheme of Arrangement with Lucas;
the accounts of the latter are consolidated adopting the principles of merger
accounting from 30 May 1996, the date of incorporation of LucasVarity. On 6
September 1996 LucasVarity also acquired Varity which was accounted for as an
acquisition. Therefore, the comparative figures are for an eight month period
and include five months of Varity results.
Associated undertakings
An associated undertaking is one in which the LucasVarity Group has a long-term
interest, usually between 20% and 50%, and over which it exercises significant
influence. The LucasVarity Group's share of the profits less losses of
associates is dealt with in the profit and loss account and its share of their
net assets, other than goodwill, is included in investments in the consolidated
balance sheet.
Segmental reporting
The LucasVarity Group identifies significant segments in accordance with the
provisions of Statement of Standard Accounting Practice No. 25. Segmental
turnover comprises sales to third parties, excluding sales-related taxes.
III-1
<PAGE> 50
Segmental operating profit represents profit before interest, taxation and
minority interests.
Segmental net operating assets comprise tangible fixed assets, stock, debtors
and creditors, but not unallocated liabilities such as all current and deferred
tax balances, dividend liabilities and net borrowings.
Exchange rates
The profit and loss accounts of overseas subsidiary and associated undertakings
are translated into sterling at the average rates of exchange prevailing during
the period. The balance sheets of overseas subsidiary and associated
undertakings and assets and liabilities denominated in foreign currencies are
translated into sterling at the rates of exchange prevailing at the end of the
financial period.
Exchange gains and losses arising in the normal course of trading are dealt with
in the profit and loss account. Other exchange differences, arising from the
translation of foreign currency funding loans and on consolidation of overseas
net assets, are dealt with in reserves.
Intangible fixed assets-entry fees
In certain circumstances in the aerospace industry, the LucasVarity Group
invests in new customer products by way of a lump sum payment (entry fee) in
return for a proportion of future revenues derived from eventual sales of the
customers' product. Such sums are included in intangible fixed assets and
amortised over the prudently estimated revenue pattern of the product or over
ten years following flight certification, if shorter. The technical and
commercial viability of the related product programmes are regularly reviewed in
appraising the carrying value of entry fees.
Depreciation
Depreciation is based on the estimated useful lives of assets and is charged on
a straight line basis at the following rates:
<TABLE>
<S> <C>
Land nil
Buildings 2%-10% per annum
Short-term leasehold properties over period of
lease
Plant and equipment 4%-33% per annum
</TABLE>
Research and development
Expenditure on research and development, other than that which is specifically
recoverable under contract, is written off as incurred. Amounts carried forward
are included in other debtors.
Leasing
Assets acquired under finance leases are treated as tangible fixed assets and
depreciation is provided accordingly. The deemed capital element of future
rentals is included under borrowings. Deemed interest, calculated on a reducing
balance basis, is charged as interest payable over the period of the lease.
Rental costs of operating leases are charged against trading profits on a
straight line basis.
Provisions
Provisions for liabilities and charges include pension liabilities in certain
overseas subsidiaries, post-retirement benefits other than pensions, provisions
for restructuring, deferred taxation and other items not classified elsewhere,
including warranty and other claims.
III-2
<PAGE> 51
Stocks
Stocks are valued at the lower of cost and net realisable value after making due
allowance for obsolete and slow moving items. In the case of work in progress
and finished goods, cost comprises direct materials, direct labour and an
appropriate proportion of production overheads.
Deferred taxation
Provision for deferred taxation is made under the liability method, on the
excess of capital allowances over depreciation and other timing differences,
where the tax liability is expected to become payable in the foreseeable future.
Pensions
The LucasVarity Group operates pension schemes under which contributions by
employees and the companies are held in trust separate from the companies'
finances.
Pension costs are charged to the profit and loss account so as to spread the
cost of pensions over the working lives of the employees within the LucasVarity
Group. An independent valuation is conducted at regular intervals and the
assessed regular pension cost is adjusted to reflect the amortisation of any
surplus or deficit established by the valuation over the remaining service lives
of current employees.
Post-retirement benefits other than pensions
The estimated cost of providing post-retirement healthcare benefits for
employees is charged in the profit and loss account on a systematic basis over
the working lives of the employees within the LucasVarity Group.
Goodwill
Goodwill, being the excess of the cost of investments in subsidiary and
associated undertakings over the fair value of the net assets acquired, is set
off against reserves in the year in which it arises. The profit or loss arising
on the disposal of businesses includes the balance of attributed goodwill
previously set off against reserves.
III-3
<PAGE> 52
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 JANUARY
<TABLE>
<CAPTION>
YEAR TO 31 JANUARY 1998 8 MONTHS TO 31 JANUARY 1997
---------------------------------- ----------------------------------
BEFORE BEFORE
EXCEPTIONAL EXCEPTIONAL EXCEPTIONAL EXCEPTIONAL
NOTES ITEMS ITEMS TOTAL ITEMS ITEMS TOTAL
----- ----------- ----------- ------ ----------- ----------- ------
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
TURNOVER
Continuing operations.......... 4,018 -- 4,018 2,364 -- 2,364
Discontinued operations........ 663 -- 663 309 -- 309
------ ------ ------ ------ ------
Total turnover................. 1 4,681 -- 4,681 2,673 -- 2,673
------ ------ ------ ------ ------ ------
Cost of sales.................. 3 (4,300) -- (4,300) (2,503) -- (2,503)
Profit on disposal of current
asset investment............. 12 -- 13 13 -- -- --
Restructuring charge........... 4 -- -- -- -- (250) (250)
------ ------ ------ ------ ------ ------
Total cost of sales............ (4,300) 13 (4,287) (2,503) (250) (2,753)
------ ------ ------ ------ ------ ------
Surplus/(deficit) on trading... 381 13 394 170 (250) (80)
Share of profits less losses of
associated undertakings...... 7 -- 7 5 -- 5
------ ------ ------ ------ ------ ------
GROUP OPERATING PROFIT
Continuing operations.......... 329 -- 329 140 (235) (95)
Discontinued operations........ 59 13 72 35 (15) 20
------ ------ ------ ------ ------ ------
Total operating
profit/(loss)................ 1 388 13 401 175 (250) (75)
Loss on sales and closures of
businesses................... -- (25) (25) -- -- --
Loss on disposals of fixed
assets....................... -- (1) (1) -- (4) (4)
------ ------ ------ ------ ------ ------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE INTEREST... 388 (13) 375 175 (254) (79)
Interest payable less
receivable................... 5 (59) -- (59) (32) -- (32)
------ ------ ------ ------ ------ ------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE TAXATION... 329 (13) 316 143 (254) (111)
Taxation....................... 6 (91) (5) (96) (56) -- (56)
------ ------ ------ ------ ------ ------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION.... 238 (18) 220 87 (254) (167)
Minority interests............. (11) -- (11) (7) -- (7)
------ ------ ------ ------ ------ ------
PROFIT/(LOSS) ATTRIBUTABLE TO
SHAREHOLDERS................. 227 (18) 209 80 (254) (174)
------ ------ ------ ------
Dividends...................... 7 (63) (32)
------ ------
AMOUNTS TRANSFERRED TO/(FROM)
RESERVES..................... 20 146 (206)
------ ------
Earnings per share............. 8 14.7p (14.3)p
Earnings per share before
exceptional items............ 8 16.0p 6.6p
====== ======
</TABLE>
III-4
<PAGE> 53
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE PERIOD ENDED 31 JANUARY
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 31 JANUARY
1998 1997
---------- -----------
#M #M
<S> <C> <C>
Profit/(loss) for the financial period...................... 209 (174)
Unrealised surplus on revaluation of fixed assets........... -- 1
Currency translation differences on foreign currency net
investments............................................... (55) (48)
----- ------
Total recognised gains and losses relating to the period.... 154 (221)
===== ======
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 31 JANUARY
1998 1997
---------- -----------
#M #M
<S> <C> <C>
Profit/(loss) attributable to shareholders.................. 209 (174)
Dividends in respect of current period...................... (63) (32)
Other recognised gains and losses relating to the period
(net)..................................................... (55) (47)
New share capital subscribed................................ 14 11
Repurchase of shares........................................ (85) --
Exchange of Varity shares for LucasVarity shares............ -- 1,299
Goodwill set off on acquisitions............................ (87) (1,202)
Goodwill adjustment on prior year acquisition............... (28) --
Goodwill on disposals transferred to profit and loss
account................................................... 7 --
----- ------
DECREASE IN SHAREHOLDERS' FUNDS............................. (88) (145)
Opening shareholders' funds................................. 546 691
----- ------
CLOSING SHAREHOLDERS' FUNDS................................. 458 546
===== ======
</TABLE>
The difference between the reported profit/(loss) on ordinary activities before
taxation and the historical cost profit/(loss) is immaterial.
III-5
<PAGE> 54
BALANCE SHEETS AT 31 JANUARY
<TABLE>
<CAPTION>
NOTES 1998 1997
----- ------ ------
#M #M
<S> <C> <C> <C>
FIXED ASSETS:
Tangible assets............................................. 9 1,362 1,302
Intangible assets........................................... 10 27 13
Investments................................................. 11 47 49
------ ------
1,436 1,364
------ ------
CURRENT ASSETS:
Investments................................................. 12 -- 16
Stocks...................................................... 13 489 518
Debtors..................................................... 14 869 871
Cash........................................................ 16 155 227
------ ------
1,513 1,632
CREDITORS:
AMOUNTS FALLING DUE WITHIN ONE YEAR
Borrowings.................................................. 16 (414) (368)
Other creditors............................................. 15 (1,097) (976)
------ ------
(1,511) (1,344)
------ ------
Net current assets.......................................... 2 288
------ ------
Total assets less current liabilities....................... 1,438 1,652
CREDITORS:
AMOUNTS FALLING DUE AFTER ONE YEAR
Borrowings.................................................. 16 (315) (322)
Accruals and deferred income................................ (52) (34)
------ ------
(367) (356)
------ ------
PROVISIONS FOR LIABILITIES AND CHARGES...................... 17 (545) (707)
------ ------
526 589
====== ======
CAPITAL AND RESERVES:
Called up share capital..................................... 19 351 359
Share premium account....................................... 20 4 3
Capital redemption reserve.................................. 20 11 --
Merger reserve.............................................. 20 178 276
Revaluation reserves........................................ 20 112 124
Profit and loss account..................................... 20 (203) (233)
Associated undertakings' reserves........................... 20 5 17
------ ------
Total shareholders' funds................................... 458 546
Minority interests.......................................... 21 68 43
------ ------
526 589
====== ======
</TABLE>
Approved by the Board of Directors on 31 March 1998 and signed on its behalf by:
<TABLE>
<S> <C>
Victor A. Rice Neil D. Arnold
Chief Executive Group Finance Director
</TABLE>
III-6
<PAGE> 55
CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 JANUARY
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
NOTES 31 JANUARY 1998 31 JANUARY 1997
----- --------------- ---------------
#M #M
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES............ 25(i) 452 298
---- ----
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received.................................... 5 8
Interest paid........................................ (56) (35)
Interest element of finance lease payments........... (8) (4)
Dividends paid to minority shareholders.............. (2) (1)
---- ----
NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE............................... (61) (32)
---- ----
TAXATION
UK corporation tax paid.............................. (12) (16)
Overseas tax paid.................................... (47) (24)
---- ----
TAX PAID............................................. (59) (40)
---- ----
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets.................... (285) (183)
Disposal of tangible fixed assets.................... 29 25
Sale and leaseback of tangible fixed assets.......... 6 8
Investment in intangible fixed assets................ (15) --
---- ----
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT............................... (265) (150)
---- ----
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings.................. 22(i) (60) (40)
Disposal of subsidiary undertakings.................. 23 62 --
Investment in associated undertakings................ (12) (1)
Disposal of associated undertaking................... 3 --
---- ----
NET CASH OUTFLOW FOR ACQUISITIONS AND DISPOSALS...... (7) (41)
---- ----
EQUITY DIVIDENDS PAID................................ (64) (55)
---- ----
NET CASH OUTFLOW BEFORE MANAGEMENT OF LIQUID
RESOURCES AND FINANCING............................ (4) (20)
---- ----
MANAGEMENT OF LIQUID RESOURCES
Proceeds from sale of current asset investment....... 29 --
Decrease in short-term deposits...................... 18 51
---- ----
NET CASH INFLOW FROM MANAGEMENT OF LIQUID
RESOURCES.......................................... 47 51
---- ----
FINANCING
Issue of Ordinary Share Capital...................... 14 4
Repurchase of shares................................. (85) --
Increase in bank loans............................... 33 75
Decrease in US dollar Loan Notes..................... -- (9)
Capital element of finance lease rental payments..... (22) (16)
---- ----
NET CASH (OUTFLOW)/INFLOW FROM FINANCING............. (60) 54
---- ----
(DECREASE)/INCREASE IN CASH IN THE PERIOD............ 25(ii) (17) 85
==== ====
</TABLE>
III-7
<PAGE> 56
NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSES
Turnover by origin to third parties and operating profit were as follows:
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997 31 JANUARY 1998 31 JANUARY 1997
--------------- --------------- ---------------- ----------------
SALES SALES OPERATING PROFIT OPERATING PROFIT
--------------- --------------- ---------------- ----------------
#M #M #M #M
<S> <C> <C> <C> <C>
BY CLASS OF BUSINESS:
Braking Systems.............. 1,550 790 134 26
Other Automotive............. 1,812 1,202 162 (2)
Aerospace.................... 648 343 75 (51)
Corporate/other.............. 8 29 (29) (68)
----- ----- ----- -----
4,018 2,364 342 (95)
Discontinued operations --
Diesel Engines............. 663 309 59 20
----- ----- ----- -----
4,681 2,673 401 (75)
===== ===== ===== =====
BY GEOGRAPHICAL REGION:
United Kingdom............... 1,226 778 70 (191)
North America................ 1,552 761 137 37
Continental Europe........... 1,025 679 108 39
Rest of World................ 215 146 20 15
----- ----- ----- -----
4,018 2,364 335 (100)
Discontinued operations --
Diesel Engines............. 663 309 59 20
----- ----- ----- -----
4,681 2,673 394 (80)
===== =====
Share of associated
undertakings............... 7 5
----- -----
401 (75)
===== =====
</TABLE>
The share of sales of associated undertakings was L134 million (8 months to 31
January 1997 -- L93 million).
Third party export sales from the United Kingdom were L854 million (8 months to
31 January 1997 -- L430 million).
III-8
<PAGE> 57
<TABLE>
<CAPTION>
1998 1997
----- -----
#M #M
<S> <C> <C>
NET OPERATING ASSETS
BY CLASS OF BUSINESS:
Braking Systems........................................... 404 518
Other Automotive.......................................... 562 615
Aerospace................................................. 236 268
Corporate/other........................................... (193) (377)
----- -----
1,009 1,024
Unallocated net liabilities................................. (653) (561)
Discontinued operations-Diesel Engines...................... 170 126
----- -----
526 589
Minority interests.......................................... (68) (43)
----- -----
Total shareholders' funds................................... 458 546
===== =====
BY GEOGRAPHICAL REGION:
United Kingdom............................................ 488 521
North America............................................. 61 103
Continental Europe........................................ 261 256
Rest of World............................................. 199 144
----- -----
1,009 1,024
Unallocated net liabilities................................. (653) (561)
Discontinued operations-Diesel Engines...................... 170 126
----- -----
526 589
Minority interests.......................................... (68) (43)
----- -----
Total shareholders' funds................................... 458 546
===== =====
</TABLE>
2 ANALYSIS OF SALES
Sales to third parties analysed by destination were as follows:
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997
--------------- ---------------
#M #M
<S> <C> <C>
United Kingdom.............................................. 821 557
North America............................................... 1,589 751
Continental Europe
France.................................................... 440 290
Germany................................................... 410 261
Italy..................................................... 96 66
Spain..................................................... 57 40
Other countries........................................... 244 163
Asia........................................................ 179 140
Rest of World............................................... 182 96
----- -----
4,018 2,364
Discontinued operations-Diesel Engines...................... 663 309
----- -----
4,681 2,673
===== =====
</TABLE>
III-9
<PAGE> 58
3 COST OF SALES
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997
--------------------------------- ---------------------------------
CONTINUING DISCONTINUED CONTINUING DISCONTINUED
OPERATIONS OPERATIONS TOTAL OPERATIONS OPERATIONS TOTAL
---------- ---------- ----- ---------- ------------ -----
#M #M #M #M #M #M
<S> <C> <C> <C> <C> <C> <C>
COST OF SALES IS ARRIVED AT AFTER
CHARGING/(CREDITING) THE
FOLLOWING ITEMS:
Decrease in stocks of finished
goods and work in progress..... 28 2 30 9 1 10
Raw materials and consumables.... 2,048 403 2,451 1,048 187 1,235
Royalties received from
licensees...................... (7) -- (7) (5) -- (5)
Hire of plant and equipment...... 23 4 27 14 2 16
Property rentals................. 14 1 15 9 -- 9
Depreciation -- owned assets..... 136 18 154 95 6 101
Depreciation -- leased assets.... 13 -- 13 10 -- 10
----- ----- ----- ----- ----- -----
Staff costs -- wages and
salaries....................... 879 101 980 564 44 608
Staff costs -- social security
costs.......................... 125 9 134 93 3 96
Staff costs -- other pension
costs.......................... 21 -- 21 36 -- 36
----- ----- ----- ----- ----- -----
Audit fees and expenses.......... 1 -- 1 2 -- 2
Other fees paid to auditors...... 1 -- 1 -- -- --
===== ===== ===== ===== ===== =====
</TABLE>
The cost of research and development expenditure was L159 million (8 months to
31 January 1997 -- L107 million), net of recoveries of L45 million (8 months to
31 January 1997 -- L15 million).
4 RESTRUCTURING CHARGE
The L250 million restructuring charge in the 8 months to 31 January 1997 relates
to the restructuring and rationalisation of each of the businesses and of
central facilities following the combination of Lucas and Varity. The major
components of the restructuring charge are L105 million for redundancy, L80
million for asset write downs, and L65 million for other rationalisation and
restructuring costs.
5 INTEREST PAYABLE LESS RECEIVABLE
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997
--------------- ---------------
#M #M
<S> <C> <C>
Interest on bank loans and overdrafts....................... 36 23
Interest on other loans..................................... 20 14
Interest on finance leases.................................. 8 5
-- --
64 42
Less: interest receivable................................... 5 10
-- --
59 32
== ==
</TABLE>
Interest payable, other than interest on fixed rate borrowings, is charged at
variable rates as determined by the lenders in the countries in which the
borrowings have been arranged. These rates are typically between 5% and 8% per
annum.
III-10
<PAGE> 59
6 TAXATION ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997
--------------- ---------------
#M #M
<S> <C> <C>
United Kingdom:
Corporation tax at 31% (1997-33%)......................... 64 11
Deferred taxation......................................... (5) 1
Double taxation relief.................................... (27) (3)
Advance Corporation Tax................................... (12) 9
--- --
Net United Kingdom taxation................................. 20 18
Overseas taxation -- current................................ 45 36
-- deferred............................... 29 --
Associated undertakings' taxation........................... 2 2
--- --
96 56
=== ==
</TABLE>
Utilisation of tax losses brought forward from earlier years reduced the
overseas tax charge by #23 million (8 months to 31 January 1997 -- #5 million).
The overall tax charge is influenced by unrelieved losses overseas and the
incidence of Advance Corporation Tax in the United Kingdom.
7 DIVIDENDS ON ORDINARY SHARES
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997
---------------------- ----------------------
PENCE PER SHARE #M PENCE PER SHARE #M
--------------- --- --------------- ---
<S> <C> <C> <C> <C>
Interim, paid 5 January 1998..................... 2.25 32 -- --
Proposed final, payable 1 July 1998.............. 2.25 31 2.25 32
---- -- ---- --
4.50 63 2.25 32
==== == ==== ==
</TABLE>
8 EARNINGS PER SHARE
The calculation of earnings per share is based on:
(i) Profit attributable to shareholders of #209 million (8 months to 31
January 1997, loss -- #174 million).
(ii) 1,418 million shares (8 months to 31 January 1997 -- 1,213
million), which is the weighted average number of shares in issue
in the period.
(iii) For the purpose of calculating earnings per share before
exceptional items the attributable profit is #227 million (8 months to
31 January 1997-#80 million). The Directors believe that the earnings
before exceptional items more accurately reflects the LucasVarity
Group's underlying trading performance.
III-11
<PAGE> 60
9 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LAND
AND PLANT AND
BUILDINGS EQUIPMENT TOTAL
--------- --------- -----
#M #M #M
<S> <C> <C> <C>
Cost or valuation:
At 1 February 1997........................................ 504 1,480 1,984
Exchange adjustments...................................... (22) (74) (96)
Acquisition of subsidiaries............................... 16 61 77
Adjustment to prior year acquisition...................... (2) (5) (7)
Additions................................................. 28 265 293
Disposal of subsidiaries.................................. (31) (42) (73)
Disposals................................................. (18) (87) (105)
----- ----- -----
AT 31 JANUARY 1998........................................ 475 1,598 2,073
----- ----- -----
Depreciation:
At 1 February 1997........................................ 84 598 682
Exchange adjustments...................................... (5) (33) (38)
Provided in the year...................................... 12 155 167
Disposal of subsidiaries.................................. (6) (19) (25)
Disposals................................................. (7) (68) (75)
----- ----- -----
AT 31 JANUARY 1998........................................ 78 633 711
----- ----- -----
Net book values -- at 31 January 1997....................... 420 882 1,302
-- AT 31 JANUARY 1998...................... 397 965 1,362
Cost or valuation:
At 30 May 1996............................................ 410 1,111 1,521
Exchange adjustments...................................... (19) (68) (87)
Acquisitions.............................................. 102 327 429
Additions................................................. 15 173 188
Disposals................................................. (5) (67) (72)
Adjustments for revaluations.............................. 1 4 5
----- ----- -----
AT 31 JANUARY 1997........................................ 504 1,480 1,984
----- ----- -----
Depreciation:
At 30 May 1996............................................ 72 576 648
Exchange adjustments...................................... (5) (32) (38)
Provided in the year...................................... 18 93 111
Disposals................................................. (1) (42) (43)
Adjustments for revaluations.............................. -- 3 4
----- ----- -----
AT 31 JANUARY 1997........................................ 84 598 682
----- ----- -----
NET BOOK VALUES............................................. 420 882 1,302
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
31 JANUARY 1998 31 JANUARY 1997
--------------- ---------------
#M #M
<S> <C> <C>
Comprising:
Freehold.................................................. 354 393
Long-term leasehold (over 50 years unexpired)............. 35 18
Short-term leasehold...................................... 8 9
</TABLE>
Fixed assets at 31 January 1998 include leased assets costing #159 million on
which accumulated depreciation of #81 million has been charged.
Land and buildings at 31 January 1998:
(i) Certain United Kingdom properties of Lucas were valued by the
Directors in 1994 on the basis of open market value for existing use.
III-12
<PAGE> 61
(ii) Certain overseas properties are subject to periodic revaluations.
The figures for land and buildings after eliminating the effect of revaluations
were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
Original cost............................................... 357 375
Depreciation................................................ 72 79
--- ---
285 296
=== ===
</TABLE>
10 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
ENTRY
FEES
-----
#M
<S> <C>
Cost:
At 1 February 1997........................................ 18
Additions................................................. 15
--
AT 31 JANUARY 1998........................................ 33
--
Amortisation:
At 1 February 1997........................................ 5
Provided in the year...................................... 1
--
AT 31 JANUARY 1998........................................ 6
--
Net book values -- at 31 January 1997....................... 13
==
-- AT 31 JANUARY 1998...................... 27
==
</TABLE>
Entry fees were included within debtors in the prior period financial
statements. They have been reclassified to intangible fixed assets due to their
increased materiality to the LucasVarity Group.
11 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
ASSOCIATED
UNDERTAKINGS
------------
#M
<S> <C>
At 1 February 1997.......................................... 49
Exchange adjustments........................................ (2)
Additions................................................... 14
Disposals................................................... (3)
Acquisition of controlling interest......................... (15)
Retained profits............................................ 4
----
AT 31 JANUARY 1998.......................................... 47
====
At 30 May 1996.............................................. 45
Exchange adjustments........................................ (3)
Arising on acquisition of Varity............................ 5
Additions................................................... 1
Retained profits............................................ 1
----
AT 31 JANUARY 1997.......................................... 49
====
</TABLE>
The cost of the investments in associated undertakings amounted to #42 million
(1997 -- #32 million).
A list of the principal associated undertakings is included in Note 30.
III-13
<PAGE> 62
During the year LucasVarity Group companies purchased goods from and sold goods
to associated undertakings of #15 million and #10 million respectively.
12 CURRENT ASSET INVESTMENTS
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
Listed investment in the USA................................ -- 16
</TABLE>
The listed investment in the USA was disposed of during the year for net
proceeds of #29 million giving rise to a pre tax profit of L13 million.
13 STOCKS
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
Raw materials and consumables............................... 159 164
Work in progress............................................ 156 178
Finished goods.............................................. 179 187
Payments on account......................................... (5) (11)
--- ---
489 518
=== ===
</TABLE>
14 DEBTORS
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
AMOUNTS DUE WITHIN ONE YEAR:
Trade debtors............................................. 700 678
Amounts owed by subsidiary undertakings................... -- --
Amounts owed by associated undertakings................... 10 10
Other debtors............................................. 64 91
Prepayments and accrued income............................ 27 28
--- ---
801 807
--- ---
AMOUNTS DUE BEYOND ONE YEAR:
Other debtors............................................. 60 60
Prepayments and accrued income............................ 8 4
--- ---
68 64
--- ---
869 871
=== ===
</TABLE>
III-14
<PAGE> 63
15 OTHER CREDITORS
<TABLE>
<CAPTION>
1998 1997
----- ----
#M #M
<S> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade creditors............................................. 603 555
Amounts owed to subsidiary undertakings..................... -- --
Amounts owed to associated undertakings..................... 2 3
Corporate taxation.......................................... 99 88
Social security and other taxes............................. 33 39
Accruals and deferred income................................ 329 259
Dividend.................................................... 31 32
----- ----
1,097 976
===== ====
</TABLE>
16 BORROWINGS
<TABLE>
<CAPTION>
1998 1997
----- -----
#M #M
<S> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Bank overdrafts............................................. 30 53
Bank loans.................................................. 352 283
US$15 million 6.43% Loan Notes.............................. 9 9
US$14.3 million 6.98% Loan Notes............................ 9 9
Finance lease obligations................................... 14 14
----- -----
Total short-term borrowings................................. 414 368
===== =====
AMOUNTS FALLING DUE AFTER ONE YEAR:
Bank loans.................................................. 29 25
US$57.2 million 6.98% Loan Notes............................ 35 36
US$15 million 7.46% Loan Notes.............................. 9 9
US$100 million 8.57% Loan Notes............................. 61 63
10 7/8% Eurosterling Bonds 2020............................. 100 100
Finance lease obligations................................... 81 89
----- -----
Total long-term borrowings.................................. 315 322
----- -----
Total borrowings............................................ 729 690
===== =====
CASH:
Cash at bank and in hand.................................... 73 119
Short-term deposits......................................... 82 108
----- -----
Total cash.................................................. 155 227
----- -----
Net (borrowings)/cash....................................... (574) (463)
===== =====
</TABLE>
The US$ Loan Notes are guaranteed by LucasVarity and have a range of maturities
from 1998 to 2005.
Included in bank loans are secured loans amounting to L9 million (1997-L13
million). The security given by the various subsidiaries to which these relate
is normally a charge on the land and buildings owned by those companies.
III-15
<PAGE> 64
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
BANK LOANS AND OVERDRAFTS ANALYSED BY MATURITY:
In one year or less or on demand............................ 382 336
Between one and two years................................... 11 9
Between two and five years.................................. 6 13
Five years or more -- by instalments........................ 6 3
-- not by instalments................... 6 --
--- ---
411 361
=== ===
OTHER BORROWINGS ANALYSED BY MATURITY:
In one year or less or on demand............................ 18 18
Between one and two years................................... 9 9
Between two and five years.................................. 66 68
Five years or more -- by instalments........................ 30 31
-- not by instalments................... 100 100
--- ---
223 226
=== ===
Total amounts payable by instalment, part of which fall due
after five years.......................................... 114 117
=== ===
FINANCE LEASE OBLIGATIONS:
Obligations are payable as follows:
Within one year............................................. 14 14
Between one and five years.................................. 52 52
Over five years............................................. 29 37
--- ---
95 103
=== ===
</TABLE>
17 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
POST- PROVISIONS
DEFERRED PENSION RETIREMENT FOR RESTRUCTURING OTHER
TAX OBLIGATIONS BENEFITS AND CLAIMS PROVISIONS TOTAL
-------- ----------- ---------- ----------------- ---------- -----
#M #M #M #M #M #M
<S> <C> <C> <C> <C> <C> <C>
At 1 February 1997..... 3 96 219 260 129 707
Reclassification....... -- (12) 26 (14) -- --
Exchange adjustments... -- (7) (7) (4) (5) (23)
Fair value on
acquisition.......... 3 -- -- -- 8 11
Adjustment to prior
year acquisition..... (40) -- 54 -- -- 14
Utilised in the
period............... (2) (14) (20) (143) (46) (225)
Charged in the
period............... 24 5 14 -- 18 61
--- --- ----- ---- ----- ----
AT 31 JANUARY 1998..... (12) 68 286 99 104 545
=== === ===== ==== ===== ====
</TABLE>
Certain of the opening balances have been reclassified to more accurately
reflect the nature of the provisions.
III-16
<PAGE> 65
<TABLE>
<CAPTION>
PENSION AND PROVISIONS
DEFERRED POST-RETIREMENT FOR RESTRUCTURING OTHER
TAX OBLIGATIONS AND CLAIMS PROVISIONS TOTAL
-------- --------------- ----------------- ---------- -----
#M #M #M #M #M
<S> <C> <C> <C> <C> <C>
At 30 May 1996................ 2 83 38 48 171
Exchange adjustments.......... -- (6) (1) (2) (9)
Fair value on acquisition..... -- 252 83 75 410
Utilised in the period........ -- (29) (33) (27) (89)
Charged in the period......... 1 15 173 35 224
-- --- --- --- -----
AT 31 JANUARY 1997............ 3 315 260 129 707
== === === === =====
</TABLE>
18 PENSIONS AND POST-RETIREMENT HEALTH CARE BENEFITS
Pensions
The LucasVarity Group operates a number of pension plans throughout the world in
accordance with local conditions and practices. The majority are defined benefit
schemes where the assets are held in trust funds separate from the LucasVarity
Group's finances. Pension expense is assessed in accordance with the advice of
independent professionally qualified actuaries.
UK
The largest scheme, representing over 80% of LucasVarity Group pension
liabilities, is the Lucas Pension Scheme for UK employees, a defined benefit
scheme. The latest actuarial valuation of the Scheme was as at 31 March 1997. At
that time the market value of the Scheme assets was #3,047 million. The
actuarial value of these assets was sufficient to cover 141% of the benefits
accrued to members, after allowing for expected future increases in earnings.
LucasVarity contributions to the Scheme are suspended.
The main actuarial assumptions used in this latest funding valuation were:
<TABLE>
<S> <C>
Rate of price inflation 4.25% per annum
Real earnings increases 1.7% per annum
Real return on investments 3.6% per annum
Asset valuation Smoothed market value
</TABLE>
Pension expense was determined using the projected unit method and on the basis
of the above assumptions except that the real investment return pre-retirement
was 4.6% per annum.
Most other UK pension schemes are also defined benefit schemes. The latest
actuarial valuations were undertaken at October 1997, using the projected unit
method. The market value of these assets was #252 million and the actuarial
value of these assets was sufficient to cover 102% of the projected benefits
that had accrued to members. Post year-end, the LucasVarity Group disposed of
Perkins Limited and these schemes transferred to the purchaser.
Rest of the World
In the USA and in Canada, the LucasVarity Group operates a number of defined
benefit and defined contribution plans.
The principal US plans are defined benefit schemes. The market value of their
assets at 31 January 1998 was #216 million and this was sufficient to cover 99%
of the projected benefits that had accrued to members. Pension expense was
determined using the projected unit method using US GAAP valuation principles
which are materially in line with those required under UK GAAP. The principal
assumptions used were a discount rate of 7.0% per annum and an assumed return on
assets of 9.25% per annum.
In France the LucasVarity Group contributes to State and independent plans at
prescribed rates.
III-17
<PAGE> 66
In Germany the LucasVarity Group has defined benefit pension obligations which,
in some plans, are partly funded by insurance policies. The unfunded portion of
these and other plans are included in provisions in note 17.
Post-retirement health care
The LucasVarity Group also operates a number of plans, primarily in the US,
which provide employees with post-employment benefits in respect of health care.
These plans are generally unfunded. The liability in respect of these benefits
is assessed by independent professionally qualified actuaries using the
projected unit method and is included under provisions. The major assumptions
were a discount rate of 7.5% per annum and an ultimate rate of inflation of
medical expenses of 5% per annum.
19 SHARE CAPITAL
<TABLE>
<CAPTION>
ISSUED, ALLOTTED
AUTHORISED & FULLY PAID
-------------------- --------------------
ORDINARY SHARES (25P EACH) NO. #M NO. #M
- -------------------------- ------------- --- ------------- ---
<S> <C> <C> <C> <C>
Balance at 1 February 1997..................... 2,000,000,000 500 1,434,371,000 359
Exercise of options............................ -- -- 13,967,535 3
Repurchase of shares........................... -- -- (43,000,000) (11)
------------- --- ------------- ---
BALANCE AT 31 JANUARY 1998..................... 2,000,000,000 500 1,405,338,535 351
============= === ============= ===
Balance at 30 May 1996......................... 200,000 -- 2 --
Increase in authorised share capital........... 1,999,800,000 500 -- --
Exchange of Lucas Industries shares for
LucasVarity shares........................... -- -- 885,805,140 222
Exchange of Varity shares for LucasVarity
shares....................................... -- -- 545,791,490 136
Exercise of options............................ -- -- 2,774,368 1
------------- --- ------------- ---
BALANCE AT 31 JANUARY 1997..................... 2,000,000,000 500 1,434,371,000 359
============= === ============= ===
</TABLE>
At 31 January 1998 the LucasVarity Group had several share option schemes:
LucasVarity Ordinary Share based plans
By virtue of a change to the Articles of Association of Lucas Industries,
approved by shareholders at an Extraordinary General Meeting of that company
held on 13 August 1996, the Lucas Industries Ordinary Shares to be issued
following the exercise of options under the Lucas Industries Executive Share
Option Scheme (1984) and Savings-Related Share Option Schemes will be exchanged
for LucasVarity Ordinary Shares on the same terms as set out in the Scheme of
Arrangement dated 6 September 1996. Options granted under the Lucas Industries
1994 Executive Share Option Scheme have been rolled over into Ordinary Shares of
LucasVarity.
III-18
<PAGE> 67
Summarised information about the executive and savings-related share options
outstanding under the LucasVarity and former Lucas Industries schemes at 31
January is as follows:
<TABLE>
<CAPTION>
EXECUTIVE SAVINGS-RELATED
OPTION SCHEMES OPTION SCHEMES TOTAL
NO. OF SHARES NO. OF SHARES NO. OF SHARES
-------------- --------------- -------------
<S> <C> <C> <C>
Outstanding at 1 February 1997.................. 10,760,401 35,544,324 46,304,725
Granted......................................... 6,078,448 11,374,122 17,452,570
Exercised....................................... (2,879,725) (10,371,780) (13,251,505)
Lapsed.......................................... (495,725) (2,477,987) (2,973,712)
---------- ----------- -----------
OUTSTANDING AT 31 JANUARY 1998.................. 13,463,399 34,068,679 47,532,078
========== =========== ===========
Latest dates exercisable range between.......... 1998/2007 1998/2004
Exercisable at the following price per share
(p):
83.0 to 95.1.................................... 75,890 2,740,685 2,816,575
95.2 to 132.9................................... 614,520 807,850 1,422,370
133.0 to 170.0.................................. 580,981 24,795,905 25,376,886
170.1 to 208.6.................................. 8,220,502 5,724,239 13,944,741
208.7 to 246.5.................................. 3,971,506 -- 3,971,506
---------- ----------- -----------
13,463,399 34,068,679 47,532,078
========== =========== ===========
</TABLE>
LucasVarity ADS based plans
By resolution of a committee of the Board of LucasVarity passed on 5 September
1996 the options over Varity Common Stock granted under the Varity Stock Option
Plans were deemed, with effect from 6 September 1996, to constitute options to
acquire, on the same terms and conditions, LucasVarity Ordinary Shares in the
form of American Depositary Shares (ADS's), at option prices calculated in that
option. A LucasVarity ADS represents the right to receive 10 Ordinary Shares of
LucasVarity.
Summarised information about options for ADS's outstanding under the former
Varity plans at 31 January 1998 is as follows:
<TABLE>
<CAPTION>
STOCK OPTION PLANS
NO. OF ADSS
------------------
<S> <C>
Outstanding at 1 February 1997.............................. 3,973,534
Granted..................................................... 4,899
Exercised................................................... (71,603)
Lapsed...................................................... --
---------
OUTSTANDING AT 31 JANUARY 1998.............................. 3,906,830
=========
Latest dates exercisable range between...................... 1998/2006
Exercisable at the following price per ADS (US$):
8.40 to 30.43............................................... 2,250,137
30.44 to 42.57.............................................. 1,656,693
---------
3,906,830
=========
</TABLE>
III-19
<PAGE> 68
20 RESERVES
<TABLE>
<CAPTION>
SHARE CAPITAL ASSOCIATED
PREMIUM REDEMPTION MERGER REVALUATION PROFIT AND UNDER TAKINGS'
ACCOUNT RESERVE RESERVE RESERVES LOSS ACCOUNT RESERVES
------- ---------- ------- ----------- ------------ --------------
#M #M #M #M #M #M
<S> <C> <C> <C> <C> <C> <C>
At 1 February 1997.............. 3 -- 276 124 (233) 17
Exchange adjustments............ -- -- -- (2) (52) (1)
Premium arising on shares
issued........................ 1 -- 10 -- -- --
Repurchase of shares............ -- 11 -- -- (85) --
Acquisition of controlling
interest...................... -- -- -- -- 13 (13)
Transfer on disposal............ -- -- -- -- 2 (2)
Revaluation reserve release..... -- -- -- (10) 10 --
Goodwill set off on
acquisitions.................. -- -- (87) -- -- --
Goodwill adjustment on prior
year acquisition.............. -- -- (28) -- -- --
Goodwill on disposals charged to
profit and loss account....... -- -- 7 -- -- --
Retained earnings............... -- -- -- -- 142 4
---- -- ------ ---- ---- ---
AT 31 JANUARY 1998.............. 4 11 178 112 (203) 5
==== == ====== ==== ==== ===
At 30 May 1996.................. 498 -- -- 130 (175) 17
Exchange adjustments............ -- -- -- (2) (44) (1)
Premium arising on Lucas
Industries shares issued prior
to 6 September 1996........... 6 -- -- -- -- --
Elimination of Lucas Industries
share premium on scheme of
arrangement with
LucasVarity................... (504) -- -- -- -- --
Premium arising on exchange of
Lucas Industries shares for
LucasVarity shares............ -- -- 504 -- -- --
Premium arising on exchange of
Varity shares for LucasVarity
Shares........................ -- -- 1,162 -- -- --
Premium arising on LucasVarity
shares issued after 6
September 1996................ 3 -- 1 -- -- --
Fixed asset revaluations........ -- -- -- -- -- --
Revaluation reserve release..... -- -- -- (4) 4 --
Goodwill set off on
acquisition................... -- -- (1,202) -- -- --
Transfer of goodwill to merger
reserve....................... -- -- (189) -- (189) --
Retained earnings............... -- -- -- -- (207) 1
---- -- ------ ---- ---- ---
AT 31 JANUARY 1997.............. 3 -- 276 124 (233) 17
==== == ====== ==== ==== ===
</TABLE>
The cumulative amount of goodwill set off against reserves at 31 January 1998,
net of disposals, is #1,500 million (1997 -- #1,392 million).
LucasVarity's profit for the year amounted to #94 million (eight months to 31
January 1997 -- L130 million).
III-20
<PAGE> 69
21 MINORITY INTERESTS
<TABLE>
<CAPTION>
1998 1997
LUCASVARITY LUCASVARITY
GROUP GROUP
----------- -----------
#M #M
<S> <C> <C>
Equity interests: minorities' share of net assets of
subsidiaries.............................................. 68 43
</TABLE>
22 PURCHASE OF SUBSIDIARY UNDERTAKINGS
(i) Purchase of subsidiary undertakings during the year
During the year the LucasVarity Group has acquired the Remsa Group, Frenos y
Mecanismos, the engine controls business of Smiths Industries plc and the
controlling interest in Freios Varga SA. The goodwill arising of #87 million has
been set off against the merger reserve.
<TABLE>
<CAPTION>
BOOK VALUE REVALUATIONS
OF ASSETS AND
ACQUIRED PROVISIONS FAIR VALUE
---------- ------------ ----------
#M #M #M
<S> <C> <C> <C>
Tangible fixed assets................................. 78 (1) 77
Fixed asset investments............................... 2 -- 2
Working capital....................................... 45 (7) 38
Taxation creditors.................................... (3) 1 (2)
Provisions............................................ (8) (3) (11)
Cash and overdrafts................................... 31 -- 31
Bank loans............................................ (47) -- (47)
--- --- ---
Net assets acquired................................... 98 (10) 88
--- --- ---
Minority shareholders' interest....................... (20)
Share of net assets of associated undertaking......... (15)
Goodwill set off against reserves..................... 87
---
Total consideration................................... 140
===
Satisfied by:
Cash consideration.................................... 91
Deferred consideration................................ 49
---
Total consideration................................... 140
===
The net outflow of cash in respect of the purchase of
subsidiary undertakings is as follows:
Cash consideration.................................... 91
Cash balances of subsidiary undertakings purchased.... (31)
---
60
===
</TABLE>
The cash flows of subsidiary undertakings acquired during the year are not
material.
The fair value assessments for the Freios Varga SA acquisition are provisional
due to the timing of the transaction.
III-21
<PAGE> 70
(ii) Purchase of Varity
Varity was acquired during the prior accounting period and, due to the timing of
the transaction, provisional fair value assessments were made at 31 January
1997. During the current year revisions have been made to certain fair values as
detailed below:
<TABLE>
<CAPTION>
ORIGINAL US ORIGINAL
TO UK ASSET
BOOK VALUE GAAP AND REVALUATIONS
OF ASSETS OTHER POLICY AND OTHER FAIR VALUE FINAL FAIR
ACQUIRED CONFORMITY ADJUSTMENTS REVISIONS VALUE
---------- ------------ ------------ ---------- ----------
#M #M #M #M #M
<S> <C> <C> <C> <C> <C>
Tangible fixed assets.......... 434 -- (18)(d) (7)(d) 409
Fixed asset investments........ 6 -- (1) -- 5
Goodwill....................... 181 (181)(a) -- -- --
Current asset investments...... 15 1 -- -- 16
Stocks......................... 108 1 (1) -- 108
Debtors........................ 245 -- -- -- 245
Creditors...................... (304) -- -- (7)(h) (311)
Provisions..................... (172) (8)(b,c) (199)(e,f,g) (14)(i,j) (393)
Cash and overdrafts............ 33 -- -- -- 33
Short-term deposits............ 18 -- -- -- 18
Bank loans..................... (2) -- -- -- (2)
---- ---- ---- --- -----
Net assets..................... 562 (187) (219) (28) 128
---- ---- ---- ---
Minority shareholders'
interest..................... (1)
Goodwill-prior period.......... 1,165
Goodwill-current period........ 28
-----
Consideration.................. 1,320
=====
The net inflow of cash in
respect of the purchase of
Varity in the prior period
was as follows:
Cash expenses.................. (21)
Cash purchased................. 33
-----
12
=====
</TABLE>
- ---------------
The reasons for the principal adjustments are described below:
(a) elimination of goodwill which was previously capitalised by Varity;
(b) restate deferred tax on a partial provisioning basis in accordance with
Statement of Standard Accounting Practice 15;
(c) additional provisions for planned redundancies which had been determined
but not announced at the time of acquisition and which were not therefore
provided in accordance with US GAAP. In total #15 million was charged as
restructuring costs in the 12 months prior to acquisition;
(d) revalue fixed assets to reflect the fair value of the assets acquired;
(e) recognise liabilities relating to prior contractual obligations arising
from the change in control (#14 million);
(f) provide for the actuarial deficit on the Varity pension schemes and
liabilities for other post-retirement benefits (#134 million);
(g) provision for the post-retirement medical benefit and environmental
liability obligations of a Varity subsidiary which are indemnified by a
predecessor of Fruehauf Trailer Corporation (FTC). Provision is required as
FTC entered into Chapter 11 bankruptcy proceedings in September 1996 and is
unlikely to be able to comply with its indemnity obligations (#31 million);
III-22
<PAGE> 71
(h) updated estimate of acquisition date liabilities of Varity's captive
insurance company;
(i) final calculation of the fair value at acquisition of the post-retirement
benefit liabilities of present and former Varity subsidiaries (#54
million); and
(j) establish a deferred tax asset in respect of Varity net operating and
capital losses which are now considered recoverable against future taxable
profits (#40 million).
23 DISPOSAL OF SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
#M
---
<S> <C>
Tangible fixed assets....................................... 48
Working capital............................................. 50
Provisions.................................................. (17)
Cash and overdrafts......................................... 1
---
Net assets.................................................. 82
Goodwill charged to profit and loss account................. 7
Loss on disposal............................................ (25)
---
Total consideration......................................... 64
===
Satisfied by:
Cash........................................................ 63
Deferred consideration...................................... 1
---
64
===
The net inflow of cash in respect of the disposal of
subsidiary undertakings is as follows
Cash consideration.......................................... 63
Cash balances of subsidiary undertakings sold............... (1)
---
62
===
</TABLE>
The cash flows of subsidiary undertakings disposed of during the year are not
material.
III-23
<PAGE> 72
24 POST BALANCE SHEET EVENTS
On 11 March 1998 LucasVarity completed the disposal of its Diesel Engines
division, VarityPerkins. The pro forma effect of the disposal on the net assets
of the LucasVarity Group at 31 January 1998 is shown below.
After accounting for the write back of the goodwill relating to VarityPerkins
resulting from the Lucas and Varity merger in 1996, the profit on disposal is
not expected to be material.
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------ PRO FORMA NET
NET ASSETS OF NET ASSETS OF ASSETS OF
THE LUCASVARITY GROUP AT VARITYPERKINS AT THE LUCASVARITY GROUP
31 JANUARY 1998 31 JANUARY 1998 OTHER (NOTE II) FOLLOWING THE DISPOSAL
------------------------ ----------------- --------------- ----------------------
#M #M #M
<S> <C> <C> <C> <C>
FIXED ASSETS:
Tangible assets...... 1,362 (166) -- 1,196
Intangible assets.... 27 -- -- 27
Investments.......... 47 (45) 35 37
------ ---- --- ------
1,436 (211) 35 1,260
------ ---- --- ------
CURRENT ASSETS:
Stock................ 489 (55) -- 434
Debtors.............. 869 (137) -- 732
Cash................. 155 (6) 656 805
------ ---- --- ------
1,513 (198) 656 1,971
CREDITORS: AMOUNTS
FALLING DUE WITHIN
ONE YEAR
Borrowings........... (414) 13 (13) (414)
Other creditors...... (1,097) 174 -- (923)
------ ---- --- ------
(1,511) 187 (13) (1,337)
------ ---- --- ------
NET CURRENT ASSETS... 2 (11) 643 634
------ ---- --- ------
TOTAL ASSETS LESS
CURRENT
LIABILITIES........ 1,438 (222) 678 1,894
CREDITORS: AMOUNTS
FALLING DUE AFTER
ONE YEAR
Borrowings........... (315) -- -- (315)
Accruals and deferred
income............. (52) -- -- (52)
Intercompany
balances........... -- 35 (35) --
------ ---- --- ------
(367) 35 (35) (367)
PROVISIONS FOR
LIABILITIES AND
CHARGES............ (545) 17 -- (528)
------ ---- --- ------
NET ASSETS........... 526 (170) 643 999
====== ==== === ======
</TABLE>
- ---------------
Note:
(i) The pro forma statement of the net assets of the LucasVarity Group is shown
as if the disposal had taken place on 31 January 1998.
III-24
<PAGE> 73
(ii) The other adjustments represent:
(a) preference shares with a value of #35 million in a subsidiary of
LucasVarity included in the disposal;
(b) cash of #656 million, which comprises the gross proceeds of #803
million (using an exchange rate of US$1.65:#1) less the estimated tax
payable on the disposal proceeds and other disposal expenses, totalling
#153 million, plus cash balances retained by the LucasVarity Group of #6
million;
(c) indebtedness of #13 million retained by the LucasVarity Group; and
(d) the elimination of funding balances due to the LucasVarity Group of
#35 million, which have been excluded from the disposal.
25 NOTES TO THE CASH FLOW STATEMENT
(i) Net cash inflow from operating activities
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 31 JANUARY
1998 1997
---------- -----------
#M #M
<S> <C> <C>
Group operating profit/(loss)............................... 401 (75)
Share of profit of associated undertakings.................. (7) (5)
Dividends from associated undertakings...................... 1 2
Depreciation................................................ 167 111
Amortisation of intangible fixed assets..................... 1 --
Profit on sale of current asset investment.................. (13) --
Provision for restructuring................................. -- 173
Utilisation of provision for restructuring.................. (125) (33)
Decrease in other provisions................................ (47) (5)
Decrease in stocks.......................................... 5 13
(Increase)/decrease in debtors.............................. (60) 70
Increase in creditors....................................... 129 47
---- ---
452 298
==== ===
</TABLE>
(ii) Reconciliation of net cash inflow to movement in net debt
<TABLE>
<CAPTION>
#M #M
-- --
<S> <C> <C>
(Decrease)/increase in cash in the period................... (17) 85
Cash inflow from increase in debt and lease financing....... (11) (50)
Cash inflow from decrease in short-term deposits............ (18) (50)
---- ----
Change in net debt resulting from cash flows................ (46) (15)
Bank loans acquired with subsidiary undertakings............ (47) (4)
Short-term deposits acquired with subsidiary undertakings... -- 18
New finance lease commitments............................... (14) (15)
Exchange movements.......................................... (4) 9
---- ----
Movement in net debt in the period.......................... (111) (7)
Opening net debt............................................ (463) (456)
---- ----
Closing net debt............................................ (574) (463)
==== ====
</TABLE>
III-25
<PAGE> 74
(iii) Analysis of net debt
<TABLE>
<CAPTION>
ACQUISITION
AT (EXCLUDING OTHER AT
1 FEBRUARY CASH CASH & NON-CASH EXCHANGE 31 JANUARY
1997 FLOWS OVERDRAFTS) CHANGES MOVEMENT 1998
---------- ----- ----------- -------- -------- ----------
#M #M #M #M #M #M
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in
hand.................... 119 (37) -- -- (9) 73
Bank overdrafts........... (53) 20 -- -- 3 (30)
---- --- --- --- --- ----
Total cash and
overdrafts.............. 66 (17) -- -- (6) 43
Short-term deposits....... 108 (18) -- -- (8) 82
Bank loans................ (308) (33) (47) -- 7 (381)
Other borrowings.......... (226) -- -- -- 3 (223)
Finance lease
obligations............. (103) 22 -- (14) -- (95)
---- --- --- --- --- ----
Net borrowings............ (463) (46) (47) (14) (4) (574)
==== === === === === ====
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION
AT (EXCLUDING OTHER AT
30 MAY CASH CASH & NON-CASH EXCHANGE 31 JANUARY
1996 FLOWS (OVERDRAFTS) CHANGES MOVEMENT 1997
------ ----- ------------ -------- -------- ----------
#M #M #M #M #M #M
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand..... 17 104 -- -- (2) 119
Bank overdrafts.............. (35) (19) -- -- 1 (53)
---- --- -- --- -- ----
Total cash and overdrafts.... (18) 85 -- -- (1) 66
Short-term deposits.......... 143 (50) 18 -- (3) 108
Bank loans................... (236) (75) (3) -- 6 (308)
Other borrowings............. (239) 9 -- -- 4 (226)
Finance lease obligations.... (105) 16 -- (14) -- (103)
---- --- -- --- -- ----
Net borrowings............... (455) (15) 15 (14) 6 (463)
==== === == === == ====
</TABLE>
26 FINANCIAL COMMITMENTS
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
CAPITAL COMMITMENTS
Contracted but not provided................................. 37 85
== ==
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1998 1997
PROPERTIES PROPERTIES OTHER OTHER
---------- ---------- ----- -----
#M #M #M #M
<S> <C> <C> <C> <C>
LEASING COMMITMENTS
Operating leases
Annual charge for leases terminating:
Within one year...................................... 1 2 6 4
One to five years.................................... 4 5 11 11
Over five years...................................... 7 6 2 5
-- -- -- --
12 13 19 20
== == == ==
</TABLE>
The majority of property leases are subject to rent reviews.
III-26
<PAGE> 75
27 CONTINGENT LIABILITIES
(a) LucasVarity has guaranteed borrowings and other liabilities of
certain subsidiary undertakings at 31 January 1998 of #163 million
(1997 -- #211 million).
(b) In the normal course of business, the LucasVarity Group gives
certain indemnities and also enters into forward commitments for the
purchase and sale of foreign currencies. Such commitments are only
entered into on the basis of forecast requirements.
28 DEFERRED TAXATION
<TABLE>
<CAPTION>
1998 1997
---- ----
#M #M
<S> <C> <C>
Accounted for:
Tax on excess of capital allowances over depreciation....... 20 13
Other timing differences.................................... (28) (6)
Advance Corporation Tax recoverable......................... (4) (4)
--- ---
(12) 3
=== ===
Not accounted for:
Tax on excess of capital allowances over depreciation....... 64 65
Other timing differences.................................... (6) 2
--- ---
58 67
=== ===
</TABLE>
No provision has been made for potential taxation which could arise on the
remittance to the United Kingdom of retained overseas earnings or on the
disposal of revalued property, as no remittances or disposals are envisaged in
the foreseeable future which would give rise to a material liability.
Surplus Advance Corporation Tax amounting to #87 million (1997 -- #98 million),
of which #4 million (1997 -- #4 million) is referred to above, is available for
set-off against future UK corporation tax and deferred tax liabilities. The tax
value of losses carried forward is #99 million (1997 -- #91 million).
29 NUMBERS OF EMPLOYEES
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
HEADCOUNT:
At 31 January the actual numbers of employees were as
follows:
United Kingdom.............................................. 25,685 26,829
Rest of World............................................... 31,269 30,230
------ ------
56,954 57,059
====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 1998 31 JANUARY 1997
--------------- ---------------
<S> <C> <C>
AVERAGE NUMBER OF EMPLOYEES
BY CLASS OF BUSINESS:
Braking Systems............................................. 11,997 10,561
Other Automotive............................................ 32,157 31,027
Diesel Engines.............................................. 4,620 2,909
Aerospace................................................... 6,738 7,950
Corporate................................................... 434 653
------ ------
55,946 53,100
====== ======
BY GEOGRAPHICAL REGION:
United Kingdom.............................................. 25,530 25,167
Rest of World............................................... 30,416 27,933
------ ------
55,946 53,100
====== ======
</TABLE>
III-27
<PAGE> 76
30 PRINCIPAL LUCASVARITY GROUP UNDERTAKINGS
The following list includes LucasVarity Group undertakings which materially
affect the accounts. All undertakings are wholly owned, except where stated, and
the LucasVarity Group's interests are in Ordinary Shares or their equivalent.
Interests in undertakings marked* are held by intermediate undertakings. The
places of incorporation and countries of operation are as shown below. All
LucasVarity Group undertakings operate in one or more of the disclosed business
segments.
Subsidiary Undertakings
<TABLE>
<S> <C> <C>
ENGLAND BRAZIL KOREA
Lucas Industries plc Freios Varga SA (65%)* Lucas Diesel Korea Ltd (70%)*
Lucas Ltd* FRANCE INDIA
(Incorporating the trading Lucas France SAS* Lucas-TVS Ltd (51%)*
of: GERMANY USA
Lucas Aerospace Lucas Automotive GmbH* Varity Automotive Inc.*
Lucas Automotive) SPAIN Kelsey-Hayes Company*
Perkins Group Ltd* Lucas Diesel SA*
(disposed of post year-end) Lucas Girling SA*
Associated Undertakings
INDIA USA
Brakes India Ltd (49%)* Lucas Sumitomo Brakes Inc.
(50%)*
</TABLE>
III-28
<PAGE> 77
31 DIRECTORS' EMOLUMENTS AND OTHER PAYMENTS
The emoluments of the Chairman and executive Directors and the non-executive
Directors' fees for the year to 31 January 1998 are as follows:
<TABLE>
<CAPTION>
YEAR TO 8 MONTHS TO
31 JANUARY 31 JANUARY
1998 1997 (C)
BASIC BONUS BENEFITS ---------- -----------
SALARY FEES (A) IN KIND TOTAL TOTAL
--------- ------- --------- -------- ---------- -----------
# # # # # #
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE DIRECTORS
V. A. Rice........................ 631,274 -- 568,293 66,030 1,265,597 402,834
J. A. Gilroy (appointed 21 January
1997)........................... 399,856 -- 323,216 45,808 768,880 17,297
N. D. Arnold (appointed 9 October
1997)(b)........................ 284,139 -- 191,799 17,516 493,454 --
J. A. M. Grant (resigned 20
December 1996)(d)............... -- -- -- -- -- 172,555
--------- ------- --------- ------- --------- -------
CHAIRMAN
Sir Brian Pearse.................. 150,000 -- -- -- 150,000 40,000
NON-EXECUTIVE DIRECTORS
P. G. Bosonnet (resigned 30 April
1997)........................... -- 8,125 -- -- 8,125 21,667
T. N. Davidson.................... -- 31,500 -- -- 31,500 21,000
Sir John Fairclough (resigned 31
December 1996).................. -- -- -- -- -- 17,208
R. M. Gates....................... -- 29,500 -- -- 29,500 19,667
S. Gillibrand..................... -- 32,667 -- -- 32,667 21,000
Sir Bryan Nicholson............... -- 35,667 -- -- 35,667 23,000
Dr. A. W. Rudge (appointed 1
January 1997)................... -- 27,500 -- -- 27,500 2,292
W. S. Rustand..................... -- 29,500 -- -- 29,500 19,667
E. A. Wallis...................... -- 41,000 -- -- 41,000 21,000
--------- ------- --------- ------- --------- -------
Total........................... 1,465,269 235,459 1,083,308 129,354 2,913,390 799,187
========= ======= ========= ======= ========= =======
</TABLE>
III-29
<PAGE> 78
The executive Directors received no emoluments in respect of the period prior to
6 September 1996 from LucasVarity. The emoluments of the Chairman and executive
Directors for the period 6 September 1996 to 31 January 1997 and the
non-executive Directors' fees for the period 30 May 1996 to 31 January 1997 are
as follows:
<TABLE>
<CAPTION>
GLOBAL TAX ON SPECIAL
BASIC BENEFITS IN SHARE PENSION
SALARY FEES BONUS KIND PLAN CONTRIBUTIONS TOTAL
------- ------- ------- ----------- ------ -------------- -------
L L L L L L L
<S> <C> <C> <C> <C> <C> <C> <C>
EXECUTIVE DIRECTORS
V. A. Rice.................... 231,786 -- 167,257 3,510 281 -- 402,834
J. A. M. Grant (d) (resigned
20 December 1996)........... 81,062 -- -- 4,057 -- 87,436 172,555
J. A. Gilroy (appointed 21
January 1997)............... 9,679 -- 7,484 134 -- -- 17,297
------- ------- ------- ----- ----- ------ -------
CHAIRMAN
Sir Brian Pearse.............. 40,000 -- -- -- -- -- 40,000
NON-EXECUTIVE DIRECTORS
P. G. Bosonnet................ -- 21,667 -- -- -- -- 21,667
T. N. Davidson................ -- 21,000 -- -- -- -- 21,000
Sir John Fairclough (resigned
31 December 1996)........... -- 17,208 -- -- -- -- 17,208
R. M. Gates................... -- 19,667 -- -- -- -- 19,667
S. Gillibrand................. -- 21,000 -- -- -- -- 21,000
Sir Bryan Nicholson........... -- 23,000 -- -- -- -- 23,000
Dr. A. W. Rudge (appointed 1
January 1997)............... -- 2,292 -- -- -- -- 2,292
W. S. Rustand................. -- 19,667 -- -- -- -- 19,667
E. A. Wallis.................. -- 21,000 -- -- -- -- 21,000
------- ------- ------- ----- ----- ------ -------
Total....................... 362,527 166,501 174,741 7,701 281 87,436 799,187
======= ======= ======= ===== ===== ====== =======
</TABLE>
- ---------------
(a) Bonus shown is that earned during the year to 31 January 1998 and paid in
April 1998. Bonuses paid during the year to 31 January 1998, reflecting
Company performance in the previous year, were: to V. A. Rice, L403,326; to
J. A. Gilroy, LNil; and to N. D. Arnold, L117,744.
(b) Mr. Arnold's emoluments are shown for a full year, although he was
appointed as a Director mid-year.
(c) The emoluments of the Chairman and executive Directors are for the period 6
September 1996 to 31 January 1997 and the non-executive Directors fees are
for the period 30 May 1996 to 31 January 1997.
(d) In addition, compensation of L820,264 was paid for loss of office,
reflecting his entitlements under his service agreement.
III-30
<PAGE> 79
Directors' interests
The interests of the Directors in Ordinary Shares of LucasVarity, which were all
held beneficially, were as follows:
<TABLE>
<CAPTION>
ORDINARY
SHARES
AT ORDINARY SHARES
31 JANUARY ORDINARY SHARES AT 30 MAY
1998 AT 1 FEBRUARY 1997 1996
---------- ------------------ ------------------
<S> <C> <C> <C>
V. A. Rice (a)................ 1,060,458 1,227,208 1
J. A. Gilroy (a).............. 202,960 91,210 91,210*
N. D. Arnold (a).............. 244,530 244,530* --
Sir Brian Pearse.............. 21,104 20,987 1
T. N. Davidson................ 119,420 119,420 --
R. M. Gates................... 13,010 13,010 --
S. Gillibrand................. 15,163 5,163 --
Sir Bryan Nicholson........... 31,030 31,030 --
Dr. A. W. Rudge............... 5,000 -- --*
W. S. Rustand................. 22,380 22,380 --
E. A. Wallis.................. 5,234 5,234 --
</TABLE>
- ---------------
* At date of appointment
(a) includes shares in the Global Share Plan purchased with Company
contributions.
None of the Directors has any beneficial interest in shares or listed preference
shares or bonds of subsidiary companies.
Since 31 January 1998 there have been no further acquisitions or disposal of
shares by Directors.
Directors' share options
<TABLE>
<CAPTION>
OPTIONS
ON MARKET OPTIONS ON
ORDINARY GRANTED PRICE ON ORDINARY
SHARES DURING DATE OF EXERCISE DATE OF DATE FIRST EXPIRY SHARES
DIRECTOR 1/2/97 YEAR EXERCISED GRANT PRICE EXERCISE EXERCISABLE DATE 31/1/98
- -------- --------- ------- --------- -------- -------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
V. A. Rice.............. 2,184,360 25.03.92 US$0.840 06.09.96 24.03.02 2,184,360(b)
2,616,480 02.06.93 US$2.725 06.09.96 01.06.03 2,616,480(a)
2,252,160 04.02.94 US$4.257 06.09.96 03.02.04 2,252,160(a)
1,391,730 12.05.95 US$3.116 06.09.96 11.05.05 1,391,730(a)
2,044,260 25.03.96 US$2.935 06.09.96 24.03.06 2,044,260(a)
575,000 29.11.96 246.5p 29.11.99 28.11.06 575,000(c)
525,000 30.04.97 183.5p 30.04.00 29.04.07 525,000(c)
J. A. Gilroy............ 223,740 25.03.92 US$0.840 06.09.96 24.03.02 223,740(b)
716,220 02.06.93 US$2.725 06.09.96 01.06.03 716,220(a)
592,710 04.02.94 US$4.257 06.09.96 03.02.04 592,710(a)
666,540 12.05.95 US$3.116 06.09.96 11.05.05 666,540(a)
1,107,800 25.03.96 US$2.935 06.09.96 24.03.06 1,107,800(a)
300,000 29.11.96 246.5p 29.11.99 28.11.06 300,000(c)
425,000 30.04.97 183.5p 30.04.00 29.04.07 425,000(c)
N. D. Arnold............ 458,390* 25.03.92 US$0.840 06.09.96 24.03.02 458,390(b)
647,910* 02.06.93 US$2.725 06.09.96 01.06.03 647,910(a)
507,840* 29.03.94 US$4.257 06.09.96 28.03.04 507,840(a)
312,570* 12.05.95 US$3.116 06.09.96 11.05.05 312,570(a)
499,630* 25.03.96 US$2.935 06.09.96 24.03.06 499,630(a)
150,000* 29.11.96 246.5p 29.11.99 28.11.06 150,000(c)
210,000* 30.04.97 183.5p 30.04.00 29.04.07 210,000(c)
</TABLE>
III-31
<PAGE> 80
<TABLE>
<CAPTION>
OPTIONS
ON MARKET OPTIONS ON
ORDINARY GRANTED PRICE ON ORDINARY
SHARES DURING DATE OF EXERCISE DATE OF DATE FIRST EXPIRY SHARES
DIRECTOR 1/2/97 YEAR EXERCISED GRANT PRICE EXERCISE EXERCISABLE DATE 31/1/98
- -------- --------- ------- --------- -------- -------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
T. N. Davidson.......... 41,400 02.06.93 US$2.725 06.09.96 01.06.98 41,400(a)
41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
R. M. Gates............. 41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
Sir Bryan Nicholson..... 41,400 02.06.93 US$2.725 06.09.96 01.06.98 41,400(a)
41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
W. S. Rustand........... 41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
</TABLE>
<TABLE>
<CAPTION>
OPTIONS
ON MARKET OPTIONS ON
ORDINARY GRANTED PRICE ON ORDINARY
SHARES DURING DATE OF EXERCISE DATE OF DATE FIRST EXPIRY SHARES
DIRECTOR 6/9/96 YEAR EXERCISED GRANT PRICE EXERCISE EXERCISABLE DATE 31/1/97
- -------- --------- ------- --------- -------- -------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
V. A. Rice.............. 2,184,360 25.03.92 US$0.840 06.09.96 24.03.02 2,184,360(b)
2,616,480 02.06.93 US$2.725 06.09.96 01.06.03 2,616,480(a)
2,252,160 04.02.94 US$4.257 06.09.96 03.02.04 2,252,160(a)
1,391,730 12.05.95 US$3.116 06.09.96 11.05.05 1,391,730(a)
2,044,260 25.03.96 US$2.935 06.09.96 24.03.06 2,044,260(a)
575,000 29.11.96 246.5p 29.11.99 28.11.06 575,000(c)
J. A. Gilroy............ 227,340* 23.03.92 US$0.840 06.09.96 24.03.02 227,340(b)
716,220* 02.06.93 US$2.725 06.09.96 01.06.03 716,220(a)
592,710* 04.02.94 US$4.257 06.09.96 03.02.04 592,710(a)
666,540* 12.05.95 US$3.116 06.09.96 11.05.05 666,540(a)
1,107,800* 23.03.96 US$2.935 06.09.96 24.03.06 1,107,800(a)
300,000* 29.11.96 246.5p 29.11.99 28.11.06 300,000(c)
T. N. Davidson.......... 41,400 02.06.93 US$2.725 06.09.96 01.06.98 41,400(a)
41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
R. M. Gates............. 41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
Sir Bryan Nicholson..... 41,400 02.06.93 US$2.725 06.09.96 01.06.98 41,400(a)
41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
W. S. Rustand........... 41,400 41,400(a) 02.06.93 US$2.725 249p
41,400 02.06.94 US$4.257 06.09.96 01.06.99 41,400(a)
41,400 25.05.95 US$3.805 06.09.96 24.05.00 41,400(a)
41,400 23.05.96 US$3.333 06.09.96 22.05.06 41,400(a)
</TABLE>
- ---------------
* At date of appointment
(a) Options granted under the Varity Corporation Shareholder Value Incentive
Plan (now closed).
(b) Options granted under the Varity Corporation Executive Stock Options Plan
(now closed).
(c) Options granted under the LucasVarity 1996 Executive Share Option Scheme.
III-32
<PAGE> 81
(d) In both (a) and (b) above the options are now represented by options for
LucasVarity ADSs and the option holdings and prices are stated as Ordinary
Share equivalents.
Notes
- - The price of options granted under the LucasVarity 1996 Executive Share
Option Scheme is based on the middle market price of the Ordinary Shares at
the close of business on the day prior to the date of grant. No options have
been granted at a discounted price.
- - Share options granted under the LucasVarity 1996 Executive Share Option
Scheme become exercisable three years after the date of grant and lapse ten
years after the date of grant. The exercise of these options is conditional
on the satisfaction of a performance measure. The measure applied to the
options is that after three years from the date of grant the total
shareholder return (TSR) of LucasVarity must at least equal the TSR of the
FTSE 100 company ranked 50th by TSR measured over the same three-year period.
If the performance measure has not been satisfied, the test will be repeated
every three months thereafter using a rolling three-year period.
- - The closing price of the Ordinary Shares at 31 January 1998 was 207p
(US$33 3/4 per ADS). The highest closing price during the year to 31 January
1998 was 243p (US$39 1/8 per ADS) and the lowest 182p (US$30 per ADS).
- - The options listed above include options that were granted to certain
non-executive Directors prior to the merger. It is not the Company's
intention to grant options to non-executive Directors in future.
III-33
<PAGE> 82
UNAUDITED RECONCILIATION TO US ACCOUNTING PRINCIPLES
The Group prepares its financial statements in accordance with UK generally
accepted accounting principles ("GAAP") which are different from those in the
US. The following is a description of the major GAAP differences and summary of
the estimated adjustments required if the financial statements had been prepared
under US GAAP.
Goodwill
For UK GAAP purposes, the Group sets off goodwill arising on consolidation of
subsidiary and associated undertakings against reserves in the year of
acquisition. Under US GAAP, goodwill is capitalised and amortised over its
estimated useful life. The estimated useful life of goodwill varies from five to
forty years depending on the nature of the business acquired and the industry in
which it operates.
Under UK GAAP, goodwill relating to disposals previously set off against
reserves is included in the determination of the gain or loss on disposal. Under
US GAAP, the unamortised balance of such goodwill would be so included.
Intangible fixed assets-entry fees
Under UK GAAP, entry fees are capitalised and subsequently amortised in order to
match cost against estimated future revenues, having regard to the technical and
commercial viability of the related product programmes. Under US GAAP, such
costs are only capitalised following flight certification of the engines to
which the payments relate.
Restructuring charge
Under UK GAAP, restructuring costs are usually charged to the profit and loss
account in the accounting period in which the management decision, based on a
determined plan, is taken to restructure the entity's operations. Under US GAAP,
provision is made when the entity is demonstrably committed to specific
restructuring actions. This commitment would typically be demonstrated by a
public announcement detailing the businesses, locations and numbers of employees
involved together with the timing and size of expenditures.
Property revaluation
Under UK GAAP, certain of the Group's land and buildings are periodically
revalued and the resulting carrying value adjustments to such assets are
credited or debited to revaluation reserves. Subsequent depreciation is computed
on the revalued amounts. Under US GAAP, revaluations are not permitted and
depreciation is computed on historical cost.
Dividends
Under UK GAAP, dividends, and the related Advance Corporation Tax (ACT), are
recorded in the financial statements for the period to which they relate. Under
US GAAP, dividends are not recorded until they are declared. The final
dividends, which are proposed by the Directors for approval and declaration by
the shareholders at the next Annual General Meeting, would not therefore be
included in the financial statements prepared under US GAAP until so approved
and declared. Accordingly, the related ACT would be similarly treated.
Deferred taxation
Under UK GAAP, the Group provides for deferred taxation to the extent the tax
liability will become payable in the foreseeable future. US GAAP requires full
provision to be made on all temporary differences between the book and tax bases
of assets and liabilities using the liability method. Deferred tax assets are
recognised if their realisation is considered more likely than not.
III-34
<PAGE> 83
Pension costs
For the purposes of the reconciliation below, the Group has adopted the
provisions of SFAS 87 -- "Employers' Accounting for Pensions" as from 1 August
1992 in respect of its principal pension plans in the United Kingdom. The
Group's only other material pension plans are in the United States and have been
reported on a SFAS 87 basis in the Group's consolidated financial statements as
permitted for overseas pension plans under UK GAAP, as the difference to SSAP 24
is immaterial.
SFAS 87 requires that the projected benefit obligation (pension liability) be
matched against the market value of the underlying plan assets and be adjusted
to reflect any other unrecognised obligations or assets in determining the
pension cost or credit for the year. As a result, the pension expense can be
significantly different from that computed under UK GAAP which requires the cost
of providing pension benefits to be expensed over the periods benefiting from
the employee's service on the basis of a constant percentage of current and
estimated future earnings.
Forward exchange contracts
The Group enters into forward exchange contracts which, under UK GAAP, are all
treated as hedges of future income. Under US GAAP, these contracts would not
have been treated as hedges and accordingly, the gain or loss arising on the
translation of these contracts at the forward rates of exchange ruling at each
balance sheet date would be included in the determination of net income.
NET INCOME
<TABLE>
<CAPTION>
YEAR TO
31 JANUARY 1998
---------------
#M
<S> <C>
NET INCOME PER UK GAAP...................................... 209
----
Continuing operations....................................... 180
Discontinued operations and exceptional items (a)........... 29
----
Adjustments:
Goodwill amortisation....................................... (40)
Goodwill on disposals transferred to profit & loss
account................................................... 4
Intangible fixed assets-entry fees.......................... (15)
Provisions for restructuring................................ (95)
Property revaluation........................................ 10
Pension credit.............................................. 117
Exchange loss relating to forward exchange contracts........ (3)
Deferred taxation
-- Effect of differences in methodology................... (15)
-- Effect of US GAAP adjustments.......................... 9
Other....................................................... (1)
----
NET INCOME PER US GAAP...................................... 180
----
Continuing operations (a)................................... 148
Discontinued operations..................................... 32
----
Basic EPS in accordance with US GAAP (pence per share)...... 12.7
====
</TABLE>
- ---------------
(a) Continuing operations net income in the year ended 31 January 1998 includes
losses of #17m which have been classified as exceptional items under UK
GAAP
III-35
<PAGE> 84
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
----- -----
#M #M
<S> <C> <C>
SHAREHOLDERS' EQUITY PER UK GAAP............................ 458 546
Adjustments:
Goodwill.................................................... 1,226 1,226
Tangible fixed assets....................................... (112) (124)
Intangible fixed assets -- entry fees....................... (15) --
Prepaid pension cost........................................ 454 337
Exchange gains relating to forward exchange contracts....... 42 45
Investments................................................. -- 5
Proposed final dividend..................................... 31 32
Advance Corporation Tax thereon............................. 8 8
Restructuring provisions.................................... 36 131
Deferred taxation
-- Effect of differences in methodology................... 147 117
-- Effect of US GAAP adjustments.......................... (160) (169)
Other....................................................... (16) (15)
----- -----
SHAREHOLDERS' EQUITY PER US GAAP............................ 2,099 2,139"
===== =====
</TABLE>
III-36
<PAGE> 85
PART B: UNAUDITED RESULTS FOR THE NINE MONTHS ENDED 31ST OCTOBER, 1998
Set out below is the text of the announcement dated 8th December, 1998 of
LucasVarity's unaudited results for the nine months ended 31st October, 1998.
"PART 1
LUCASVARITY REPORTS
THIRD QUARTER AND NINE MONTH RESULTS
LucasVarity plc today reports its results for the three month (third quarter)
and nine month periods ended 31 October 1998.
THIRD QUARTER AND YEAR TO DATE HIGHLIGHTS
- Earnings per ordinary share from continuing operations (before
exceptional items) increased sharply in both periods:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Third Quarter............................................... 4.3p 3.5p
Nine Months................................................. 12.0p 8.9p
</TABLE>
- Third quarter sales from continuing operations up 2.9% -- up 5.3%
excluding currency translation effects.
- Third quarter operating profit from continuing operations (before
exceptional items) up 12.8% -- up 16.3% excluding currency translation
effects.
- Despite the adverse effect of the General Motors strike in 1998:
- Year to date sales from continuing operations up 6.4% -- up 8.7%
excluding currency translation effects.
- Year to date operating profit from continuing operations (before
exceptional items) up 17.3% -- up 21.1% excluding currency
translation effects.
- Sale of Heavy Vehicle Braking Systems for L235 million announced in
November.
Victor A Rice, Chief Executive, commented:
"Given the mixed trading conditions in certain parts of our businesses, the
Group's third quarter results are satisfactory. Our progression in terms of
margin improvement and favourable comparisons to last year's results
demonstrates that we are successfully driving the Group's performance towards
continuous improvement.
Following the change of domicile proposal, it is strictly "business as usual".
We have a clearly articulated strategy and we will be working hard to put our
strong balance sheet to work".
SUMMARY AND OUTLOOK
SUMMARY
THIRD QUARTER
Group turnover from continuing operations for the third quarter increased by
2.9% to L1,033 million and operating profit from continuing operations before
exceptional items increased 12.8% to L97 million as compared to the prior year
third quarter. Excluding the effects of currency translation, which reduced
sales by L24 million and operating profit by L3 million, sales from continuing
operations increased 5.3% and operating profit 16.3%. Third quarter operating
margins improved from 8.6% in 1997 to 9.4% in 1998.
A strong European diesel car and van market, growth in the North American
light-vehicle market, and improved Aerospace turnover were the main drivers
behind the underlying sales increase. The improvements in operating
III-37
<PAGE> 86
profit and margins were due to the continuing implementation of cost improvement
programmes and increased turnover levels.
Profit before tax and exceptional items from continuing operations of L91
million increased 26.4% compared to the prior year. Contributing to the
improvement was an L8 million decrease in net interest expense as a result of
cash proceeds received in the first quarter of 1998 from the sale of
VarityPerkins. After L13 million of expenses relating to the proposed change of
domicile and L7 million of costs pertaining to the termination of interest rate
swaps, profit before tax was L71 million.
Third quarter profit attributable to shareholders from continuing operations
(before exceptional items) was L61 million, or 4.3p per ordinary share compared
to L49 million, or 3.5p per ordinary share in the prior year. After exceptional
items and discontinued operations, 1998 third quarter earnings per ordinary
share were 3.0p compared to 4.0p in the third quarter of 1997.
Under US GAAP, third quarter earnings per American Depository Share (ADS) from
continuing operations before exceptional items and non-cash exchange gains
relating to long-term forward exchange contracts were US$0.81 compared to
US$0.73 in the prior year. After exceptional items, foreign exchange gains and
discontinued operations, 1998 third quarter earnings per ADS were US$0.68
compared to US$0.74 in the third quarter of 1997.
1998 NINE MONTHS
Group turnover from continuing operations for the nine months to 31 October 1998
increased by 6.4% to L3,226 million and operating profit from continuing
operations before exceptional items, increased 17.3% to L278 million as compared
to the prior year nine months.
Currency translation reduced sales for the nine months by L71 million and
operating profit by L9 million. Excluding the adverse effects of currency
translation, sales from continuing operations increased 8.7% and operating
profit 21.1%. The nine month operating margin was 8.6% compared to the prior
year's 7.8%.
The underlying sales growth from continuing operations was 8.0% after
considering the net effect of business acquisitions and disposals which
increased nine month sales by L20 million compared to the prior year. Strong
North American and European car markets, and improved Aerospace turnover were
the main drivers behind the sales growth. The improvements in operating profit
and margin were due to the continuing implementation of cost improvement
programmes and increased turnover levels. A strike at General Motors in the
second quarter reduced operating profit by L11 million.
Profit before tax and exceptional items from continuing operations of L256
million increased 31.3% compared to the prior year. Contributing to the
improvement was a L20 million decrease in net interest expense primarily as a
result of cash proceeds received in the first quarter of 1998 from the sale of
VarityPerkins. After recording L122 million of net exceptional gains relating to
business and asset sales, principally the first quarter sale of VarityPerkins,
operating losses of L2 million from discontinued operations through the date of
disposal, expenses of L13 million relating to the proposed change of domicile
and the cost of terminating interest rate swaps of L7 million, profit before tax
was L356 million in the nine months to 31 October 1998.
Tax expense was L199 million which, after excluding L123 million of taxes
associated with exceptional items, primarily tax on the sale of VarityPerkins,
resulted in an effective tax rate of 30%.
Nine month profit attributable to shareholders from continuing operations before
exceptional items was L169 million, or 12.0p per ordinary share compared to L126
million, or 8.9p per ordinary share in the prior year. After exceptional items
and discontinued operations, nine month earnings per ordinary share were 10.4p
compared to 12.0p in the prior year nine months.
Under US GAAP, nine month earnings per ADS from continuing operations before
exceptional items and non-cash exchange gains relating to long-term forward
exchange contracts were US$2.33 compared to US$1.98 in the prior year. After
exceptional items, foreign exchange gains and discontinued operations, 1998 nine
month earnings per ADS were US$2.80 compared to US$2.18 in the prior year nine
months.
III-38
<PAGE> 87
KEY EVENTS
During the third quarter, the following key events occurred:
- A joint venture was formed with Thomson-CSF to design, develop and
manufacture automotive radar sensors for adaptive cruise control and
future collision avoidance systems for passenger cars and light trucks
on a global basis.
- Significant contract awards were achieved in both the Automotive and
Aerospace sectors.
- The sale of the controlling interest in Lucas Kienzle Instruments
Limited, a business within the Electrical and Electronic Systems
division, was agreed with Mannesmann VDO AG.
- The proposal to change the Group's domicile to the United States put to
shareholders on 6 November 1998 was not approved by the requisite 75%
majority of shareholders. In total, 82% of shareholders voted, with
approximately 74% voting in favour versus 26% against.
- In November 1998, an announcement was made regarding the sale of the
Heavy Vehicle Braking Systems division to Meritor Automotive Inc. for
cash of approximately L235 million.
OUTLOOK
Heading into the fourth quarter, economic conditions in Asia and South America
remain difficult and other regions are now showing signs that the trading
environment is becoming tougher.
In the automotive industry, production cutbacks at certain European car
manufacturers, together with lower demand from the aftermarket, will constrain
sales growth in the fourth quarter and in the next fiscal year. In both Europe
and North America, light vehicle production and car and van registrations have
demonstrated strong growth in the first nine months of the current year, but
this growth rate is expected to moderate in the fourth quarter. In 1999, in line
with most industry participants, we expect both markets on average to decline by
approximately 3 to 4% from their 1998 levels. However, the Group is well placed
with a significant presence in the North American light truck and the European
diesel car and van sectors -- both of which have shown, and continue to
demonstrate, above average growth rates.
The aerospace markets we serve continue to expand, and our recent contract
successes leave us confident that we can share in this growth over the medium
term.
The Group continues to implement its restructuring programme and has already
generated substantial cost reductions. We expect to see further benefits from
management effort in this area over the next year.
III-39
<PAGE> 88
OPERATING AND FINANCIAL REVIEW
Review of continuing operations before exceptional items (# million except
margin %):
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED 31 OCTOBER ENDED 31 OCTOBER
---------------- ----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
SALES
Braking Systems......................................... 461 406 1,372 1,171
Other Automotive........................................ 402 432 1,331 1,380
Aerospace............................................... 170 166 523 474
Corporate/Other......................................... -- -- -- 8
------ ------ ------ ------
Total................................................... 1,033 1,004 3,226 3,033
====== ====== ====== ======
OPERATING PROFIT
Braking Systems......................................... 44 38 118 101
Other Automotive........................................ 41 39 126 116
Aerospace............................................... 21 19 63 52
Corporate/Other......................................... (9) (10) (29) (32)
------ ------ ------ ------
Total................................................... 97 86 278 237
====== ====== ====== ======
OPERATING MARGIN
Braking Systems......................................... 9.5% 9.4% 8.6% 8.6%
Other Automotive........................................ 10.2% 9.0% 9.5% 8.4%
Aerospace............................................... 12.4% 11.4% 12.0% 11.0%
------ ------ ------ ------
Total................................................... 9.4% 8.6% 8.6% 7.8%
====== ====== ====== ======
</TABLE>
The following is a review of LucasVarity's operations for the third quarter of
1998, compared with the third quarter of 1997:
BRAKING SYSTEMS
The Braking Systems' segment comprises the Light Vehicle Braking Systems (LVBS)
and Heavy Vehicle Braking Systems (HVBS) businesses. The HVBS business, which
had fiscal 1997 sales of approximately #175 million, is to be sold to Meritor
Automotive Inc. Completion is expected prior to the end of the current fiscal
year.
Third quarter turnover in the Braking Systems segment increased #55 million, or
13.5%, to L461 million. The January 1998 acquisition of Freios Varga, South
America's largest brake company, contributed L39 million to the third quarter
sales whilst the effects of currency translation reduced sales by L9 million.
The remaining increase of #25 million, or 6.2%, resulted primarily from a strong
North American passenger car market. Production of light vehicles in North
America for the third fiscal quarter increased 4.8% from last year. Light trucks
increased 0.3% and passenger car production increased 9.1%. General Motors'
strike negatively affected LVBS's second quarter results. Recovery of lost sales
in the third quarter has not occurred to the extent expected. Car registrations
in Europe rose approximately 3% in the third quarter as compared to last year.
However, LVBS' sales were negatively affected by production cutbacks at three
European customers, Ford, Rover and Fiat, which will also have an effect on the
fourth quarter.
Operating profit increased 15.8% to L44 million, resulting in an operating
margin of 9.5% compared to 9.4% in the prior year. Operating margins increased
despite the dilutive effect of the acquisition of Freios Varga. The weak trading
conditions in South America have exacerbated the depressive effect on overall
Braking Systems' margins.
During the quarter, LVBS announced that it is producing a brake actuation system
for drum brakes and front callipers for Honda's 1999 minivan, the Odyssey. This
represents the first North American contract with Honda. In addition, the
division secured a brake systems award for a light commercial van to be produced
by a co-
III-40
<PAGE> 89
operative venture between GM's Opel division and Renault. This is LVBS' first
total brake systems award in Europe.
OTHER AUTOMOTIVE
The Other Automotive segment comprises the Diesel Systems, Electrical and
Electronic Systems (E&ES) and Aftermarket businesses. Excluding the effects of
currency translation, which reduced third quarter 1998 reported sales by L9
million, and the revenues of businesses disposed of subsequent to the prior year
third quarter totalling L39 million, underlying sales improved L18 million, or
4.2%. The Diesel Systems business was the main contributor to this growth,
reflecting continued increases in diesel car and van sales in Europe. Production
cutbacks at some customers constrained growth at E&ES. The European automotive
aftermarket showed signs of slowdown with automotive manufacturers adjusting
order schedules to manage their own inventory levels.
Excluding the effects of currency translation, which reduced reported operating
profit by L2 million compared to the prior year quarter, the underlying profit
increased by L4 million, or 10.3%. Operating margin was 10.2% for the quarter
compared to 9.0% last year. The improvement in margin resulted primarily from
cost reduction and manufacturing improvement programmes and the sale of lower
margin businesses over the past year.
During the quarter, E&ES announced the formation of a joint venture with
Thomson-CSF to design, develop and manufacture automotive radar sensors for
adaptive cruise control and future collision avoidance systems for passenger
cars and light trucks on a global basis. The joint venture is well placed to
capture a significant part of the emerging demand for high performance adaptive
cruise control systems.
AEROSPACE
Turnover in the Aerospace segment for the third quarter increased 2.4% to L170
million. Operating profit improved 10.5% to L21 million reflecting an operating
margin of 12.4% as compared to 11.4% in 1997.
Both the original equipment and higher margin aftermarket sectors demonstrated
growth, primarily from existing contracts. However, sales were affected by
strikes at two sites at Macon and Utica in the United States. Both strikes were
resolved prior to the end of the third quarter.
The improved operating margin reflected the benefits of cost reduction
activities. In the quarter, two one-off items affected profits. The strikes at
Macon and Utica led to higher costs being incurred in an effort to minimise
disruption to customer deliveries. Separately, a favourable re-assessment of
warranty provisions, relating to the cargo systems business, resulted in the
recognition of income.
During the quarter the Aerospace division made two announcements regarding major
contract awards. The first was from Fairchild Aerospace to supply the complete
fly-by-wire flight control system for its new 728JET. The contract is worth more
than L600 million over the life of the programme. The division was also awarded
several contracts to supply a major portion of the primary and secondary flight
controls and thrust reverser and actuation on the Airbus A340-500/600. The
combined value of these contracts is approximately L320 million.
OTHER FINANCIAL HIGHLIGHTS
DISCONTINUED OPERATIONS
In March 1998, LucasVarity completed the sale of VarityPerkins, which
constituted 100% of the Diesel Engines Segment, to Caterpillar Inc. for gross
proceeds of L803 million. After deducting L156 million of tax and transaction
costs relating to the disposal, net cash received amounted to L647 million. A
net accounting loss of L3 million was recorded on the sale after considering net
assets disposed and the write-back of L453 million of goodwill. This goodwill
resulted from the accounting treatment of the acquisition of Varity Corporation
by Lucas Industries in September 1996. In the 1998 first quarter, prior to
completion of the transaction, VarityPerkins had sales of L42 million and an
operating loss of L2 million.
III-41
<PAGE> 90
EXCEPTIONAL ITEMS
During the 1998 third quarter, L19 million of one-off expenses after tax were
recognised. The costs associated with the proposed change of domicile amounted
to L13 million and an after-tax loss of L6 million was recognised in the quarter
on the termination of an interest rate swap portfolio. These swaps dated back to
1993 and no longer served the purpose of hedging the underlying exposure for
which they were originally established.
In the 1998 second quarter, L8 million of net exceptional after-tax losses were
recognised on the sale of Deeco Systems (an Electrical and Electronic Systems
business) and the Company's 35% interest in Min-Cer (a Mexican heavy-duty brake
business). The loss on the sale of Deeco Systems included the write-back of L9
million of goodwill. In addition, a L6 million loss was recognised on the
termination of a product line within the Aerospace division.
In the 1998 first quarter, L12 million of net exceptional after tax gains were
realised. In addition to the net loss of L3 million on the sale of
VarityPerkins, gains of L10 million were recognised on the sale of Lucas
Services UK, Aftermarket's starters and alternators remanufacturing business and
the wiper motor and emergency lighting business. The remaining exceptional gain
related to Electrical and Electronic Systems' joint venture agreement with TRW,
Inc. to develop and manufacture EPAS. Net proceeds of L18 million were received
which, after subtracting related assets, taxes and provisions, resulted in a net
gain of L5 million.
In the 1997 second quarter, L17 million of exceptional gains were recognised on
the sale of five businesses and the remaining interest in Hayes Wheels
International, Inc. One other business was sold in the 1997 first quarter
resulting in an exceptional gain of L1 million.
CASH FLOW AND DEBT
Net cash in-flow from operating activities in the nine months to 31 October 1998
after interest, tax and dividends paid to minority shareholders was L132
million. This amount included cash outflows for restructuring activities of L38
million and working capital of L84 million. Investments of L189 million were
made for capital expenditure and L25 million on acquisitions, while proceeds
from disposals, including the sale of VarityPerkins, amounted to L685 million.
Dividends of L31 million were paid to shareholders. As a result of these cash
flows, the Company has moved from a net borrowings position of L574 million at
the beginning of the fiscal year to a net cash position of L14 million at 31
October 1998.
III-42
<PAGE> 91
PART 2
LUCASVARITY PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE THREE AND NINE MONTH PERIODS ENDED 31 OCTOBER 1998 AND 1997
(# MILLION)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
TURNOVER:
Continuing operations............................. 1,033 1,004 3,226 3,033
Discontinued operations........................... -- 157 42 480
------- ------- ------- -------
Total turnover...................................... 1,033 1,161 3,268 3,513
Cost of sales....................................... (937) (1,063) (2,995) (3,242)
------- ------- ------- -------
Surplus on trading.................................. 96 98 273 271
Share of profits less losses of associated
undertakings...................................... 1 1 3 4
------- ------- ------- -------
TOTAL OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS:
Continuing operations............................. 97 86 278 237
Discontinued operations........................... -- 13 (2) 38
------- ------- ------- -------
TOTAL OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS..... 97..... 99 276 275
Profit on the sale of current asset investment...... -- -- -- 13
Costs of proposed change of domicile................ (13) -- (13) --
------- ------- ------- -------
TOTAL OPERATING PROFIT.............................. 84 99 263 288
Profit on business and asset disposals.............. -- -- 122 5
------- ------- ------- -------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND
TAXATION.......................................... 84 99 385 293
Interest
-- ordinary activities............................ (6) (14) (22) (42)
-- costs relating to termination of interest rate
swaps.......................................... (7) -- (7) --
------- ------- ------- -------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION....... 71 85 356 251
Taxation
-- ordinary activities............................ (27) (26) (76) (72)
-- exceptional items.............................. 1 -- (123) --
------- ------- ------- -------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION........ 45 59 157 179
Minority interests and other........................ (3) (2) (10) (9)
------- ------- ------- -------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS................. 42 57 147 170
======= ======= ======= =======
</TABLE>
III-43
<PAGE> 92
LUCASVARITY PLC
PER SHARE AMOUNTS
FOR THE THREE AND NINE MONTH PERIODS ENDED 31 OCTOBER 1998 AND 1997
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
-------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
EARNINGS PER SHARE:
Before costs of proposed change of domicile, termination
of interest rate swaps, sale of businesses and fixed
assets, and discontinued operations..................... 4.3p 3.5p 12.0p 8.9p
Costs of proposed change of domicile, termination of
interest rate swaps, and sale of businesses and fixed
assets.................................................. (1.3)p (0.1)p (1.3)p 1.3p
Discontinued operations................................... -- 0.6p (0.3)p 1.8p
----- ----- ----- -----
EARNINGS PER ORDINARY SHARE............................... 3.0p 4.0p 10.4p 12.0p
===== ===== ===== =====
AVERAGE SHARES OUTSTANDING (MILLIONS)..................... 1,410 1,411 1,409 1,421
</TABLE>
III-44
<PAGE> 93
LUCASVARITY PLC
CONSOLIDATED BALANCE SHEETS
AT 31 OCTOBER 1998 AND 31 JANUARY 1998
(# MILLION)
<TABLE>
<CAPTION>
31 OCTOBER 31 JANUARY
---------- ----------
<S> <C> <C>
FIXED ASSETS:
Tangible assets........................................... 1,239 1,362
Intangible assets......................................... 33 27
Investments............................................... 30 47
------ ------
1,302 1,436
------ ------
CURRENT ASSETS:
Stocks.................................................... 425 489
Debtors................................................... 821 869
Cash...................................................... 432 155
------ ------
1,678 1,513
CREDITORS:
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Borrowings................................................ (92) (414)
Other creditors........................................... (954) (1,097)
------ ------
(1,046) (1,511)
------ ------
Net current assets.......................................... 632 2
------ ------
Total assets less current liabilities....................... 1,934 1,438
CREDITORS:
AMOUNTS FALLING DUE AFTER ONE YEAR:
Borrowings................................................ (326) (315)
Accruals and deferred income.............................. (34) (52)
------ ------
(360) (367)
------ ------
PROVISIONS FOR LIABILITIES AND CHARGES...................... (453) (545)
------ ------
Net Assets.................................................. 1,121 526
====== ======
CAPITAL & RESERVES:
Total shareholders' funds................................. 1,048 458
Minority interests........................................ 73 68
------ ------
1,121 526
====== ======
</TABLE>
III-45
<PAGE> 94
LUCASVARITY PLC
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED 31 OCTOBER 1998 AND 1997
(# MILLION)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
---------------- ----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Group operating profit.............................. 84 99 263 288
Share of profit less dividends of associated
undertakings..................................... (1) (1) 1 (4)
Depreciation/amortisation........................... 41 40 122 121
Profit on sale of current asset investment.......... -- -- -- (13)
Utilisation of provision for restructuring.......... (4) (19) (38) (78)
Decrease in other provisions........................ (16) (6) (29) (30)
Increase in working capital......................... (28) (26) (84) (14)
------ ------ ------ ------
NET CASH INFLOW FROM OPERATING ACTIVITIES............. 76 87 235 270
------ ------ ------ ------
INTEREST PAID AND DIVIDENDS PAID TO MINORITY
SHAREHOLDERS........................................ (13) (6) (35) (39)
------ ------ ------ ------
TAX PAID.............................................. (25) (19) (68) (40)
------ ------ ------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT:
Purchase of tangible fixed assets................... (63) (47) (189) (187)
Disposal of tangible fixed assets................... 4 2 13 16
Investment in intangible fixed assets............... (4) -- (7) --
------ ------ ------ ------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT.......................................... (63) (45) (183) (171)
------ ------ ------ ------
NET CASH (OUTFLOW)/INFLOW FOR ACQUISITIONS AND
DISPOSALS........................................... (5) (9) 660 22
------ ------ ------ ------
EQUITY DIVIDENDS PAID................................. -- -- (31) (32)
------ ------ ------ ------
NET CASH (OUTFLOW)/INFLOW BEFORE MANAGEMENT OF LIQUID
RESOURCES AND FINANCING............................. (30) 8 578 10
------ ------ ------ ------
MANAGEMENT OF LIQUID RESOURCES AND FINANCING:
Proceeds from sale of current asset investment...... -- -- -- 29
Issue of ordinary share capital..................... -- 4 8 14
Purchase of ordinary share capital.................. -- (21) -- (79)
Decrease in bank loans.............................. (7) (68) (299) (11)
(Increase)/decrease in short-term deposits.......... (13) 46 (266) 47
Capital element of finance lease rental payments.... (1) (1) (11) (13)
------ ------ ------ ------
NET CASH OUTFLOW FROM MANAGEMENT OF LIQUID RESOURCES
AND FINANCING.................................... (21) (40) (568) (13)
------ ------ ------ ------
(DECREASE)/INCREASE IN CASH IN THE PERIOD........... (51) (32) 10 (3)
====== ====== ====== ======
</TABLE>
III-46
<PAGE> 95
LUCASVARITY PLC
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
FOR THE NINE MONTH PERIOD ENDED 31 OCTOBER 1998
<TABLE>
<CAPTION>
#M
-----
<S> <C>
Increase in cash in the period.............................. 10
Cash outflow from decrease in debt and lease financing...... 310
Cash outflow from increase in short-term deposits........... 266
-----
Change in net debt resulting from cash flows................ 586
Exchange movements.......................................... 2
-----
Movement in net debt in the period.......................... 588
Net debt at 31 January 1998................................. (574)
-----
Net cash at 31 October 1998................................. 14
=====
</TABLE>
LUCASVARITY PLC
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE NINE MONTH PERIOD ENDED 31 OCTOBER 1998
<TABLE>
<CAPTION>
#M
-----
<S> <C>
Profit attributable to shareholders......................... 147
Dividend in respect of current period....................... (35)
Currency translation differences............................ 8
New share capital subscribed................................ 8
Goodwill on disposals transferred to profit and loss
account................................................... 462
-----
Net increase in shareholders' funds......................... 590
Opening shareholders' funds................................. 458
-----
Closing shareholders' funds................................. 1,048
=====
</TABLE>
III-47
<PAGE> 96
LUCASVARITY PLC
UK TO US GAAP RECONCILIATION
FOR THE THREE AND NINE MONTH PERIODS ENDED
31 OCTOBER 1998 AND 1997
<TABLE>
<CAPTION>
THIRD QUARTER
------------------------------------
1998 1997
---------------- ----------------
#M US$M #M US$M
<S> <C> <C> <C> <C>
NET INCOME -- UK GAAP................................ 42 71 57 93
Adjustments to conform with US GAAP:
Goodwill amortisation.............................. (9) (15) (11) (17)
Goodwill written off on divestments................ -- -- -- --
Property revaluation............................... -- -- -- --
Pension credit..................................... 33 56 29 47
Provisions for restructuring....................... (8) (14) (33) (53)
Exchange gains relating to forward exchange
contracts....................................... 21 35 22 36
Deferred tax....................................... (18) (31) (1) (2)
Other.............................................. (4) (6) 1 1
----- ------- ----- -------
NET INCOME -- US GAAP................................ 57 96 64 105
===== ======= ===== =======
EARNINGS PER ADS (US GAAP)........................... US$0.68 US$0.74
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
------------------------------------
1998 1997
---------------- ----------------
#M US$M #M US$M
<S> <C> <C> <C> <C>
NET INCOME -- UK GAAP................................ 147 244 170 278
Adjustments to conform with US GAAP:
Goodwill amortisation.............................. (26) (43) (32) (51)
Goodwill written off on divestments................ 48 79 1 2
Property revaluation............................... 10 16 -- --
Pension credit..................................... 99 165 88 143
Provisions for restructuring....................... (15) (25) (56) (91)
Exchange gains relating to forward exchange
contracts....................................... 23 38 17 28
Deferred tax....................................... (40) (67) (2) (3)
Other.............................................. (8) (13) 3 4
----- ------- ----- -------
NET INCOME -- US GAAP................................ 238 394 189 310
===== ======= ===== =======
EARNINGS PER ADS (US GAAP)........................... US$2.80 US$2.18
======= =======
</TABLE>
III-48
<PAGE> 97
LUCASVARITY PLC
UK TO US GAAP RECONCILIATION
AT 31 OCTOBER 1998
<TABLE>
<CAPTION>
#M US$M
----- -----
<S> <C> <C>
SHAREHOLDERS' FUNDS (UK GAAP)............................... 1,048 1,750
Adjustments to conform with US GAAP:
Goodwill.................................................. 787 1,314
Revaluation of tangible fixed assets...................... (103) (172)
Entry fees................................................ (21) (35)
Prepaid pension cost...................................... 548 915
Exchange gains relating to forward exchange contracts..... 69 115
Restructuring provision................................... 21 35
Deferred taxation......................................... (46) (77)
Other..................................................... (17) (28)
----- -----
SHAREHOLDERS' EQUITY (US GAAP).............................. 2,286 3,817
===== =====
</TABLE>
III-49
<PAGE> 98
LUCASVARITY PLC
CONDENSED US GAAP INFORMATION
31 OCTOBER 1998
BASIS OF PRESENTATION
The condensed consolidated financial information on the following pages has been
prepared without audit to provide an indication of how the Company's financial
position and results would be presented under United States (US) generally
accepted accounting principles (GAAP). The financial information does not
represent the Company's results as if it had been registered as a US company
throughout the periods presented.
The Group prepares its financial statements in accordance with UK GAAP, which
are different from those in the US and require different presentation. An
explanation and reconciliation of the major differences between US and UK GAAP,
which affect LucasVarity, is provided in the Company's annual report and
accounts, and annual report on Form 20-F, for the fiscal year ended 31 January
1998. In addition, reconciliations, on a quarterly basis, are included within
the Company's quarterly results announcements. The summary financial
information, presented herein, is based on these reconciliations. No additional
adjustments have been included to reflect any impact that might have resulted
had the Group been a US domiciled company during the periods presented. In the
opinion of management, it reflects all adjustments necessary for a fair
presentation of the Company's financial position, results of operations, and
cash flows for the periods presented.
This information should be read in conjunction with the audited financial
statements and notes thereto for the year ended 31 January 1998 and the
Company's annual report on Form 20-F for the same period, which was filed with
the US Securities and Exchange Commission (SEC) in August 1998. The results for
the three and nine months ended 31 October 1998 are not necessarily indicative
of the results which may be expected for the Group's 1998 fiscal year because of
seasonal and other factors.
The results and cash flows have been translated from sterling to US dollars at
the average rate for the relevant periods and the balance sheets at the
period-end rates. These rates range from 1.62 to 1.68 dollars to sterling.
III-50
<PAGE> 99
LUCASVARITY PLC
SEGMENTAL RESULTS
FOR THE THREE AND NINE MONTH PERIODS
ENDED 31 OCTOBER 1998 AND 1997
(US$ MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales:
Braking Systems.............................. 775 653 2,278 1,907
Other Automotive............................. 676 695 2,209 2,250
Aerospace.................................... 286 268 868 772
Corporate and other.......................... -- -- -- 13
------- ------- ------- -------
Total.......................................... 1,737 1,616 5,355 4,942
======= ======= ======= =======
Operating profit:
Braking Systems.............................. 75 62 196 164
Other Automotive............................. 100 90 297 265
Aerospace.................................... 41 39 125 113
Corporate and other.......................... (16) (13) (47) (44)
------- ------- ------- -------
Total.......................................... 200 178 571 498
======= ======= ======= =======
Interest
ordinary activities.......................... (11) (23) (37) (69)
termination of swaps......................... (12) -- (12) --
Sale of businesses and assets, net of taxes.... -- (2) 38 32
Cost of proposed change of domicile............ (22) -- (22) --
Restructuring charges.......................... (14) (51) (32) (85)
Taxes.......................................... (74) (40) (190) (110)
Minority interests............................. (6) (3) (17) (15)
Foreign exchange............................... 35 36 38 28
Discontinued operations........................ -- 10 57 31
------- ------- ------- -------
Net Income..................................... 96 105 394 310
======= ======= ======= =======
Earnings per American Depository Share:
Before restructuring charges, foreign exchange,
costs of proposed redomicile, termination of
interest rate swaps, sale of businesses,
fixed assets and discontinued operations..... US$0.81 US$0.73 US$2.33 US$1.98
Foreign exchange on forward contracts.......... 0.16 0.17 0.17 0.13
Restructuring charges, costs of proposed
redomicile, termination of interest rate
swaps, and sale of businesses and fixed
assets....................................... (0.29) (0.24) (0.10) (0.15)
Discontinued operations........................ -- 0.08 0.40 0.22
------- ------- ------- -------
Net income..................................... US$0.68 US$0.74 US$2.80 US$2.18
======= ======= ======= =======
Operating margins:
Braking Systems.............................. 9.7% 9.5% 8.6% 8.6%
Other Automotive............................. 14.8% 12.9% 13.4% 11.8%
Aerospace.................................... 14.3% 14.6% 14.4% 14.6%
------- ------- ------- -------
Total.......................................... 11.5% 11.0% 10.7% 10.1%
======= ======= ======= =======
</TABLE>
III-51
<PAGE> 100
LUCASVARITY PLC
CONSOLIDATED BALANCE SHEETS
AT 31 OCTOBER AND 31 JANUARY 1998
(US$ MILLION)
<TABLE>
<CAPTION>
31 OCTOBER 31 JANUARY
---------- ----------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.............................. 651 190
Marketable securities.................................. 70 64
Receivables............................................ 1,224 1,125
Inventories............................................ 710 712
Prepaid expenses and other............................. 347 328
Net assets of discontinued operations.................. -- 933
----- -----
Total current assets................................... 3,002 3,352
Investments in associated companies....................... 50 61
Fixed assets, net......................................... 1,897 1,778
Goodwill.................................................. 1,314 1,346
Prepaid pension and other................................. 1,082 858
----- -----
7,345 7,395
===== =====
LIABILITIES:
Current liabilities:
Short-term debt........................................ 162 676
Current portion of long-term debt...................... 37 52
Accounts payable and accrued liabilities............... 1,747 1,651
----- -----
Total current liabilities.............................. 1,946 2,379
Long-term debt............................................ 544 517
Other long-term liabilities............................... 916 945
Minority interests........................................ 122 112
Total shareholders' equity................................ 3,817 3,442
----- -----
7,345 7,395
===== =====
</TABLE>
III-52
<PAGE> 101
LUCASVARITY PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE AND NINE MONTH PERIODS ENDED 31 OCTOBER 1998 AND 1997
(US$ MILLION)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
-------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations..................... 96 95 337 279
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortisation........................... 82 67 239 208
Gain on sales of businesses, investments and fixed
assets............................................... -- 2 (46) (32)
Increase/(decrease) in restructuring accrual............ 6 24 (32) (26)
(Increase)/decrease in:
Working capital...................................... (48) (24) (107) (82)
Tax liabilities...................................... 32 9 86 47
Prepaid pension...................................... (56) (47) (165) (143)
Other long-term liabilities.......................... (13) 7 (23) (7)
Foreign exchange........................................ (35) (36) (38) (28)
Other................................................... 4 14 14 16
----- ----- ----- -----
CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING
OPERATIONS.............................................. 68 111 265 232
----- ----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase)/decrease in marketable securities............ (2) 2 (5) 42
Additions to fixed assets............................... (107) (63) (312) (235)
Sales of fixed assets and businesses.................... 3 8 110 91
Acquisitions, net of cash acquired...................... (4) -- (42) (10)
CASH USED BY INVESTING ACTIVITIES FROM CONTINUING
OPERATIONS.............................................. (110) (53) (249) (112)
----- ----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings and overdrafts, net..................... (27) (64) (501) (55)
Repurchases of share capital............................ -- (34) -- (129)
Equity dividends paid................................... -- -- (51) (53)
Other................................................... (2) 4 (8) 1
----- ----- ----- -----
CASH USED BY FINANCING ACTIVITIES FROM CONTINUING
OPERATIONS.............................................. (29) (94) (560) (236)
----- ----- ----- -----
Effect of foreign currency translation on cash and cash
equivalents............................................. 25 7 3 (16)
----- ----- ----- -----
DECREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING
OPERATIONS.............................................. (46) (29) (541) (132)
Cash used by discontinued operations...................... (2) (27) 1,002 11
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......... 699 246 190 311
----- ----- ----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ 651 190 651 190"
===== ===== ===== =====
</TABLE>
III-53
<PAGE> 102
APPENDIX IV -- FINANCIAL INFORMATION ON TRW
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND DIRECTORS, TRW INC.
We have audited the accompanying consolidated balance sheets of TRW Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of earnings, cash flows and changes in shareholders' investment for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TRW Inc. and
subsidiaries at December 31, 1998 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Cleveland, Ohio Ernst & Young LLP
January 19, 1999
IV-1
<PAGE> 103
STATEMENTS OF EARNINGS
TRW INC. AND SUBSIDIARIES
(IN MILLIONS EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Sales................................................ US$11,886 US$10,831 US$ 9,857
Cost of sales........................................ 9,715 8,826 8,376
--------- --------- ---------
Gross profit......................................... 2,171 2,005 1,481
Administrative and selling expenses.................. 826 684 613
Research and development expenses.................... 522 461 412
Purchased in-process research and development........ -- 548 --
Interest expense..................................... 114 75 84
Other expense (income) -- net........................ (37) (3) 70
--------- --------- ---------
Earnings from continuing operations before income
taxes.............................................. 746 240 302
Income taxes......................................... 269 289 120
--------- --------- ---------
Earnings (loss) from continuing operations........... 477 (49) 182
Discontinued operations
Earnings from operations........................... -- -- 38
Gain on disposal................................... -- -- 260
--------- --------- ---------
Net earnings (loss).................................. US$ 477 US$ (49) US$ 480
--------- --------- ---------
PER SHARE OF COMMON STOCK
Diluted
Continuing operations.............................. US$ 3.83 US$ (.40) US$ 1.37
Discontinued operations
Earnings from operations........................ -- -- .29
Gain on disposal................................ -- -- 1.96
--------- --------- ---------
Net earnings (loss) per share........................ US$ 3.83 US$ (.40) US$ 3.62
--------- --------- ---------
Basic
Continuing operations.............................. US$ 3.93 US$ (.40) US$ 1.41
Discontinued operations
Earnings from operations........................ -- -- .29
Gain on disposal................................ -- -- 2.02
--------- --------- ---------
Net earnings (loss) per share........................ US$ 3.93 US$ (.40) US$ 3.72
--------- --------- ---------
</TABLE>
See notes to financial statements.
IV-2
<PAGE> 104
BALANCE SHEETS
TRW INC. AND SUBSIDIARIES
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31 1998 1997
- ----------- -------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. US$ 83 US$ 70
Accounts receivable (net of allowances of US$33 million in
1998 and US$23 million in 1997)........................ 1,721 1,617
Inventories
Finished products and work in-process.................. 316 292
Raw materials and supplies............................. 300 281
-------- --------
Total inventories......................................... 616 573
Prepaid expenses.......................................... 104 79
Deferred income taxes..................................... 179 96
-------- --------
Total current assets........................................ 2,703 2,435
Property, plant and equipment -- on the basis of cost
Land...................................................... 119 111
Buildings................................................. 1,706 1,599
Machinery and equipment................................... 4,779 4,364
-------- --------
6,604 6,074
Less accumulated depreciation and amortization............ 3,921 3,453
-------- --------
Total property, plant and equipment -- net.................. 2,683 2,621
Intangible assets
Intangibles arising from acquisitions..................... 850 673
Other..................................................... 360 232
-------- --------
1,210 905
Less accumulated amortization............................. 143 94
-------- --------
Total intangible assets -- net.............................. 1,067 811
Investments in affiliated companies......................... 243 139
Long-term deferred income taxes............................. 33 --
Other notes and accounts receivable......................... 227 194
Other assets................................................ 213 210
-------- --------
US$7,169 US$6,410
-------- --------
</TABLE>
See notes to financial statements.
IV-3
<PAGE> 105
BALANCE SHEETS
TRW INC. AND SUBSIDIARIES
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31 1998 1997
- ----------- -------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities
Short-term debt........................................... US$ 839 US$ 411
Accrued compensation...................................... 377 338
Trade accounts payable.................................... 964 859
Other accruals............................................ 631 846
Dividends payable......................................... 40 38
Income taxes.............................................. 137 99
Current portion of long-term debt......................... 30 128
-------- --------
Total current liabilities................................... 3,018 2,719
Long-term liabilities....................................... 826 788
Long-term debt.............................................. 1,353 1,117
Deferred income taxes....................................... -- 57
Minority interests in subsidiaries.......................... 94 105
Shareholders' investment
Serial Preference Stock II (involuntary liquidation US$7
million in 1998 and US$8 million in 1997).............. -- 1
Common stock (shares outstanding 119.9 million in 1998 and
122.5 million in 1997)................................. 75 78
Other capital............................................. 457 450
Retained earnings......................................... 2,021 1,778
Treasury shares-cost in excess of par value............... (637) (563)
Accumulated other comprehensive income (loss)............. (38) (120)
-------- --------
Total shareholders' investment.............................. 1,878 1,624
-------- --------
US$7,169 US$6,410
-------- --------
</TABLE>
See notes to financial statements.
IV-4
<PAGE> 106
STATEMENTS OF CASH FLOWS
TRW INC. AND SUBSIDIARIES
(IN MILLIONS)
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss).................................. US$ 477 US$ (49) US$ 480
Adjustments to reconcile net earnings (loss) to net
cash provided by continuing operations
Purchased in-process research and development...... -- 548 --
Depreciation and amortization...................... 566 490 452
Deferred income taxes.............................. (223) 116 (182)
Discontinued operations............................ -- -- (298)
Other-net.......................................... 8 10 23
Changes in assets and liabilities, net of effects of
businesses acquired or sold
Accounts receivable................................ (27) 32 (46)
Inventories and prepaid expenses................... (73) (26) 8
Accounts payable and other accruals................ (73) (166) 298
Other-net.......................................... 6 (1) (24)
--------- --------- ---------
Net cash provided by operating activities of
continuing operations.............................. 661 954 711
INVESTING ACTIVITIES
Capital expenditures................................. (625) (571) (501)
Acquisitions, net of cash acquired................... (249) (1,270) (76)
Net proceeds from divestitures....................... -- -- 789
Other-net............................................ 17 24 35
--------- --------- ---------
Net cash provided by (used in) investing
activities......................................... (857) (1,817) 247
FINANCING ACTIVITIES
Increase (decrease) in short-term debt............... (167) 912 (127)
Proceeds from debt in excess of 90 days.............. 1,086 113 51
Principal payments on debt in excess of 90 days...... (397) (89) (91)
Dividends paid....................................... (154) (154) (148)
Acquisition of common stock.......................... (184) (247) (361)
Other-net............................................ 26 41 51
--------- --------- ---------
Net cash provided by (used in) financing
activities......................................... 210 576 (625)
Effect of exchange rate changes on cash.............. (1) (29) (6)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents..... 13 (316) 327
Cash and cash equivalents at beginning of year....... 70 386 59
--------- --------- ---------
Cash and cash equivalents at end of year............. US$ 83 US$ 70 US$ 386
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid (net of amount capitalized)............ US$ 133 US$ 76 US$ 89
Income taxes paid (net of refunds)................... US$ 391 US$ 78 US$ 615
</TABLE>
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.
See notes to financial statements.
IV-5
<PAGE> 107
STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT
TRW INC. AND SUBSIDIARIES
(IN MILLIONS)
<TABLE>
<CAPTION>
SERIAL ACCUMULATED
PREFERENCE OTHER TOTAL
STOCK II COMMON OTHER RETAINED TREASURY COMPREHENSIVE SHAREHOLDERS'
SERIES 1&3 STOCK CAPITAL EARNINGS SHARES INCOME (LOSS) INVESTMENT
---------- ------ ------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995......... US$ 1 US$40 US$398 US$1,693 US$ (31) US$ 71 US$2,172
----- ----- ------ -------- ------- ------ --------
Net earnings -- 1996................. 480 480
Other comprehensive income
Translation loss, net of tax of
US$2 million..................... (29) (29)
Minimum pension liability, net of
tax of US$2 million.............. 3 3
--------
Total comprehensive income........... 454
Stock dividend....................... 42 (42) --
Dividends declared
Preference......................... (1) (1)
Common (US$1.17 per share)......... (150) (150)
ESOP funding......................... 17 17
Purchase and sale of shares and
other.............................. (2) 39 (372) (335)
Shares sold under stock options...... 32 32
----- ----- ------ -------- ------- ------ --------
BALANCE AT DECEMBER 31, 1996......... 1 80 437 1,980 (354) 45 2,189
----- ----- ------ -------- ------- ------ --------
Net earnings(loss) -- 1997........... (49) (49)
Other comprehensive income
Translation loss, net of tax of
US$7 million..................... (177) (177)
Unrealized gain on securities, net
of tax of US$6 million........... 12 12
--------
Total comprehensive income (loss).... (214)
Dividends declared
Preference......................... (1) (1)
Common (US$1.24 per share)......... (152) (152)
ESOP funding......................... 2 2
Purchase and sale of shares and
other.............................. (2) 13 (262) (251)
Shares sold under stock options...... 51 51
----- ----- ------ -------- ------- ------ --------
BALANCE AT DECEMBER 31, 1997......... 1 78 450 1,778 (563) (120) 1,624
----- ----- ------ -------- ------- ------ --------
Net earnings -- 1998................. 477 477
Other comprehensive income
Translation gain, net of tax of
US$3 million..................... 75 75
Unrealized gain on securities, net
of tax of US$10 million.......... 18 18
Minimum pension liability, net of
tax of US$5 million.............. (11) (11)
--------
Total comprehensive income........... 559
Dividends declared
Preference......................... (1) (1)
Common (US$1.28 per share)......... (154) (154)
Purchase and sale of shares and
other.............................. (1) (3) 7 3 (181) (175)
Credits(charges) from issuance of
treasury shares.................... (82) 82 --
Shares sold under stock options...... 25 25
----- ----- ------ -------- ------- ------ --------
BALANCE AT DECEMBER 31, 1998......... US$-- US$75 US$457 US$2,021 US$(637) US$(38) US$1,878
----- ----- ------ -------- ------- ------ --------
</TABLE>
See notes to financial statements.
IV-6
<PAGE> 108
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation -- The financial statements include the accounts of
the Company and its subsidiaries except for two wholly owned insurance
subsidiaries. The insurance subsidiaries and the investments in affiliated
companies are accounted for by the equity or cost method as appropriate.
Use of estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of December 31, 1998 and
1997, and reported amounts of sales and expenses for the years ended December
31, 1998, 1997 and 1996. Actual results could differ from those estimates.
Long-term contracts -- The percentage-of-completion (cost-to-cost) method is
used to estimate sales under fixed-price and fixed-price incentive contracts.
Sales under cost-reimbursement contracts are recorded as costs are incurred.
Fees based on cost, award fees and incentive fees are included in sales at the
time such amounts are reasonably estimable. Losses on contracts are recognized
when determinable.
Accounts receivable -- Accounts receivable at December 31, 1998 and 1997,
included US$692 million and US$640 million, respectively, related to long-term
contracts, of which US$339 million and US$209 million, respectively, were
unbilled. Unbilled costs, fees and claims represent revenues earned and billable
in the following month as well as revenues earned but not billable under terms
of the contracts. A substantial portion of such amounts is expected to be billed
during the following year. Retainage receivables and receivables subject to
negotiation are not significant.
Inventories -- Inventories are stated at the lower of cost, principally the
first-in, first-out (FIFO) method, or market. Inventories applicable to
long-term contracts are not significant.
Depreciation -- Depreciation is computed over the assets' estimated useful lives
using the straight-line method for the majority of the Company's depreciable
assets. The remaining assets are depreciated using accelerated methods. The
estimated useful lives of buildings, machinery and equipment, and computers and
other office equipment are between 30-40 years, 8-12 years and 3-5 years,
respectively.
Asset impairment -- The Company records impairment losses on long-lived and
intangible assets used in operations when events and circumstances indicate that
the assets may be impaired and the undiscounted net cash flows estimated to be
generated by those assets are less than their carrying amounts.
Intangible assets -- Intangible assets are stated on the basis of cost and are
being amortized by the straight-line method over the estimated future periods to
be benefited, except for intangibles arising from acquisitions prior to 1971
(US$49 million) which are not being amortized because there is no indication of
diminished value.
Intangibles arising from acquisitions after 1970 are being amortized over
periods primarily ranging from 15 to 40 years. Other intangible assets primarily
include capitalized software and other intangible assets acquired through
acquisitions including core and developed technology, workforce and tradename.
Capitalized software is being amortized over periods not to exceed 10 years.
Other intangible assets acquired through acquisitions are being amortized
primarily over 15 years. The carrying value of intangible assets is assessed for
impairment on a quarterly basis.
Forward exchange contracts -- The Company enters into forward exchange contracts
the majority of which hedge firm foreign currency commitments and certain
intercompany transactions. At December 31, 1998, the Company had contracts
outstanding amounting to US$162 million denominated principally in the British
pound, the U.S. dollar, the Spanish peseta, the European currency unit and the
Canadian dollar, maturing at various dates through December 1999. Changes in
market value of the contracts are generally included in the basis of the
transactions. Foreign exchange contracts are placed with a number of major
financial institutions to minimize credit risk. No collateral is held in
relation to the contracts, and the Company anticipates that these financial
institutions will satisfy their obligations under the contracts.
IV-7
<PAGE> 109
Fair values of financial instruments --
<TABLE>
<CAPTION>
1998 1997
-------------------- ------------------
CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- ------------- -------- -------- -------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents..................... US$ 83 US$ 83 US$ 70 US$ 70
Short-term debt............................... 839 839 411 411
Floating rate long-term debt.................. 227 227 736 736
Fixed rate long-term debt..................... 1,156 1,249 509 584
Interest rate hedges -- (liability)........... -- -- -- (5)
Forward currency exchange contracts -- asset
(liability)................................. -- 1 -- (2)
</TABLE>
The fair value of long-term debt was estimated using a discounted cash flow
analysis, based on the Company's current borrowing rates for similar types of
borrowing arrangements. The fair value of interest rate hedges and forward
currency exchange contracts is estimated based on quoted market prices of
offsetting contracts.
Environmental costs -- The Company participates in environmental assessments and
remedial efforts at operating facilities, previously owned or operated
facilities, and Superfund or other waste sites. Costs related to these locations
are accrued when it is probable that a liability has been incurred and the
amount of that liability can be reasonably estimated. Estimated costs are
recorded at undiscounted amounts based on experience and assessments and are
regularly evaluated as efforts proceed. Insurance recoveries are recorded as a
reduction of environmental costs when fixed and determinable.
Comprehensive income -- The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income" during the first
quarter of 1998. This Statement requires that foreign currency translation,
unrealized gains or losses on the Company's available-for-sale securities and
minimum pension liability adjustments be included in other comprehensive income
and that the accumulated balance of other comprehensive income be separately
displayed. Prior year information has been restated to conform to the
requirements of Statement 130.
The components of accumulated other comprehensive income at December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
- ------------- -------- --------
<S> <C> <C>
Foreign currency translation loss (net of tax of US$1
million in 1998 and US$4 million in 1997)................. US$ (55) US$ (130)
Unrealized gain on securities (net of tax of US$16 million
in 1998 and US$6 million in 1997)......................... 30 12
Minimum pension liability adjustments (net of tax of US$7
million in 1998 and US$2 million in 1997)................. (13) (2)
-------- --------
Accumulated other comprehensive income (loss)............... US$ (38) US$ (120)
-------- --------
</TABLE>
Treasury stock -- In February 1996, the Company's Directors authorized the
acquisition of up to 20 million shares of the Company's common stock. The
Company's purchases of shares of TRW common stock are recorded as treasury stock
and result in a reduction of shareholders' investment. When treasury shares are
issued, the Company uses a first-in, first-out method and the excess of the
purchase price over the issuance price is treated as a reduction of retained
earnings.
IV-8
<PAGE> 110
Earnings per share -- The effects of preferred stock dividends, convertible
preferred stock and employee stock options were excluded from the calculation of
1997 diluted earnings per share as they would have been antidilutive.
<TABLE>
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997 1996
- ----------------------------------- -------- -------- --------
<S> <C> <C> <C>
NUMERATOR
Earnings (loss) from continuing operations.............. US$476.8 US$(48.5) US$182.4
Preferred stock dividends............................... (.6) (.7) (.7)
-------- -------- --------
Numerator for basic earnings per share-earnings (loss)
available to common shareholders...................... 476.2 (49.2) 181.7
Effect of dilutive securities
Preferred stock dividends............................. .6 -- .7
-------- -------- --------
Numerator for diluted earnings per share-earnings (loss)
available to common shareholders after assumed
conversions........................................... US$476.8 US$(49.2) US$182.4
-------- -------- --------
DENOMINATOR
Denominator for basic earnings per
share-weighted-average common shares.................. 121.3 123.7 128.7
Effect of dilutive securities
Convertible preferred stock........................... .9 -- 1.1
Employee stock options................................ 2.2 -- 3.0
-------- -------- --------
Dilutive potential common shares........................ 3.1 -- 4.1
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions....... 124.4 123.7 132.8
-------- -------- --------
Basic earnings (loss) per share from continuing
operations............................................ US$ 3.93 US$(0.40) US$ 1.41
-------- -------- --------
Diluted earnings (loss) per share from continuing
operations............................................ US$ 3.83 US$(0.40) US$ 1.37
-------- -------- --------
</TABLE>
RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------- -------- -------- --------
<S> <C> <C> <C>
Customer-funded......................................... US$1,425 US$1,501 US$1,425
Company-funded
Research and development.............................. 522 461 412
Product development................................... 196 184 160
-------- -------- --------
718 645 572
-------- -------- --------
US$2,143 US$2,146 US$1,997
-------- -------- --------
</TABLE>
Company-funded research and development programs include research and
development for commercial products and independent research and development and
bid and proposal work related to government products and services. A portion of
the cost incurred for independent research and development and bid and proposal
work is recoverable through overhead charged to government contracts. Product
development costs include engineering and field support for new customer
requirements.
The 1997 amounts exclude the US$548 million charge for purchased in-process
research and development.
ACQUISITIONS
On February 5, 1997, the Company acquired an 80 percent equity interest in the
air bag and steering wheel businesses of Magna International for cash of US$415
million plus assumed net debt of US$50 million. On January 30, 1998, the Company
acquired the remaining 20 percent for cash of US$102 million. These businesses
supply air bag modules, inflators, propellants, steering wheels and other
related automotive components. The results of operations have been included in
the financial statements from the dates of acquisition. The acquisitions were
accounted for by the purchase method; accordingly, the combined purchase price
has been allocated to the
IV-9
<PAGE> 111
net assets acquired based on their estimated fair values and to costs for
certain restructuring actions, primarily plant closing and severance costs of
US$40 million. As of December 31, 1998, the balance of the restructuring
reserve, included in other accruals, was US$18 million and will be used
primarily for severance costs in 1999 and 2000. The combined purchase price in
excess of the net assets is US$336 million and is being amortized over 40 years.
On December 24, 1997, the Company acquired the shares of BDM International, Inc.
(BDM) for cash of US$880 million plus assumed net debt of US$85 million. BDM is
an information technology company operating in the systems and software
integration, computer and technical services and enterprise management and
operations markets. The acquisition was accounted for by the purchase method
with the purchase price allocated to the net assets acquired based on their fair
values. An independent valuation was performed, primarily using the income
approach for valuing the intangible assets. As a result of the valuation, US$548
million was allocated to in-process research and development projects that had
not reached technological feasibility and had no alternative future use. This
amount was recognized as an expense with no income tax benefit at the date of
acquisition. The intangible assets of US$371 million are being amortized over an
average period of 15 years.
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company as if the 1997 acquisitions
had taken place at the beginning of the respective periods. The pro forma
information includes adjustments for interest expense that would have been
incurred to finance the acquisitions, additional depreciation based on the fair
market value of the property, plant and equipment acquired, write-off of
purchased in-process research and development and the amortization of intangible
assets arising from the transactions. The pro forma financial information is not
necessarily indicative of the results of operations as they would have been had
the transactions been affected on the assumed dates.
<TABLE>
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE DATA)
YEAR ENDED (UNAUDITED) 1997 1996
- ----------------------------------- --------- ---------
<S> <C> <C>
Sales....................................................... US$11,758 US$11,231
Loss from continuing operations............................. (85) (392)
Loss per share.............................................. (.69) (3.05)
</TABLE>
SPECIAL CHARGES AND DIVESTITURE
On July 29, 1998, the Company announced actions intended to enhance the
automotive segment profit margins. The Company will record pre-tax charges of
US$125 million to US$150 million by the end of 2000, of which US$24 million was
expensed in 1998 primarily for plant closing and severance costs. Other accruals
at December 31, 1998 includes US$18 million relating to these charges and will
be used in 1999.
During 1996, the Company recorded before-tax charges of US$385 million (US$252
million after tax, or US$1.90 per share) primarily for actions taken in the
automotive and space, defense and information systems businesses. The components
of the charge included severance costs of US$40 million, contract reserves of
US$99 million, litigation and warranty expenses of US$127 million, asset
writedowns of US$96 million and other items of US$23 million. The charges are
included in the Statements of Earnings for 1996 as follows: US$321 million
included in cost of sales, US$18 million included in interest expense, US$65
million included in other expense(income) -- net and a reduction of US$19
million included in other captions. Other accruals at December 31, 1998 and 1997
included US$7 million and US$21 million, respectively, relating to severance
costs. The balance will be expended in 1999 and 2000.
During 1996, the Company sold substantially all of the businesses in its
Information Systems & Services segment. The financial statements reflect as
discontinued operations for all periods presented that segment's net assets and
operating results, as well as the related transaction gain. Net proceeds of
US$1.1 billion in cash resulted in a gain of US$484 million (US$260 million
after tax, or US$1.96 per share). Sales of the discontinued operations were
US$453 million in 1996.
IV-10
<PAGE> 112
OTHER EXPENSE(INCOME) -- NET
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
------------- -------- -------- --------
<S> <C> <C> <C>
Other income............................................ US$ (123) US$ (66) US$ (67)
Other expense........................................... 73 48 119
Minority interests...................................... 11 20 12
Earnings of affiliates.................................. (5) (12) (1)
Foreign currency translation............................ 7 7 7
-------- -------- --------
US$ (37) US$ (3) US$ 70
-------- -------- --------
</TABLE>
Other income in 1998 includes a US$49 million benefit from the settlement of
certain patent litigation. Other income in 1997 includes a US$15 million gain on
the sale of a property. Other expense in 1996 includes US$65 million of special
charges. Refer to the "Special Charges and Divestiture" footnote.
INCOME TAXES
Earnings from continuing operations before income taxes
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------- -------- -------- --------
<S> <C> <C> <C>
U.S..................................................... US$ 534 US$ 95 US$ 133
Non-U.S................................................. 212 145 169
-------- -------- --------
US$ 746 US$ 240 US$ 302
-------- -------- --------
</TABLE>
Provision for income taxes
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------- -------- -------- --------
<S> <C> <C> <C>
Current
U.S. federal.......................................... US$ 359 US$ 136 US$ 176
Non-U.S............................................... 86 84 73
U.S. state and local.................................. 28 23 20
-------- -------- --------
473 243 269
Deferred
U.S. federal.......................................... (196) 46 (130)
Non-U.S............................................... (10) (4) (6)
U.S. state and local.................................. 2 4 (13)
-------- -------- --------
(204) 46 (149)
-------- -------- --------
US$ 269 US$ 289 US$ 120
-------- -------- --------
</TABLE>
Effective income tax rate
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
U.S. statutory income tax rate.............................. 35.0% 35.0% 35.0%
Nondeductible expenses...................................... .9 2.7 2.4
U.S. state and local income taxes net of U.S. federal tax
benefit................................................... 2.6 7.6 3.0
Non-U.S. tax rate variances net of foreign tax credits...... 2.1 (2.2) 3.4
Prior years' adjustments.................................... (.3) (3.5) (1.9)
Purchased in-process research and development............... -- 80.0 --
Other....................................................... (4.2) .7 (2.3)
------ ------ ------
36.1% 120.3% 39.6%
------ ------ ------
</TABLE>
IV-11
<PAGE> 113
The effective tax rate in 1998 was 36.1 percent compared to 120.3 percent in
1997. Excluding the write-off of purchased in-process research and development,
the 1997 effective tax rate would have been 36.6 percent.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1998 and
1997, the Company had unused tax benefits of US$39 million and US$30 million,
respectively, related to non-U.S. net operating loss carryforwards for income
tax purposes, of which US$25 million and US$13 million can be carried forward
indefinitely and the balance expires at various dates through 2005. A valuation
allowance at December 31, 1998 and 1997, of US$29 million and US$25 million,
respectively, has been recognized to offset the related deferred tax assets due
to the uncertainty of realizing the benefit of the loss carryforwards.
It is the Company's intention to reinvest undistributed earnings of certain of
its non-U.S. subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, deferred income taxes have not been provided for accumulated
undistributed earnings of US$544 million at December 31, 1998.
<TABLE>
<CAPTION>
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
---------------- ----------------
(IN MILLIONS) 1998 1997 1998 1997
- ------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Pensions and postretirement benefits other than
pensions....................................... US$259 US$260 US$ -- US$ 6
Completed contract method of accounting for
long-term contracts............................ -- 49 165 457
Service contracts................................ -- -- 24 --
State and local taxes............................ 12 23 1 --
Reserves and accruals............................ 161 142 -- --
Depreciation and amortization.................... -- 10 128 91
Insurance accruals............................... 32 22 -- --
Non-U.S. net operating loss carryforwards........ 39 30 -- --
Other............................................ 106 123 50 41
------ ------ ------ ------
609 659 368 595
Valuation allowance for deferred tax assets...... (29) (25) -- --
------ ------ ------ ------
US$580 US$634 US$368 US$595
------ ------ ------ ------
</TABLE>
PENSION PLANS
At December 31, 1998, the Company adopted SFAS No. 132, "Employers' Disclosures
about Pension and Other Postretirement Benefits." This statement revises
employers' disclosures about pension and other postretirement benefit plans. The
measurement and recognition requirements for pension or other postretirement
benefit plans have not changed. Prior year information has been restated to
conform to the requirements of the new standard.
The Company has defined benefit pension plans for substantially all employees.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over the two-year period ended
December 31, 1998, and a statement of the funded status as of December 31, 1998
and 1997.
IV-12
<PAGE> 114
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
(IN MILLIONS) U.S. NON-U.S. U.S. NON-U.S.
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligations at January 1............... US$2,872 US$ 429 US$2,381 US$ 412
Service cost................................. 94 16 72 16
Interest cost................................ 200 29 179 29
Amendments................................... 3 1 5 5
Actuarial loss............................... 127 64 320 17
Foreign currency exchange changes............ -- 7 -- (31)
Acquisitions................................. -- -- 114 --
Benefits paid................................ (254) (29) (199) (19)
-------- -------- -------- --------
Benefit obligations at December 31............. 3,042 517 2,872 429
Change in plan assets
Fair value of plan assets at January 1......... 3,139 322 2,787 314
Actual return on plan assets................. 392 22 438 24
Foreign currency exchange changes............ -- (4) -- (13)
Acquisitions................................. -- -- 104 --
Company contributions........................ 27 21 9 13
Plan participant contributions............... -- 3 -- 3
Benefits paid................................ (254) (29) (199) (19)
-------- -------- -------- --------
Fair value of plan assets at December 31....... 3,304 335 3,139 322
Funded status of the plan...................... 262 (182) 267 (107)
Unrecognized actuarial (gain)loss............ (172) 28 (162) (39)
Unrecognized prior service cost.............. 29 10 33 11
Unrecognized net transition asset............ (4) (10) (23) (11)
-------- -------- -------- --------
Total recognized............................... US$ 115 US$ (154) US$ 115 US$ (146)
-------- -------- -------- --------
</TABLE>
The following table provides the amounts recognized in the balance sheet as of
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
(IN MILLIONS) U.S. NON-U.S. U.S. NON-U.S.
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Prepaid benefit cost........................... US$ 169 US$ 2 US$ 157 US$ (115)
Accrued benefit liability...................... (54) (156) (42) (31)
Additional minimum liability................... (13) (20) (16) (7)
Intangible asset and other..................... 9 4 13 6
Accumulated other comprehensive income......... 4 16 3 1
-------- -------- -------- --------
Total recognized............................... US$ 115 US$ (154) US$ 115 US$ (146)
-------- -------- -------- --------
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the U.S. pension plans with accumulated benefit obligations
in excess of plan assets were US$72 million, US$62 million and zero,
respectively, as of December 31, 1998, and US$189 million, US$167 million and
US$105 million, respectively, as of December 31, 1997.
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the non-U.S. pension plans with accumulated benefit
obligations in excess of plan assets were US$187 million, US$169 million and
US$22 million, respectively, as of December 31, 1998, and US$150 million, US$138
million and US$21 million, respectively, as of December 31, 1997.
The defined benefit pension plans held approximately 4.8 million and 4.4 million
shares of the Company's common stock with a fair value of approximately US$267
million and US$232 million at December 31, 1998 and 1997, respectively. The
plans received approximately US$6 million and US$5 million in dividends on these
shares in 1998 and 1997, respectively.
IV-13
<PAGE> 115
The following table provides the components of net pension cost for the plans
for years 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -------------------
(IN MILLIONS) U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Defined benefit plans
Service cost-benefits earned
during the year........... US$ 94 US$ 16 US$ 72 US$ 16 US$ 73 US$ 14
Interest cost on projected
benefit obligation........ 200 29 179 29 165 28
Expected return on plan
assets.................... (260) (28) (223) (26) (205) (24)
Amortization of recognized
loss...................... 1 1 -- -- 10 4
Amortization of prior service
cost...................... 7 2 7 3 6 6
Amortization of transition
asset..................... (18) (1) (18) (1) (18) (1)
-------- -------- -------- -------- -------- --------
Defined benefit plans.......... 24 19 17 21 31 27
Defined contribution plans..... 1 5 1 5 1 5
Employee stock ownership and
savings plan................. 47 -- 44 -- 40 --
-------- -------- -------- -------- -------- --------
Total pension cost............. US$ 72 US$ 24 US$ 62 US$ 26 US$ 72 US$ 32
-------- -------- -------- -------- -------- --------
</TABLE>
The amount included within other comprehensive income arising from a change in
the minimum pension liability was a loss of US$11 million, net of tax of US$5
million, in 1998, zero in 1997 and a gain of US$3 million, net of tax of US$2
million, in 1996.
The assumptions used in the measurement of the Company's benefit obligations are
shown in the following table:
<TABLE>
<CAPTION>
1998 1997
----------------- ------------------
U.S. NON-U.S. U.S. NON-U.S.
----- --------- ------ ---------
<S> <C> <C> <C> <C>
Actuarial assumptions
Discount rate..................................... 6.75% 5.5-6.0% 7.00% 6.0-7.0%
Rate of increase in compensation levels........... 4.00% 2.0-3.5% 4.40% 3.5-4.0%
</TABLE>
The expected long-term rate of return on plan assets for U.S. plans was 9.5
percent for 1998 and 9 percent for 1997. For non-U.S. plans the expected
long-term rate of return ranged from 8.5 to 8.75 percent in 1998 and 9 to 9.5
percent in 1997.
The Company sponsors a contributory stock ownership and savings plan for which a
majority of its U.S. employees are eligible. The Company matches employee
contributions up to 3 percent of the participant's qualified compensation. The
Company contributions are held in an unleveraged employee stock ownership plan.
The Company also sponsors other defined contribution pension plans covering
employees at some of its operations.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
At December 31, 1998, the Company adopted SFAS No. 132, "Employers' Disclosures
about Pension and Other Postretirement Benefits." This statement revises
employers' disclosures about pension and other postretirement benefit plans. The
measurement and recognition requirements for pension or other postretirement
benefit plans have not changed. Prior year information has been restated to
conform to the requirements of the new standard.
The Company provides health care and life insurance benefits for a majority of
its retired employees in the United States and Canada. The health care plans
provide for cost sharing, in the form of employee contributions, deductibles and
coinsurance, between the Company and its retirees. The postretirement health
care plan covering a majority of employees who retired since August 1, 1988,
limits the annual increase in the Company's contribution toward the plan's cost
to a maximum of the lesser of 50 percent of medical inflation or 4 percent. Life
insurance benefits are generally noncontributory. The Company's policy is to
fund the cost of postretirement
IV-14
<PAGE> 116
health care and life insurance benefits in amounts determined at the discretion
of management. Retirees in certain other countries are provided similar benefits
by plans sponsored by their governments.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over the two-year period ended
December 31, 1998, and a statement of the funded status as of December 31, 1998
and 1997:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
- ------------- ------- -------
<S> <C> <C>
Change in benefit obligations
Benefit obligations at January 1............................ US$ 794 US$ 760
Service cost.............................................. 19 13
Interest cost............................................. 54 54
Actuarial (gain) loss..................................... 8 (1)
Acquisitions.............................................. -- 4
Foreign currency exchange rate changes.................... (3) (3)
Plan amendments........................................... 1 --
Plan participant contributions............................ 5 5
Benefits paid............................................. (44) (38)
------- -------
Benefit obligations at December 31.......................... 834 794
Change in plan assets
Fair value of plan assets at January 1...................... 129 83
Actual return on plan assets.............................. 12 12
Company contributions..................................... 49 67
Plan participant contributions............................ 5 5
Benefits paid............................................. (44) (38)
------- -------
Fair value of plan assets at December 31.................... 151 129
------- -------
Funded status of the plan................................... (683) (665)
Unrecognized actuarial gain................................. (14) (30)
Unrecognized prior service cost............................. (5) (6)
------- -------
Total accrued benefit cost recognized....................... US$(702) US$(701)
------- -------
</TABLE>
The following table provides the components of net postretirement benefit cost
for the plans for years 1998, 1997 and 1996:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------- ------ ------ ------
<S> <C> <C> <C>
Components of net post retirement benefit cost
Service cost................................................ US$ 19 US$ 13 US$ 13
Interest cost............................................... 54 54 54
Expected return on plan assets.............................. (13) (9) (5)
------ ------ ------
Net postretirement benefit cost............................. US$ 60 US$ 58 US$ 62
------ ------ ------
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligations as of December 31, 1998 and 1997, was 6.75
percent and 7 percent, respectively. The weighted average rate of compensation
increase was 4.0 percent and 4.4 percent for 1998 and 1997, respectively. The
weighted average expected long-term rate of return on plan assets was 9.5
percent for 1998 and 8 percent for 1997. A 7.5 percent annual rate of increase
in the per capita cost of covered health care benefits was assumed for 1999. The
rate was assumed to decrease gradually to 5 percent in the year 2009 and remain
at that level thereafter.
IV-15
<PAGE> 117
A one-percentage-point change in the assumed health care cost trend rate would
have the following effects:
<TABLE>
<CAPTION>
ONE-PERCENTAGE-POINT
--------------------
(IN MILLIONS) INCREASE DECREASE
- ------------- -------- --------
<S> <C> <C>
Effect on total of service and interest cost components..... US$ 10 US$ (7)
Effect on postretirement benefit obligations................ US$100 US$(83)
</TABLE>
DEBT AND CREDIT AGREEMENTS
Short-term debt
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
- ------------- -------- --------
<S> <C> <C>
U.S. borrowings............................................. US$ 589 US$ 318
Non-U.S. borrowings......................................... 250 93
-------- --------
US$ 839 US$ 411
-------- --------
</TABLE>
Long-term debt
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
- ------------- -------- --------
<S> <C> <C>
U.S. borrowings............................................. US$ 141 US$ 691
Non-U.S. borrowings......................................... 91 54
Medium-term notes
6.05% Notes due 2005...................................... 200 --
6.25% Notes due 2010...................................... 150 --
6.65% Notes due 2028...................................... 150 --
6.30% Notes due 2008...................................... 100 --
9.35% Notes due 2020 (due 2000 at option of note
holder)................................................ 100 100
9.375% Notes due 2021..................................... 100 100
Other medium-term notes................................... 326 278
Other....................................................... 25 22
-------- --------
Total long-term debt........................................ 1,383 1,245
Less current portion........................................ 30 128
-------- --------
US$1,353 US$1,117
-------- --------
</TABLE>
The Company maintains two committed U.S. dollar revolving credit agreements. The
first agreement allows the Company to borrow up to US$750 million with 17 banks
and extends through June 2002. The second agreement allows the Company to borrow
up to US$745 million with 14 banks and extends to December 6, 1999. The interest
rate under the agreements is either a negotiated rate, the banks' prime rates, a
rate based on the banks' costs of funds in the secondary certificate of deposit
market or a rate based on an Interbank Offered Rate. The Company's commercial
paper borrowings are supported by these agreements. At December 31, 1998, there
were no outstanding borrowings under the U.S. revolving credit agreements.
The Company also maintains a committed U.S. dollar denominated revolving credit
agreement with five banks for use by the Company's Brazilian operations. The
agreement allows the Company to borrow up to US$50 million and extends through
July 2003. The interest rate under the agreement is a rate based on an Interbank
Offered Rate. At December 31, 1998, there were US$20 million in outstanding
borrowings under this agreement.
The Company also maintains a committed multi-currency revolving credit agreement
with 17 banks. The agreement allows the Company to borrow up to US$250 million
and extends through June 2002. The interest rate under the agreement is based on
various interest rate indices. At December 31, 1998, there were no outstanding
borrowings under the multi-currency credit agreement.
IV-16
<PAGE> 118
At December 31, 1998, US$191 million of short-term debt was reclassified to
long-term debt as the Company intends to refinance the borrowings on a long-term
basis and has the ability to do so under its U.S. and multi-currency revolving
credit agreements.
During 1998, the Company refinanced short-term debt by issuing US$659 million of
notes and debentures that mature at various dates through 2028.
The Company established a US$1 billion Universal Shelf Registration Statement
during 1998 of which approximately US$841 million remains available at December
31, 1998. Securities that may be issued under this shelf registration statement
include debt securities, common stock, warrants to purchase debt securities and
warrants to purchase common stock.
The weighted average interest rate on short-term borrowings outstanding,
including amounts reclassified to long-term debt, at December 31, 1998 and 1997,
is 5.9 percent and 6.4 percent, respectively.
The other medium-term notes bear interest at rates ranging from 5.98 percent to
9.25 percent and mature at various dates through 2020.
Long-term non-U.S. borrowings bear interest, stated in terms of the local
currency borrowing, at rates ranging from 3.3 percent to 9.5 percent at December
31, 1998, and mature at various dates through 2006.
The maturities of long-term debt are, in millions: 1999 -- US$30; 2000 -- US$35;
2001 -- US$29; 2002 -- US$194; 2003 -- US$85; and US$1,010 thereafter.
The indentures and other debt agreements impose, among other covenants,
maintenance of minimum net worth. Under the most restrictive interpretation of
these covenants, the payment of dividends was limited to approximately US$972
million at December 31, 1998.
Compensating balance arrangements and commitment fees were not material.
LEASE COMMITMENTS
The Company leases certain offices, manufacturing and research buildings,
machinery, automobiles and computer and other equipment. Such leases, some of
which are noncancelable and in many cases include renewals, expire at various
dates. The Company pays most maintenance, insurance and tax expenses relating to
leased assets. Rental expense for operating leases was US$180 million for 1998,
US$146 million for 1997 and US$130 million for 1996.
At December 31, 1998, the future minimum lease payments for noncancelable
operating leases totaled US$390 million and are payable as follows: 1999 --
US$108; 2000 -- US$82; 2001 -- US$57; 2002 -- US$42; 2003 -- US$30; and US$71
thereafter.
CAPITAL STOCK
Serial Preference Stock II -- cumulative -- stated at US$2.75 a share; 5 million
shares authorized.
Series 1 -- each share convertible into 8.8 shares of common; redeemable at
US$104 per share; involuntary liquidation price of US$104 per share;
dividend rate of US$4.40 per annum.
Series 3 -- each share convertible into 7.448 shares of common; redeemable
at US$100 per share; involuntary liquidation price of US$40 per share;
dividend rate of US$4.50 per annum.
Series 4 -- not convertible into common shares; redemption price and
involuntary liquidation price of US$125 per one one-hundredth of a share;
annual dividend rate per one one-hundredth of a share of the lesser of
US$4.00 or the current dividend on common stock; no shares outstanding at
December 31, 1998.
Common stock -- US$0.625 par value; authorized 500 million shares; shares
outstanding were reduced by treasury shares of 13.6 million in 1998 and 10.9
million in 1997.
The Company has a shareholder purchase rights plan under which each shareholder
of record as of May 17, 1996, received one-half of one right for each TRW common
share held. Each right entitles the holder, upon the
IV-17
<PAGE> 119
occurrence of certain events, to buy one one-hundredth of a share of Cumulative
Redeemable Serial Preference Stock II, Series 4, at a price of US$300. In other
events, each right entitles the holder, other than the acquiring party, to
purchase US$600 of TRW common stock or common stock of another person at a 50
percent discount. The Company may redeem these rights at its option at one cent
per right under certain circumstances.
At December 31, 1998, 14.8 million shares of common stock were reserved for the
exercise and issuance of stock options and conversion of the Serial Preference
Stock II, Series 1 and 3. There were 1.2 million shares of Cumulative Redeemable
Serial Preference Stock II, Series 4, reserved for the shareholder purchase
rights plan.
STOCK OPTIONS
The Company has granted nonqualified stock options to certain employees to
purchase the Company's common stock at the market price on the date of grant.
Stock options granted become exercisable to the extent of one-third of the
optioned shares for each full year of employment following the date of grant and
expire 10 years after the date of grant. The Company applies the provisions of
Accounting Principles Board Opinion No. 25 in accounting for its employee stock
options and, as such, no compensation expense is recognized as the exercise
price equals the market price of the stock on the date of grant.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
MILLIONS EXERCISE MILLIONS EXERCISE MILLIONS EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year......................... 8.5 US$35.02 8.5 US$29.72 9.2 US$26.45
Granted........................ 2.4 53.31 2.0 50.19 1.7 43.98
Exercised...................... .9 25.68 1.6 25.96 1.9 25.28
Canceled, expired or
terminated................... .2 46.54 .4 38.63 .5 35.51
Outstanding at end of year..... 9.8 40.11 8.5 35.02 8.5 29.72
Exercisable.................... 5.8 32.31 5.3 27.81 5.6 25.18
Weighted-average fair value of
options granted.............. 12.86 11.92 9.45
</TABLE>
At December 31, 1998, approximately 2,000 employees were participants in the
plan. As of that date, the per share exercise prices of options outstanding
ranged from US$19.88 to US$58.88. The following table provides certain
information with respect to stock options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
MILLIONS OF REMAINING AVERAGE MILLIONS OF AVERAGE
SHARES CONTRACTUAL LIFE EXERCISE SHARES EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING IN YEARS PRICE EXERCISABLE PRICE
- ------------------------ ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
US$19.88 -- US$39.99............. 4.3 3.8 US$27.16 4.3 US$27.16
US$40.00 -- US$58.88............. 5.5 8.3 50.21 1.5 46.88
--- --- -------- --- --------
9.8 6.3 US$40.11 5.8 US$32.31
--- ---
</TABLE>
Had the compensation cost for the stock options granted in 1998, 1997 and 1996
been determined based on the fair value at the grant date consistent with the
fair value method of SFAS No. 123, the Company's net earnings and earnings per
share would have been reduced by US$13 million (US$.10 per share) in 1998, US$9
million (US$.08 per share) in 1997 and US$5 million (US$.04 per share) in 1996.
The effect on 1996 net earnings is not representative of the effect on future
years' net earnings amounts as the compensation cost reflects expense for only
two years' vesting in 1996.
Fair value was estimated at the date of grant using the Black-Scholes option
pricing model and the following weighted-average assumptions for 1998, 1997 and
1996, respectively: risk-free interest rate of 4.59%, 5.83% and 5.43%; dividend
yield of 2.28%, 2.54% and 2.84%; expected volatility of 23%, 20% and 20%; and an
expected option life of six years for 1998, 1997 and 1996.
IV-18
<PAGE> 120
CONTINGENCIES
The Company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. In addition, the Company is conducting a number of
environmental investigations and remedial actions at current and former Company
locations and, along with other companies, has been named a potentially
responsible party for certain waste management sites. Each of these matters is
subject to various uncertainties, and some of these matters may be resolved
unfavorably to the Company. A reserve estimate for each matter is established
using standard engineering cost estimating techniques. In the determination of
such costs, consideration is given to professional judgment of Company
environmental engineers in consultation with outside environmental specialists
when necessary. At multi-party sites, the reserve estimate also reflects the
expected allocation of total project costs among the various potentially
responsible parties. At December 31, 1998, the Company had reserves for
environmental matters of US$64 million, including US$7 million of additional
accruals recorded during the year. The Company aggressively pursues
reimbursement for environmental costs from its insurance carriers. However,
insurance recoveries are not recorded as a reduction of environmental costs
until they are fixed and determinable. At December 31, 1998, the "Other Notes
and Accounts Receivable" caption on the balance sheet includes US$22 million of
insurance recoveries related to environmental matters. The Company believes that
any liability that may result from the resolution of environmental matters for
which sufficient information is available to support these cost estimates will
not have a material adverse effect on the Company's financial position. However,
the Company cannot predict the effect on the Company's financial position of
expenditures for aspects of certain matters for which there is insufficient
information. In addition, the Company cannot predict the effect of compliance
with environmental laws and regulations with respect to unknown environmental
matters on the Company's financial position or the possible effect of compliance
with environmental requirements imposed in the future.
Further, product liability claims may be asserted in the future for events not
currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at December 31, 1998, management does not
anticipate that any related liability, after consideration of insurance
recovery, would have a material adverse effect on the Company's financial
position.
During 1997, TRW Vehicle Safety Systems Inc., a wholly owned subsidiary of the
Company, reported to the Arizona Department of Environmental Quality (ADEQ)
potential violations of the Arizona hazardous waste law at its Queen Creek,
Arizona facility for the possible failure to properly label and dispose of
wastewater that might be classified as hazardous waste. ADEQ is conducting an
investigation into these potential violations and the Company is cooperating
with the investigation. If ADEQ initiates proceedings against the Company with
respect to such matters, the Company could be liable for penalties and fines and
other relief. The Arizona State Attorney General also is investigating matters,
and federal, civil and criminal governmental investigations with respect to
these potential violations are ongoing. Management is currently evaluating this
matter and is unable to make a meaningful estimate of the amount or range of
possible liability, if any, at this time, although management believes that the
Company would have meritorious defenses.
During 1996, the Company was advised by the United States Department of Justice
(DOJ) that it had been named as a defendant in two lawsuits brought by a former
employee of the Company's former Space & Technology Group and originally filed
under seal in 1994 and 1995, respectively, in the United States District Court
for the Central District of California under the qui tam provisions of the civil
False Claims Act. The Act permits an individual to bring suit in the name of the
United States and share in any recovery. The allegations in the lawsuits relate
to the classification of costs incurred by the Company that were charged to
certain of its federal contracts. Under the law, the government must investigate
the allegations and determine whether it wishes to intervene and take
responsibility for the lawsuits. On February 13, 1998, the DOJ intervened in the
litigation. On February 19, 1998 and March 4, 1998, the former employee filed
amended complaints in the Central District of California that realleged certain
of the claims included in the 1994 and 1995 lawsuits and omitted the remainder.
The amended complaints allege that the United States has incurred substantial
damages and that the Company should be ordered to cease and desist from
violations of the civil False Claims Act and is liable for treble damages,
penalties, costs, including attorneys' fees, and such other relief as deemed
proper by the court. On March 17, 1998, the DOJ filed its complaint against the
Company upon intervention in the 1994 lawsuit, which set forth a
IV-19
<PAGE> 121
limited number of the allegations in the 1994 lawsuit and other allegations not
in the 1994 lawsuit. The DOJ elected not to pursue the other claims in the 1994
lawsuit or the claims in the 1995 lawsuit. The DOJ's complaint alleges that the
Company is liable for treble damages, penalties, interest, costs and "other
proper relief." On March 18, 1998, the former employee withdrew the first
amended complaint in the 1994 lawsuit at the request of the DOJ. On May 18,
1998, the Company filed answers to the former employee's first amended complaint
in the 1995 lawsuit and to the DOJ's complaint, denying all substantive
allegations against the Company contained therein. At the same time, the Company
filed counterclaims against both the former employee and the federal government.
On July 20, 1998, both the former employee and the DOJ filed motions seeking to
dismiss the Company's counterclaims. On November 23, 1998 (entered as an Order
on January 21, 1999), the court dismissed certain counterclaims asserted against
the former employee and the federal government and took under advisement the
former employee's motion to dismiss certain other counterclaims. The Company
cannot presently predict the outcome of these lawsuits, although management
believes that their ultimate resolution will not have a material effect on the
Company's financial condition or results of operations.
OPERATING SEGMENTS
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" during the fourth quarter of 1998. Statement 131
establishes standards for reporting information about operating segments in
annual financial statements and requires that select information about operating
segments be disclosed in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. Operating segment and geographic area information for all
periods presented has been restated to conform to Statement 131.
The Company's reportable operating segments include Automotive and Space,
Defense & Information Systems. The operating segments are managed separately as
they each represent a strategic business component that offers different
advanced technology products and serves different markets. Separate financial
results are available for each operating segment and are regularly reviewed by
the chief operating officer for purposes of assessing performance and allocating
resources. The Company's Space, Defense & Information Systems businesses have
been aggregated into one operating segment as they exhibit similar economic
characteristics, operate in substantially the same regulatory environment, offer
similar products and services to the same customer base, perform jointly on a
significant number of contracts and exhibit similar methods of developing and
delivering products and services.
The Company is a United States-based company providing advanced technology
products and services for the automotive and space, defense and information
systems markets. The principal markets for the Company's automotive products are
North American, European and Asian original equipment manufacturers and
independent distributors. Space, Defense & Information Systems primarily offers
products and services to the United States Government, agencies of the United
States Government, state and local governments, and international and commercial
customers.
Automotive -- Occupant restraint systems, including sensors, steering wheels,
air bag and seat belt systems. Steering systems, including hydraulic and
electrically assisted power and manual rack and pinion steering for light
vehicles, hydraulic steering systems for commercial truck and off-highway
vehicles and suspension components. Electrical and electronic controls,
engineered fasteners and stud welding and control systems. Engine valves and
valve train parts.
Space, Defense & Information Systems -- Spacecraft, including the design and
manufacture of spacecraft equipment, propulsion subsystems, electro-optical and
instrument systems, spacecraft payloads, high-energy lasers and laser technology
and other high-reliability components. Electronic systems, equipment, components
and services, including the design and manufacture of space communication
systems, airborne reconnaissance systems, unmanned aerial vehicles, avionics
systems, commercial telecommunications and other electronic technologies for
tactical and strategic applications. Systems integration, systems engineering
services and software development in the fields of military command and control,
strategic missiles, intelligence requirements management, public safety,
modeling and simulation, training, telecommunications, image processing, earth
observation, nuclear waste management, air traffic control, security and
counterterrorism, and other high-
IV-20
<PAGE> 122
technology systems. Information technology systems, products and services
focused on defense, health and human safety, integrated supply chain,
warehousing, logistics, test and evaluation, criminal justice, tax systems
modernization, and financial applications.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates operating performance based on each segment's profit before income
taxes and total assets net of segment current operating liabilities. Debt and
related interest expense, interest related to the other postretirement benefit
liability, currently payable income taxes, current deferred income taxes,
long-term deferred income taxes in 1998 and corporate staff expenses are
maintained at the corporate level and are not a component of the operating
segment results.
Information concerning operating segments as of and for each of the three years
ended December 31, is as follows:
<TABLE>
<CAPTION>
SPACE,
DEFENSE &
INFORMATION
(IN MILLIONS) AUTOMOTIVE SYSTEMS TOTAL
- ------------- ---------- ----------- ---------
<S> <C> <C> <C>
1998
Revenue from external customers......................... US$ 7,201 US$ 4,685 US$11,886
Segment profit before income taxes...................... 543 458 1,001
Restructuring charges included in segment profit........ 24 -- 24
Segment assets.......................................... 3,316 1,240 4,556
Depreciation and amortization........................... 396 156 552
Capital expenditures.................................... 456 163 619
1997
Revenue from external customers......................... US$ 7,032 US$ 3,799 US$10,831
Segment profit before income taxes...................... 637 348 985
Segment assets.......................................... 2,926 1,083 4,009
Depreciation and amortization........................... 362 115 477
Capital expenditures.................................... 398 156 554
1996
Revenue from external customers......................... US$ 6,493 US$ 3,364 US$ 9,857
Segment profit before income taxes...................... 330 180 510
Special charges included in segment profit.............. 293 89 382
Segment assets.......................................... 2,334 657 2,991
Depreciation and amortization........................... 327 112 439
Capital expenditures.................................... 343 157 500
</TABLE>
The Company accounts for intersegment sales or transfers at current market
prices. Intersegment sales and transfers were not significant. Sales to agencies
of the U.S. Government, primarily by the Space, Defense & Information Systems
segment, were US$4,119 million in 1998, US$3,523 million in 1997 and US$3,121
million in 1996. Sales to Ford Motor Company by the Automotive segment were
US$1,423 million in 1998, US$1,469 million in 1997 and US$1,470 million in 1996.
Reconciliations of the items reported for the operating segments to the
applicable amounts reported in the consolidated financial statements are as
follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------- -------- -------- --------
<S> <C> <C> <C>
Segment profit before income taxes...................... US$1,001 US$ 985 US$ 510
Purchased in-process research and development........... -- (548) --
Interest expense........................................ (119) (80) (88)
Corporate expense and other............................. (136) (117) (120)
-------- -------- --------
Earnings from continuing operations before income
taxes................................................. US$ 746 US$ 240 US$ 302
-------- -------- --------
</TABLE>
IV-21
<PAGE> 123
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------- -------- -------- --------
<S> <C> <C> <C>
Segment assets.......................................... US$4,556 US$4,009 US$2,991
Segment current operating liabilities................... 1,843 1,828 1,620
Current deferred taxes.................................. 179 96 424
Long-term deferred taxes................................ 33 -- --
Segment eliminations and adjustments.................... 122 114 106
Corporate and other..................................... 436 363 758
-------- -------- --------
Total assets............................................ US$7,169 US$6,410 US$5,899
-------- -------- --------
</TABLE>
Information concerning principal geographic areas as of and for the three years
ended December 31, is as follows:
<TABLE>
<CAPTION>
UNITED
(IN MILLIONS) STATES GERMANY ALL OTHER TOTAL
- ------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenue from external customers
1998........................................ US$7,658 US$1,562 US$2,666 US$11,886
1997........................................ 6,919 1,442 2,470 10,831
1996........................................ 6,469 1,038 2,350 9,857
Property, plant and equipment - net
1998........................................ US$1,491 US$ 497 US$ 695 US$ 2,683
1997........................................ 1,560 451 610 2,621
1996........................................ 1,576 264 640 2,480
</TABLE>
Revenues are attributable to geographic areas based on the location of the
assets producing the revenues. Inter-area sales are not significant to the total
revenue of any geographic area.
EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITORS (UNAUDITED)
On January 28, 1999, the Company announced its intention to acquire the
outstanding common shares of LucasVarity plc in a cash tender offer totaling
approximately US$7 billion. TRW has received fully underwritten financing from
J.P. Morgan, Bank of America, and Citibank. The Boards of Directors of both
companies have approved the transaction and LucasVarity's Board of Directors has
entered into irrevocable agreements to support the transaction. The transaction,
which is subject to normal closing conditions, is expected to be completed in
the second quarter of 1999 and will be accounted for under purchase accounting.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
(IN MILLIONS EXCEPT ------------------- ------------------- ------------------- -------------------
PER SHARE DATA) 1998 1997 1998 1997 1998 1997 1998 1997
------------------- -------- -------- -------- -------- -------- -------- -------- --------
(A) (B) (C) (D)(E)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................ US$3,095 US$2,660 US$3,028 US$2,852 US$2,836 US$2,521 US$2,927 US$2,798
Gross profit......... 520 482 547 534 522 466 582 523
Earnings (loss)
before income
taxes.............. 204 195 198 219 164 166 180 (340)
Net earnings
(loss)............. 129 119 126 135 104 108 118 (411)
Net earnings (loss)
per share
Diluted............ 1.03 .92 1.00 1.05 .85 .85 .96 (3.34)
Basic.............. 1.05 .95 1.03 1.09 .86 .88 .98 (3.34)
</TABLE>
- ---------------
(A) Earnings (loss) before income taxes includes a US$49 million gain (US$32
million after tax, 25 cents per share) from the settlement of certain
patent litigation and a US$34 million charge (US$22 million after tax,
IV-22
<PAGE> 124
17 cents per share) for litigation and contract reserves and severance
costs relating to the combination of the Company's systems integration
business with BDM International, Inc.
(B) Earnings (loss) before income taxes includes a charge of US$13 million (US$8
million after tax, 7 cents per share) related to the automotive
restructuring.
(C) Earnings (loss) before income taxes includes a benefit of US$25 million
(US$16 million after tax, 13 cents per share) from an interest accrual
adjustment relating to a tax litigation settlement and an US$11 million
charge (US$10 million after tax, 8 cents per share) related to the
automotive restructuring.
(D) Earnings (loss) before income taxes includes a US$548 million (US$4.46 per
share) one time noncash charge related to in-process research and
development with no income tax benefit.
(E) Earnings (loss) before income taxes includes a US$15 million gain (US$10
million after tax, 8 cents per share) related to the sale of a property.
STOCK PRICES AND DIVIDENDS (UNAUDITED)
The book value per common share at December 31, 1998, was US$15.61 compared to
US$13.19 at the end of 1997. The Company's Directors declared the 242nd
consecutive quarterly dividend during December 1998. Dividends declared per
share in 1998 were US$1.28, up 3 percent from US$1.24 in 1997. The following
table highlights the market prices of the Company's common and preference stocks
and dividends paid for the quarters of 1998 and 1997.
<TABLE>
<CAPTION>
PRICE OF PRICE OF
TRADED SHARES TRADED SHARES DIVIDENDS PAID PER SHARE
--------------------- --------------------- -------------------------
1998 1997 1998 1997
--------------------- --------------------- ----------- -----------
QUARTER HIGH LOW HIGH LOW
------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock 1 US$ 56 1/4 US$ 50 9/16 US$ 55 7/8 US$ 48 1/8 US$ .31 US$ .31
Par value US$0.625 2 57 3/8 50 1/16 58 3/8 47 3/8 .31 .31
per share 3 56 15/16 42 11/16 61 5/16 51 1/4 .31 .31
4 58 43 61 3/16 50 1/2 .33 .31
Cumulative Serial 1 400 200 500 300 1.10 1.10
Preference Stock II 2 468 468 457 1/2 442 1.10 1.10
US$4.40 Convertible 3 495 420 600 300 1.10 1.10
Series 1 4 480 480 495 495 1.10 1.10
Cumulative Serial 1 390 379 400 364 1.125 1.125
Preference Stock II 2 400 400 402 396 1.125 1.125
US$4.50 Convertible 3 405 405 423 1/4 423 1/4 1.125 1.125
Series 3 4 350 250 420 400 1.125 1.125
</TABLE>
The US$4.40 Convertible Series 1 was not actively traded during the first
quarter of 1998 and the first and third quarters of 1997. The US$4.50
Convertible Series 3 were not actively traded during the fourth quarter of 1998.
The prices shown for these quarters represent the range of asked(high) and
bid(low) quotations.
IV-23
<PAGE> 125
APPENDIX V -- CERTAIN MARKET, DIVIDEND AND EXCHANGE RATE INFORMATION
1. MARKET PRICE DATA
The principal trading market for LucasVarity Shares is the London Stock Exchange
and the principal trading market for LucasVarity ADSs is the NYSE. LucasVarity
Shares have been listed and traded on the London Stock Exchange since 6
September 1998 and LucasVarity ADSs have been listed and traded on the NYSE
since 6 September, 1996. The following table sets out, for the periods
indicated, the reported high and low Closing Prices for LucasVarity Shares and
high and low closing prices for LucasVarity ADSs on the NYSE as reported on
Bloomberg. Each LucasVarity ADS represents ten LucasVarity Shares.
<TABLE>
<CAPTION>
PRICE PER PRICE PER
LUCASVARITY SHARE LUCASVARITY ADS
------------------ ----------------
HIGH LOW HIGH LOW
------- ------- ------ ------
(PENCE) (PENCE) (US$) (US$)
<S> <C> <C> <C> <C>
1997:
First Quarter......................................... 228.00 193.50 38 1/2 30 1/2
Second Quarter........................................ 211.00 182.00 34 7/8 30
Third Quarter......................................... 243.00 182.00 39 1/8 30 3/4
Fourth Quarter........................................ 242.50 188.25 39 1/8 31 7/16
1998:
First Quarter......................................... 243.50 198.00 41 5/18 32 1/2
Second Quarter........................................ 284.25 233.00 46 1/2 39 13/16
Third Quarter......................................... 246.00 181.00 40 9/16 31 1/4
Fourth Quarter........................................ 216.00 170.50 36 1/4 29 1/2
</TABLE>
On 27 January, 1999, the last business day prior to the announcement of the
Offer, the Closing Price for LucasVarity Shares was 283.5 pence and the closing
price on the NYSE Composite Tape for LucasVarity ADSs was US$46 11/16.
The following table shows the Closing Price for LucasVarity Shares, and the
closing price on the NYSE Composite Tape LucasVarity ADSs for the first dealing
day that the London Stock Exchange or, as the case may be, the NYSE was open for
business in each month from August 1998 to February 1999, for 5 January, 1999
(the last business day prior to the commencement of the Offer Period) and for 4
February, 1999 (the latest practicable date prior to publication of this
document):
<TABLE>
<CAPTION>
LUCASVARITY
DATE SHARE PRICE ADS
- ---- ----------- ------
(PENCE) (US$)
<S> <C> <C>
3 August, 1998.............................................. 214.00 34 11/16
1 September, 1998........................................... 216.25 36 1/8
1 October, 1998............................................. 179.00 30 7/16
2 November, 1998............................................ 208.50 36 3/16
1 December, 1998............................................ 208.00 35 3/4
4 January, 1999............................................. 207.75 35 1/2
5 January, 1999............................................. 215.25 38
1 February, 1999............................................ 289.50 47 1/2
4 February, 1999............................................ 291.75 48 7/16
</TABLE>
V-1
<PAGE> 126
2. DIVIDEND DATA
<TABLE>
<CAPTION>
HISTORICAL DIVIDENDS
DECLARED
-----------------------------
LUCASVARITY LUCASVARITY*
SHARE ADS
------------ -------------
(PENCE) (PENCE)
<S> <C> <C>
Eight months to 31 January, 1997............................ 2.25 22.5
Year to 31 January, 1998.................................... 4.5 45.0
Six months to 31 July, 1998................................. 2.5 25.0
</TABLE>
- ---------------
* Dividends were paid by the US Depositary to LucasVarity ADS holders in US
dollars converted at the prevailing exchange rate.
3. EXCHANGE RATE DATA
The following table shows, for the periods and dates indicated, certain
information regarding the exchange rate for the pound sterling, based on the
Noon Buying Rate, expressed in US dollars per L1.
<TABLE>
<CAPTION>
PERIOD AVERAGE
YEAR ENDED 31 DECEMBER END RATE* HIGH LOW
- ---------------------- ------ ------- ------ ------
<S> <C> <C> <C> <C>
1994.................................................. 1.5665 1.5319 1.6368 1.4615
1995.................................................. 1.5535 1.5785 1.6440 1.5302
1996.................................................. 1.7123 1.5606 1.7123 1.4948
1997.................................................. 1.6427 1.6373 1.7035 1.5775
1998.................................................. 1.6628 1.6573 1.7222 1.6114
</TABLE>
- ---------------
* The average of the daily Noon Buying Rates during the period.
On 28 January, 1999, the date of announcement of the Offer, the Noon Buying Rate
for the pound sterling was US$1.6470 per L1.
V-2
<PAGE> 127
APPENDIX VI -- ADDITIONAL INFORMATION
1. RESPONSIBILITY
The Directors of the Offeror, whose names are set out in paragraph 2(a) below,
accept responsibility for the information contained in this document, other than
that relating to the LucasVarity Group and the Directors of LucasVarity. To the
best of the knowledge and belief of the Directors of the Offeror (who have taken
all reasonable care to ensure that such is the case), such information is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
The Directors of LucasVarity (other than Dr. R. M. Gates who is also a Director
of TRW and has taken no part in discussions by the Board of LucasVarity relating
to the Offer), whose names are set out in paragraph 2(c) below, accept
responsibility for the information contained in this document relating to the
LucasVarity Group and the Directors of LucasVarity. Dr. R. M. Gates accepts
responsibility for the factual information relating to the LucasVarity Group and
himself contained in this document but not for any recommendation, forecast or
other expression of opinion or expectation made in connection with the Offer. To
the best of the knowledge and belief of the Directors of LucasVarity (who have
taken all reasonable care to ensure that such is the case), such information (on
the basis described herein) is in accordance with the facts and does not omit
anything likely to affect the import of such information.
2. DIRECTORS OF THE OFFEROR, TRW AND OF LUCASVARITY
(A) DIRECTORS OF THE OFFEROR
The Directors of the Offeror are Joseph T. Gorman, Peter S. Hellman and
Carl G. Miller. The Secretary of the Offeror is William B. Lawrence. They
have each held their respective positions since 28 January, 1999. The
registered office of the Offeror is 9 Cheapside, London EC2V 6AD. The
Offeror was formed at the direction of TRW and is a wholly owned
subsidiary of TRW.
JOSEPH T. GORMAN
Mr. Gorman was elected a Director of TRW in 1984. Mr. Gorman has been
Chairman of the Board and Chief Executive Officer of TRW since 1988. Mr.
Gorman currently is a Director of Aluminum Company of America and The
Procter & Gamble Company.
PETER S. HELLMAN
Mr. Hellman was elected a Director of TRW in 1995. Mr. Hellman has been
President and Chief Operating Officer of TRW since 1995. He was Executive
Vice President and Assistant President of TRW from 1994 to 1995.
Previously, Mr. Hellman served as Executive Vice President and Chief
Financial Officer of TRW from 1991 to 1994. He also is a Director of
Arkwright Mutual Insurance Company and U.S. West, Inc.
CARL G. MILLER
Mr. Miller was elected Executive Vice President and Chief Financial
Officer of TRW in 1996. He was Executive Vice President, Chief Financial
Officer and Controller in 1996 and Vice President and Controller of TRW
from 1990 to 1996.
WILLIAM B. LAWRENCE
Executive Vice President, General Counsel and Secretary of TRW since June
1997. He was Executive Vice President, Planning, Development & Government
Affairs of TRW from 1989 to June 1997.
(B) DIRECTORS AND EXECUTIVE OFFICERS OF TRW
The Directors of TRW are: Michael H. Armacost, Bernd Blankenstein, Martin
Feldstein, Robert M. Gates, Joseph T. Gorman, Carl H. Hahn, Timothy W.
Hannermann, George H. Heilmeier, Peter S. Hellman, Karen N. Horn, E.
Bradley Jones, William S. Kiser, Howard V. Knicely, William B. Lawrence,
David B.
VI-1
<PAGE> 128
Lewis, James T. Lynn, Lynn M. Martin, Carl G. Miller, Philip A. Odeen,
John D. Ong, Richard W. Pogue, James S. Remick, Peter Staudhammer, John P.
Stenbit, and Ronald D. Sugar.
Unless otherwise indicated, the business address of each such Director and
executive officer is 1900 Richmond Road, Cleveland, Ohio 44124. Unless
otherwise indicated, each occupation set out opposite an individual's name
refers to employment with TRW. All Directors and executive officers listed
below are citizens of the United States, except that Dr. Blankenstein is a
citizen of Germany and Dr. Hahn is a citizen of Austria.
MICHAEL H. ARMACOST
Mr. Armacost was elected a Director of TRW in 1993. Mr. Armacost has been
President of the Brookings Institution since October 1995. He served as a
distinguished fellow and visiting professor at the Asia/ Pacific Research
Center of Stanford University from 1993 to 1995. Mr. Armacost was U.S.
Ambassador to Japan from 1989 to 1993. He is also a Director of AFLAC
Incorporated, Applied Materials, Inc. and Cargill, Incorporated.
BERND BLANKENSTEIN
Executive Vice President of TRW and Managing Director of TRW Engine
Components since January 1999. He was Executive Vice President and General
Manager, TRW Steering, Suspension & Engine Group from 1996 to 1998;
Managing Director, TRW Deutschland GmbH from 1995 to 1996; Vice President
and General Manager, TRW's Global Engine Components business from 1994 to
1996; and Managing Director, TRW Motorkomponenten GmbH & Co. KG from 1991
to 1995.
MARTIN FELDSTEIN
Dr. Feldstein was elected a Director of TRW in 1981, resigned his position
upon joining the U.S. federal government in August 1982 and was again
elected a Director in July 1984. Dr. Feldstein has been Professor of
Economics at Harvard University since 1967. In addition, he serves as
President and Chief Executive Officer of the National Bureau of Economic
Research, a position he held from 1977 to 1982 and from July 1984 until
the present. Dr. Feldstein is also a Director of American International
Group, Inc., Columbia/HCA Healthcare Corp. and J.P. Morgan & Co.
Incorporated.
ROBERT M. GATES
Dr. Gates was elected a Director of TRW in 1994. Dr. Gates, 55, is a
consultant, author and lecturer. He is a former Director of the United
States Central Intelligence Agency. Prior to serving as Director, Dr.
Gates served as Deputy National Security Adviser and Assistant to the
President of the United States. Dr. Gates was first elected a Director of
Varity Corporation in 1993. He is a Director of LucasVarity and NACCO
Industries Inc. and a Trustee of Fidelity Funds.
JOSEPH T. GORMAN
Mr. Gorman was elected a Director of TRW in 1984. Mr. Gorman has been
Chairman of the Board and Chief Executive Officer of TRW since 1988. Mr.
Gorman currently is a Director of Aluminum Company of America and The
Procter & Gamble Company.
CARL H. HAHN
Dr. Hahn was elected a Director of TRW in 1993. Dr. Hahn served as
Chairman of the Board of Volkswagen AG from 1981 until his retirement at
the end of 1992. He also is a Director of PACCAR Inc. and a member of the
supervisory Board of Perot Systems Corporation.
TIMOTHY W. HANNEMANN
Executive Vice President and General Manager, TRW Space & Electronics
Group since 1993.
VI-2
<PAGE> 129
GEORGE H. HEILMEIER
Dr. Heilmeier was elected a Director of TRW in 1992. Dr. Heilmeier has
been Chairman Emeritus of Bell Communications Research Inc. (Bellcore)
since 1998. He served as Chairman and Chief Executive Officer of Bellcore
from 1997 to 1998. He served as President and Chief Executive Officer of
Bellcore from 1991 to year-end 1996. Dr. Heilmeier is also a Director of
Automatic Data Processing, Inc., Compaq Computer Corporation and TeleTech
Holdings, Inc. and a trustee of The MITRE Corporation.
PETER S. HELLMAN
Mr. Hellman was elected a Director of TRW in 1995. Mr. Hellman has been
President and Chief Operating Officer of TRW since 1995. He was Executive
Vice President and Assistant President of TRW from 1994 to 1995.
Previously, Mr. Hellman served as Executive Vice President and Chief
Financial Officer of TRW from 1991 to 1994. He also is a Director of
Arkwright Mutual Insurance Company and U.S. West, Inc.
KAREN N. HORN
Mrs. Horn was elected a Director of TRW in 1990. Mrs. Horn has served as
Senior Managing Director and Head of International Private Banking of
Bankers Trust New York Corporation since 1996. She was Chairman of Bank
One, Cleveland, N. A. from 1987 to 1996 and also served as Chief Executive
Officer of Bank One from 1987 to 1995. Mrs. Horn also is a Director of Eli
Lilly and Company and Rubbermaid Incorporated.
E. BRADLEY JONES
Mr. Jones was elected a Director of TRW in 1982. Mr. Jones served as
Chairman and Chief Executive Officer of Republic Steel Corporation and its
successor LTV Steel Company from 1982 until his retirement in 1984. He is
also a Director of Birmingham Steel Corporation, CSX Transportation Inc.
and RPM, Inc. and a trustee of The Fidelity Funds.
WILLIAM S. KISER
Dr. Kiser was elected a Director of TRW in 1985. Dr. Kiser served as Vice
Chairman and Chief Medical Officer of Primary Health Systems, Inc. from
1994 until his retirement in 1998. He served as medical Director of
American Health Care Management, Inc. from 1992 to 1994. Dr. Kiser is also
a trustee and officer of the American Foundation of Urologic Diseases.
HOWARD V. KNICELY
Executive Vice President, Human Resources and Communications since 1995.
He was Executive Vice President, Human Resources, Communications &
Information Resources from 1989 to 1994.
WILLIAM B. LAWRENCE
Executive Vice President, General Counsel and Secretary of TRW since June
1997. He was Executive Vice President, Planning, Development & Government
Affairs of TRW from 1989 to June 1997.
DAVID B. LEWIS
Mr. Lewis was elected a Director of TRW in 1995. Mr. Lewis has been
Chairman of the Board of Lewis & Munday, a Detroit law firm, since 1982.
He is also a Director of Comerica Bank, CSX Transportation Inc., M.A.
Hanna Company and LG&E Energy Corporation.
JAMES T. LYNN
Mr. Lynn was elected a Director of TRW in 1993. Mr. Lynn served as senior
advisor to Lazard Freres & Co. LLC, investment bankers, from November 1992
to 1997. He served as Chairman of the Board and Chief Executive Officer of
Aetna Life and Casualty Company from 1984 until his retirement in 1992.
VI-3
<PAGE> 130
LYNN M. MARTIN
Ms. Martin was elected a Director of TRW in 1995. Ms. Martin has chaired
Deloitte & Touche's Council on the Advancement of Women and has served as
an advisor to the firm since 1993. She also has held the Davee Chair at
the J. L. Kellogg Graduate School of Management, Northwestern University,
since 1993. Previously, Ms. Martin served as U. S. Secretary of Labor from
1991 to 1993. She is also a Director of Ameritech Corporation, Dreyfus
Funds, Harcourt General, Inc., The Procter & Gamble Company and Ryder
System, Inc.
CARL G. MILLER
Mr. Miller was elected Executive Vice President and Chief Financial
Officer of TRW in 1996. He was Executive Vice President, Chief Financial
Officer and Controller in 1996 and Vice President and Controller of TRW
from 1990 to 1996.
PHILIP A. ODEEN
Executive Vice President and General Manager, TRW Systems & Information
Technology Group since 1998. He was President and Chief Executive Officer
of BDM International, Inc. from 1992 to 1998.
JOHN D. ONG
Mr. Ong was elected a Director of TRW in 1995. Mr. Ong is Chairman
Emeritus of The BFGoodrich Company. He served as Chairman of the Board of
BFGoodrich from 1979 to 1997. He was also Chief Executive Officer of
BFGoodrich from July 1979 through 1996. Currently, Mr. Ong is a Director
of Ameritech Corporation, ASARCO, Inc., Cooper Industries, Inc., The Geon
Company and Marsh & McLennan Companies, Inc.
RICHARD W. POGUE
Mr. Pogue was elected a Director of TRW in 1994. Mr. Pogue has served as
senior advisor to Dix & Eaton, a public relations firm, since 1994.
Previously, he was senior partner at the law firm of Jones, Day, Reavis &
Pogue from 1993 to 1994 and managing partner of that firm from 1984 to
1992. Mr. Pogue is also a Director of Continental Airlines, Inc., Derlan
Industries Limited, M.A. Hanna Company, The IT Group, Inc., KeyCorp,
Lamalie Associates, Inc., and Rotek Incorporated.
JAMES S. REMICK
Executive Vice President and Deputy General Manager, TRW Automotive since
January 1999. He was Executive Vice President and General Manager, TRW
Occupant Restraint Systems Group from 1996 to 1998; Executive Vice
President and General Manager, TRW Steering, Suspension & Engine Group
from 1995 to 1996; Vice President and Deputy General Manager, Automotive
in 1995; and Vice President and General Manager, TRW Steering & Suspension
Systems, North and South America from 1991 to 1995.
PETER STAUDHAMMER
Vice President, Science & Technology since 1993. He was Vice President and
Director of the Center for Automotive Technology from 1990 to 1993.
JOHN P. STENBIT
Executive Vice President, Telecommunications since October 1997. He was
Executive Vice President and General Manager, TRW Systems Integration
Group from 1994 to October 1997; Vice President and General Manager, TRW
Systems Integration Group from 1990 to 1994. Mr. Stenbit is also a
Director of ICO Global Communications (Holdings) Limited.
RONALD D. SUGAR
Executive Vice President of TRW Inc. since January 1999. He was Executive
Vice President and General Manager, TRW Automotive Electronics Group from
1996 through 1998; Executive Vice President and Chief Financial Officer
from 1994 to 1996; Vice President, Group Development, TRW Space &
Electronics Group from 1992 to 1994.
VI-4
<PAGE> 131
(c) DIRECTORS OF LUCASVARITY
The Directors of LucasVarity whose registered office is at 46 Park Street,
London W1Y 4DJ are as follows: Edmund Arthur Wallis, Victor Albert Rice,
John Anthony Gilroy, Neil David Arnold, Thomas Noel Davidson, Robert
Michael Gates, Sydney Gillibrand, Sir Bryan Hubert Nicholson, Dr Alan
Walter Rudge and Warren Stanford Rustand.
EDMUND ARTHUR WALLIS, CHAIRMAN
Appointed to the Board of LucasVarity on 30 May, 1996 and became Chairman
on 15 May, 1998. Mr. Wallis, 59, joined the Board of Lucas Industries plc
in 1995. He is Chairman of PowerGen plc. He joined the Central Electricity
Generating Board from school and held several positions prior to becoming
its Director of Operations in 1986. In 1988, he was asked by the then
Secretary of State for Energy, Lord Parkinson, to create PowerGen. He is a
Director of Mercury European Privatisation Trust plc.
VICTOR ALBERT RICE, CHIEF EXECUTIVE OFFICER
Appointed to the Board of LucasVarity on 30 May, 1996 and made Chief
Executive Officer on 5 September, 1996. Mr. Rice, 57, was formerly the
Chairman and Chief Executive Officer of Varity Corporation from 1980 until
the merger with Lucas Industries plc. He was first elected a Director of
Varity Corporation in 1978. Mr. Rice also serves as a Director of American
Precision Industries Inc.
JOHN ANTHONY GILROY, CHIEF OPERATING OFFICER
Appointed to the Board of LucasVarity on 21 January, 1997. Mr. Gilroy, 62,
joined the Varity Corporation group as Chief Executive of VarityPerkins in
1989 and was appointed Chief Operating Officer of Varity Corporation in
November 1994. He subsequently became President and Chief Operating
Officer of Varity Corporation in April 1996.
NEIL DAVID ARNOLD, GROUP FINANCE DIRECTOR
Appointed to the Board of LucasVarity on 8 October, 1997. Mr. Arnold, 50,
joined VarityPerkins as a graduate trainee in 1969. Among positions he
held at Varity Corporation were Chief Financial Officer and Corporate
Treasurer. He was appointed Group Finance Director of LucasVarity in
December 1996. He is a Director of WHX Inc.
THOMAS NOEL DAVIDSON
Appointed to the Board of LucasVarity on 30 May, 1996. Mr. Davidson, 59,
is a private investor and venture capitalist. He was first elected a
Director of Varity Corporation in 1987. Among other Boards, he is a
Director of Canada Publishing Corporation, Derlan Industries Inc., MDC
Corporation and Clemmer Corporation. He served as Chairman of Hanson
Chemical Inc. until 1992, General Trust Corporation until 1993 and Nu-Tech
Precision Metal Inc. until 1995.
ROBERT MICHAEL GATES
Appointed to the Board of LucasVarity on 30 May, 1996. Dr. Gates, 55, is a
consultant, author and lecturer. He is a former Director of the United
States Central Intelligence Agency. Prior to serving as Director, Dr.
Gates served as Deputy National Security Adviser and Assistant to the
President of the United States. Dr. Gates was first elected a Director of
Varity Corporation in 1993. He is a Director of TRW Inc. and NACCO
Industries Inc. and a Trustee of Fidelity Funds.
SYDNEY GILLIBRAND, CBE
Appointed to the Board of LucasVarity on 30 May, 1996. Mr. Gillibrand, 64,
joined the Board of Lucas Industries plc in 1995. He was Vice-Chairman of
British Aerospace plc from 1992 to 1995 and now holds the post of Senior
Corporate Adviser with that company. He was a member of the Supervisory
Board of Airbus Industries from 1986 to 1992. He is Chairman of AMEC plc
and non-executive Director of ICL plc and Messier Dowty International
Limited.
VI-5
<PAGE> 132
SIR BRYAN HUBERT NICHOLSON
Appointed to the Board of LucasVarity on 30 May, 1996. Sir Bryan, 66, is
Chairman and a Director of British United Provident Association and is
Chairman of Cookson Group plc. Sir Bryan was a Director of Varity
Corporation from 1993 until the merger with Lucas Industries plc. He is a
past President of the Confederation of British Industry and is the former
Chairman and Chief Executive Officer of the British Post Office. He is a
Director of GKN PLC and Equitas Holdings Limited.
DR. ALAN WALTER RUDGE, CBE
Appointed to the Board of LucasVarity on 1 January, 1997. Dr. Rudge, 61,
is Chairman of WS Atkins plc. He served as Deputy Chief Executive of
British Telecommunications plc until 1997 and is Chairman of the UK's
Engineering and Physical Sciences Research Council and Engineering
Council.
WARREN STANFORD RUSTAND
Appointed to the Board of LucasVarity on 30 May, 1996. Mr. Rustand, 56, is
the Chairman of Cambridge Company Limited and of Health Partners and a
Director of 20/20 Laser Centers and Ventana Group Systems. He was a
Director of Varity Corporation from 1989 until the merger with Lucas
Industries plc.
3. PRINCIPAL PURCHASES
In accordance with normal UK practice and pursuant to relief granted by the SEC
from Rule 10b-13 under the Exchange Act, TRW, the Offeror or their respective
nominees or brokers (acting as agents) may make certain purchases of LucasVarity
Securities outside the United States during the period in which the Offer
remains open for acceptance, and affiliates of J.P. Morgan will continue to act
as market makers for LucasVarity on the London Stock Exchange. In accordance
with the terms of the SEC relief that has been granted, among other things, (i)
such purchases may not be effected within the United States, (ii) information
regarding such purchases must be disclosed in the United States by press release
to the extent that disclosure is made public in the UK pursuant to the City Code
and (iii) TRW, the Offeror and any such other person must comply with any
applicable rules of UK regulatory organisations, including the City Code and the
rules of the London Stock Exchange.
4. SHAREHOLDINGS AND DEALINGS
(A) DEFINITIONS
For the purposes of this paragraph 4:
"arrangement" includes indemnity or option arrangements, and any agreement
or understanding, formal or informal, of whatever nature, relating to
relevant securities of LucasVarity which may be an inducement to deal or
refrain from dealing;
an "associate" includes:
(i) subsidiaries and associated companies of LucasVarity and companies
of which any such subsidiaries or associated companies are associated
companies;
(ii) banks, financial and other professional advisers (including
stockbrokers) to LucasVarity or a company covered in (i) above,
including persons controlling, controlled by or under the same control
as such bank, financial or other professional advisers;
(iii) the Directors of LucasVarity together with the directors of any
company covered in (i) above (together in each case with their close
relatives and related trusts); and
(iv) the pension funds of LucasVarity or a company covered in (i) above;
a "bank" does not apply to a bank whose sole relationship with LucasVarity
or a company covered in (i) above is the provision of normal commercial
banking services or such activities in connection with the Offer as
confirming that cash is available, handling acceptances and other
registration work;
VI-6
<PAGE> 133
ownership or control of 20 per cent. or more of the equity share capital
of a company is regarded as the test of associated company status and
"control" means a holding, or aggregate holdings, of shares carrying 30
per cent. or more of the voting rights attributable to the share capital
of a company which are currently exercisable at a general meeting,
irrespective of whether the holding or holdings give(s) de facto control;
"derivative" includes any financial product whose value in whole or in
part is determined directly or indirectly by reference to the price of an
underlying security but which does not include the possibility of delivery
of such underlying securities;
"disclosure period" means the period commencing on 6 January, 1998 (the
date twelve months prior to the commencement of the Offer Period) and
ending on 4 February, 1999 (the latest practicable date prior to the
publication of this document); and
"relevant securities" means LucasVarity Securities or any securities
convertible into, rights to subscribe for, options (including traded
options) in respect of, or derivatives referenced to, LucasVarity
Securities.
(B) SHARES OF THE OFFEROR
Save as disclosed below, neither LucasVarity nor any of its directors nor their
immediate families, owns or is interested, directly or indirectly, in any shares
of the Offeror or any securities convertible into, rights to subscribe for, or
options (including traded options) in respect of such shares, nor has any such
person dealt for value therein during the disclosure period:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF TRW SHARES
TRW SHARES UNDER OPTION(1)
---------- ---------------
<S> <C> <C>
R. M. Gates................................................. 2,580 3,000
</TABLE>
- ---------------
NOTE:
(1) Of this amount, options to acquire 1,500 shares are exercisable within
sixty days of 4 February, 1999 (being the latest practicable date prior to
the publication of this document).
(C) LUCASVARITY SECURITIES
As at 4 February, 1999 (being the latest practicable date prior to the
publication of this document), the interests of the Directors of LucasVarity in
LucasVarity Securities which had been notified to LucasVarity pursuant to
section 324 or 328 of the Companies Act and which are required to be entered in
the register maintained under section 325 of the Companies Act and the interests
of all persons connected (within the meaning of section 346 of the Companies
Act) with the Directors of LucasVarity which would, if the connected person were
a Director of LucasVarity, be required to be disclosed in accordance with the
foregoing sections, and the existence of which is
VI-7
<PAGE> 134
known or could with reasonable diligence become known by the relevant Director
of LucasVarity, all of which are beneficial unless otherwise stated, were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF LUCASVARITY
LUCASVARITY NUMBER OF ISSUED
SHARES LUCASVARITY ADSS SHARE CAPITAL
----------- ---------------- -------------
<S> <C> <C> <C>
E. A. Wallis..................................... 5,234 -- .0004%
V. A. Rice....................................... 50,000 106,241 .080%
J. A. Gilroy..................................... 205,169(1) 9,121 0.21%
N. D. Arnold..................................... 50,000 24,862 .021%
T. N. Davidson................................... -- 16,082 .011%
R. M. Gates...................................... -- 1,701 .0012%
S. Gillibrand.................................... 15,163 -- .001%
Sir Bryan Nicholson.............................. 72,430 -- .005%
A. W. Rudge...................................... 5,000 -- .0004%
W. S. Rustand.................................... -- 2,238 .0016%
Total............................................ 402,996 160,245 0.143%
</TABLE>
- ---------------
NOTE: (1) This number includes 153,346 LucasVarity Shares in which J. A. Gilroy
is interested under an employee benefit trust.
VI-8
<PAGE> 135
The following Directors of LucasVarity hold options to subscribe for LucasVarity
Shares under the LucasVarity Share Option Schemes:
<TABLE>
<CAPTION>
OPTIONS IN
RESPECT OF EXERCISE PRICE
LUCASVARITY PER LUCASVARITY
DIRECTOR SHARES SHARE DATE GRANTED EXERCISE PERIOD
- -------- ------------- --------------- ------------ -----------------
<S> <C> <C> <C> <C>
E. A. Wallis -- -- -- --
V. A. Rice 1,984,360(2) US$0.840 25.03.92 06.09.96-24.03.02
2,616,480(1) US$2.725 02.06.93 06.09.96-01.06.03
2,252,160(1) US$4.257 04.02.94 06.09.96-03.02.04
1,391,730(1) US$3.116 12.05.95 06.09.96-11.05.05
2,044,260(1) US$2.935 25.03.96 06.09.96-24.03.06
575,000(3) 246.5p 29.11.96 29.11.99-28.11.06
525,000(3) 183.5p 30.04.97 30.04.00-29.04.07
950,000(3) 194.0p 16.09.98 16.09.01-15.09.08
J. A. Gilroy 223,740(2) US$0.840 25.03.92 06.09.96-24.03.02
716,220(1) US$2.725 02.06.93 06.09.96-01.06.03
592,710(1) US$4.257 04.02.94 06.09.96-03.02.04
666,540(1) US$3.116 12.05.95 06.09.96-11.05.05
1,107,800(1) US$2.935 25.03.96 06.09.96-24.03.06
300,000(3) 246.5p 29.11.96 29.11.99-28.11.06
425,000(3) 183.5p 30.04.97 30.04.00-29.04.07
550,000(3) 194.0p 16.09.98 16.09.01-15.09.08
N. D. Arnold 458,390(2) US$0.840 25.03.92 06.09.96-24.03.02
647,910(1) US$2.725 02.06.93 06.09.96-01.06.03
507,840(1) US$4.257 29.03.94 06.09.96-28.03.04
312,570(1) US$3.116 12.05.95 06.09.96-11.05.05
499,630(1) US$2.935 25.03.96 06.09.96-24.03.06
150,000(3) 246.5p 29.11.96 29.11.99-28.11.06
210,000(3) 183.5p 30.04.97 30.04.00-29.04.07
450,000(3) 194.0p 16.09.98 16.09.01-15.09.08
T. N. Davidson 41,400(1) US$4.257 02.06.94 06.09.96-01.06.99
41,400(1) US$3.805 25.05.95 06.09.96-24.05.00
41,400(1) US$3.333 23.05.96 06.09.96-22.05.06
R. M. Gates 41,400(1) US$4.257 02.06.94 06.09.96-01.06.99
41,400(1) US$3.805 25.05.95 06.09.96-24.05.00
41,400(1) US$3.333 23.05.96 06.09.96-22.05.06
S. Gillibrand -- -- -- --
Sir Bryan Nicholson 41,400(1) US$4.257 02.06.94 06.09.96-01.06.99
41,400(1) US$3.805 25.05.95 06.09.96-24.05.00
41,400(1) US$3.333 23.05.96 06.09.96-22.05.06
Dr. A. W. Rudge -- -- -- --
W. S. Rustand 41,400(1) US$4.257 02.06.94 06.09.96-01.06.99
41,400(1) US$3.805 25.05.95 06.09.96-24.05.00
41,400(1) US$3.333 23.05.96 06.09.96-22.05.06
Total 13,852,650(1)
2,666,490(2)
4,135,000(3)
Grand Total 20,654,140
</TABLE>
- ---------------
NOTES: (1) Options granted under the Varity Corporation Shareholder Value
Incentive Plan.
(2) Options granted under the Varity Corporation Executive Stock Option
Plan.
(3) Options granted under the LucasVarity 1996 Executive Scheme.
VI-9
<PAGE> 136
(d) Save as disclosed in this document, none of the Directors of LucasVarity
(nor any person connected with any of them within the meaning of section
346 of the Companies Act) has any interest in any relevant securities nor
has any such person dealt for value therein during the disclosure period;
(e) The Directors of LucasVarity have given irrevocable undertakings to
accept the Offer in respect of their holdings amounting in aggregate to
1,852,100 LucasVarity Shares, representing 0.13 per cent. of LucasVarity's
issued share capital, as recorded against their respective names in the
tables in paragraph 4(c) (other than 153,346 LucasVarity Shares recorded
against the name of Mr. J. A. Gilroy in which he is interested under an
employee benefit trust);
(f) The following associates (other than the Directors and their immediate
families) of LucasVarity own or control the following LucasVarity Shares:
<TABLE>
<CAPTION>
NUMBER OF
NAME LUCASVARITY SHARES
---- ------------------
<S> <C>
Lucas Pensions Trust Ltd.................................... 1,632,452
Lucas Employees Trust Ltd................................... 15,951,200
</TABLE>
(g) LucasVarity, the Directors of LucasVarity and their immediate families
have dealt for value in relevant securities during the disclosure period
as follows:
<TABLE>
<CAPTION>
NUMBER AND CLASS
DATE NAME OF DIRECTOR NATURE OF TRANSACTION OF SECURITIES PRICE (P)
---- ---------------- --------------------- ---------------- ---------
<S> <C> <C> <C> <C>
17.9.98.. N. D. Arnold Acquisition of Shares 50,000 Ordinary 196.03
19.5.98.. T. N. Davidson Exercise of Stock Options 41,400 Ordinary 160.82
23.10.98.. R. M. Gates Acquisition of Shares 4,000 Ordinary 193.24
(or ADSs) (400 ADSs)
17.9.98.. J. A. Gilroy Acquisition of Shares 50,000 Ordinary 196.03
11.5.98.. Sir Bryan Nicholson Exercise of Stock Options 41,400 Ordinary 165,86
17.9.98.. V. A. Rice Acquisition of Shares 50,000 Ordinary 196.03
23.12.98.. V. A. Rice Exercise of Stock Options 200,000 Ordinary 51.40
23.12.98.. V. A. Rice Disposal of Shares 20,000 Ordinary 202.6
180,000 Ordinary 201.1
</TABLE>
(h) Except (i) for 17,000 LucasVarity Shares held by the TRW Master Trust for
the TRW Pension Plan (ii) as disclosed in this paragraph 4 in respect of
Dr. R. M. Gates and in respect of the irrevocable undertakings given by
Directors of LucasVarity referred to in paragraph 4(e) above and (iii) as
set out below, neither the Offeror, the Directors of the Offeror or their
immediate families or related trusts, persons, acting in concert with the
Offeror, persons with whom the Offeror or any person acting in concert
with the Offeror has an arrangement, nor any persons who prior to posting
of this document have irrevocably committed themselves to accept the
Offer, owns or controls or (in the case of the Directors of the Offeror)
is interested in any relevant securities nor has any such person dealt
for value therein during the disclosure period:
(i) As at the close of business on 3 February, 1999 (the latest
practicable date prior to the posting of this document), 10,088
LucasVarity Shares were held by J.P. Morgan Securities Limited; and
(ii) The following dealings for value in LucasVarity Shares and
LucasVarity ADSs, in aggregated form, have taken place during the
disclosure period:
VI-10
<PAGE> 137
LUCASVARITY SHARES
<TABLE>
<CAPTION>
SALES PURCHASES
--------------------------- ---------------------------
HIGH LOW VOLUME HIGH LOW VOLUME
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
J.P. MORGAN SECURITIES LIMITED
1 month....................... L2.91 L2.16 124,911 L2.91 L2.15 124,911
2 months...................... L2.03 L1.92 200,198 L1.97 L1.92 204,479
3 months...................... L2.09 L1.95 32,029 L2.01 -- 1,650
3-6 months.................... -- -- -- L1.93 -- 3,923
6-9 months.................... L2.76 L2.40 409,000 L2.75 L2.39 409,000
9-12 months................... L2.55 L2.19 174,271 L2.55 L2.21 174,271
</TABLE>
LUCASVARITY ADSS
<TABLE>
<CAPTION>
SALES PURCHASES
--------------------------- ---------------------------
HIGH LOW VOLUME HIGH LOW VOLUME
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
J.P. MORGAN SECURITIES LIMITED
1 month....................... -- -- -- -- -- --
2 months...................... -- -- -- -- -- --
3 months...................... -- -- -- -- -- --
3-6 months.................... -- -- -- -- -- --
6-9 months.................... -- -- -- -- -- --
9-12 months................... $ 42.25 $ 42.00 25,000 $ 42.25 $ 42.25 25,000
</TABLE>
<TABLE>
<CAPTION>
SALES PURCHASES
--------------------------- ---------------------------
HIGH LOW VOLUME HIGH LOW VOLUME
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
J.P. MORGAN SECURITIES INC.
1 month....................... $48 -- 75,000 $48 -- 75,000
2 months...................... -- -- -- -- -- --
3 months...................... -- -- -- -- -- --
3-6 months.................... $37.305 $30.188 75,450 $37.305 $30.188 75,450
6-9 months.................... -- -- -- -- -- --
9-12 months................... $42.722 $34.938 142,220 $42.24 $34.938 142,220
</TABLE>
(i) Save as disclosed in this document, none of the subsidiaries of
LucasVarity, pension funds of LucasVarity or of a subsidiary of
LucasVarity, banks, financial or other professional advisers to
LucasVarity (other than exempt market makers) nor any person with whom
LucasVarity or any person who is an associate of LucasVarity has an
arrangement, owns or controls any relevant securities, nor has any such
person, nor any person whose investments are managed on a discretionary
basis by fund managers (other than exempt fund managers) connected with
LucasVarity, dealt for value therein during the period commencing on 6th
January, 1999 (the date of commencement of the Offer period) and ending
on 4 February, 1999 (the latest practicable date prior to the
publication of this document);
(j) Save as disclosed in this document neither the Offeror nor any person
acting in concert with the Offeror is a party to any arrangement in
relation to any relevant securities;
(k) Save for the irrevocable undertakings referred to in paragraph 4(e)
above, neither LucasVarity nor any associate of LucasVarity has any
arrangement in relation to any relevant securities; and
(l) LucasVarity made the following repurchases of LucasVarity Shares during
the disclosure period:
VI-11
<PAGE> 138
<TABLE>
<CAPTION>
NUMBER OF
DATE LUCASVARITY SHARES AVERAGE PRICE(P)
---- ------------------ ----------------
<S> <C> <C>
15.12.98............................................. 2,511,115 196.75
16.12.98............................................. 1,700,000 199.40
18.12.98............................................. 755,261 200.80
21.12.98............................................. 105,000 201.82
22.12.98............................................. 259,841 203.13
23.12.98............................................. 6,000,000 202.00
29.12.98............................................. 2,251,544 199.94
04.01.99............................................. 1,012,207 202.43
</TABLE>
5. MATERIAL CONTRACTS
(a) The following contracts have been entered into by members of the TRW
Group otherwise than in the ordinary course of business since 6 January,
1997 (the date two years prior to the commencement of the Offer period)
and are or may be material:
(i) An agreement dated 28 January, 1999 between TRW and LucasVarity
whereby, in consideration (among other things) of TRW committing its
resources towards the necessary preparations preceding the making of
the Offer, LucasVarity agreed to pay a fee to TRW of US$49,800,000
(L30 million at the exchange rate of US$1.66) in certain
circumstances, which can be summarised as follows: (i) the Offer
lapsing or being withdrawn and prior to this (w) the Offeror not
having purchased at least a majority of LucasVarity's outstanding
share capital and any person publicly announcing or proposing an
Independent Competing Offer (as defined) which has not been withdrawn
prior to such lapse or withdrawal, or (x) the Directors of LucasVarity
agreeing to recommend an Independent Competing Offer, or (y) the
Directors of LucasVarity having withdrawn or modified their approval
or recommendation of the Offer in a manner adverse to TRW or approving
or recommending an Independent Competing Offer, or (z) LucasVarity
breaching certain terms of a confidentiality agreement with TRW; or
(ii) a third party announcing a recommended offer for LucasVarity
within 18 months of LucasVarity and TRW agreeing to terminate good
faith efforts to consummate the Offer.
An Independent Competing Offer means an offer, scheme of arrangement,
recapitalisation or other transaction which (a) is made or entered
into by a party which is not an affiliate of TRW and (b) is of a cash
amount in excess of the Offer or which comprises consideration which
the parties agree or which is determined by an independent financial
adviser to exceed the value of the Offer.
(ii) On 20 November, 1997, BDM International Inc. ("BDM"), TRW and
Systems Acquisition Inc. entered into an agreement pursuant to which
Systems Acquisition Inc., a wholly-owned subsidiary of TRW, agreed to
acquire and thereafter acquired all of the outstanding shares of BDM
for a total purchase price of US$930 million.
(b) The following contracts have been entered into by members of the
LucasVarity Group otherwise than in the ordinary course of business since
6th January, 1997 (the date two years prior to the commencement of the
Offer Period) and are or may be material:
(i) the agreement between TRW and LucasVarity referred to in paragraph
5(a)(i) above;
(ii) the following agreements were entered into on 22 November, 1998 and
(save as otherwise stated below) completed on 31 January, 1999. They
relate to the sale by Lucas Industries plc to Meritor Automotive, Inc.
("Meritor") of the Heavy Vehicle Braking System Division of
LucasVarity (the "HVBS Division"):
(A) An Umbrella Agreement dated 22 November, 1998 between Lucas
Industries plc, Lucas Limited, Kelsey-Hayes Company, Lucas
Automotive GmbH, Meritor Heavy Vehicle Braking Systems (UK)
Limited, Meritor Heavy Vehicle Braking Systems (USA), Inc.,
Meritor Automotive GmbH, Meritor Automotive, Inc. and LucasVarity
plc governing the terms of the
VI-12
<PAGE> 139
sale of the Heavy Vehicle Braking division of LucasVarity
pursuant to the Agreements listed at paragraphs (B) to (E) below.
Pursuant to this agreement, Meritor and various Meritor group
companies (the "Meritor Group") agreed to purchase HVBS for
US$390,000,000 subject to adjustment dependant on the net asset
position at Closing (31 January, 1999). Pursuant to this
agreement, warranties and indemnities relating to the operation
of the HVBS Division were given by Lucas Industries plc and other
members of the LucasVarity Group. The obligations of the
LucasVarity Group were guaranteed by LucasVarity and those of the
Meritor Group by Meritor. Members of the LucasVarity Group have
entered into restrictive covenants (maximum three years) relating
to confidentiality, non-solicitation of employees and generally
not competing with the business being sold in certain
jurisdictions.
(B) An Asset Agreement dated 22 November, 1998 between Lucas Limited,
Meritor Heavy Vehicle Braking Systems (UK) Limited, Lucas
Industries plc, Lucas France SAS and Meritor Automotive, Inc. for
the sale of the HVBS Division in the United Kingdom and France.
(C) A Business Sale Agreement dated 22 November, 1998 between
Kelsey-Hayes Company and Meritor Heavy Vehicle Braking System
(U.S.A.), Inc. relating to the sale of the HVBS Division in the
United States;
(D) A Business Sale Agreement dated 22 November, 1998 between Lucas
Automotive GmbH, Lucas Limited, Meritor Automotive GmbH and
Meritor Automotive, Inc. relating to the sale of the HVBS
Division in Germany.
(E) A Transfer and Amendment Agreement dated 22 November, 1998
between Lucas Industries plc, Huayang Group and Meritor
Automotive Inc. relating to the transfer of shares in a Chinese
joint venture relating to the LucasVarity HVBS Division. This
agreement only becomes effective on a date when approval (which
has been applied for) is received from Chinese Governmental
authorities.
(iii) (A) Following the oral acceptance on 11 December, 1997 by
Caterpillar Inc. ("Caterpillar") of a written offer (the "Offer
for Sale") to Caterpillar made by Perkins Limited (a former
member of the LucasVarity Group) and by LucasVarity, Perkins
Limited, LucasVarity and Caterpillar became bound by the terms
and conditions of the form of business sale agreement annexed to
the Offer for Sale (the "Business Sale Agreement"). Pursuant to
the Offer for Sale and oral acceptance, Perkins Limited
conditionally agreed to sell to Caterpillar the business of
Perkins Limited (other than certain excluded assets and excluded
liabilities) (the "Business"). The aggregate purchase price for
the Business was US$1 billion (the "Asset Purchase Price"). The
Asset Purchase Price was subject to adjustment to the extent that
the net assets of the Business at closing were more or less than
L182 million. Perkins Limited gave certain representations and
warranties to Caterpillar in respect of the Business. Caterpillar
gave certain representations and warranties to Perkins Limited
and LucasVarity. LucasVarity and Perkins Limited agreed that for
a period of five years after closing they would not (nor would
their affiliates) engage in any business that competed with the
Business at the closing date. The obligations of Perkins Limited
in the Business Sale Agreement were guaranteed by LucasVarity.
(B) At the same time as the terms and conditions of the Business Sale
Agreement came into effect, LucasVarity, Inc. and Lucas
Industries plc (both are members of the LucasVarity Group)
entered into a stock purchase agreement for the sale to
Caterpillar of the shares of Perkins Engines, Inc. and Perkins
Motoren GmbH (the "Stock Purchase Agreement"). The total
aggregate purchase price for the shares was US$20 million. The
purchase price was subject to adjustment on a pound for pound
basis to the extent that the net assets of the companies being
sold were more or less than L7 million based on a closing date
net asset statement. Representations and warranties were given by
the parties to the agreement similar to those given by the
parties to the Business Sale Agreement. The obligations of
LucasVarity,
VI-13
<PAGE> 140
Inc. and Lucas Industries plc in the Stock Purchase Agreement
were guaranteed by LucasVarity;
(C) Also, at the same time as the terms and conditions of the
Business Sale Agreement came into effect, LucasVarity, Inc. and
Caterpillar entered into an option agreement (the "Put Option
Agreement") whereby, in consideration of the sum of US$1,
Caterpillar granted to LucasVarity, Inc. the right to require
Caterpillar to purchase all of the shares of Varity
International, Inc. The option was exercised by LucasVarity Inc.
in accordance with its terms. The terms on which the shares of
Varity International, Inc. were transferred to Caterpillar are as
set out in the form of stock purchase agreement annexed to the
Put Option Agreement. The form of that stock purchase agreement
is substantially the same as the form of the Stock Purchase
Agreement referred to in paragraph (iii)(B) above. The
consideration for the sale of the shares of Varity International,
Inc. was (1) US$305 million in cash, (2) a promissory note of
Caterpillar in the principal amount of US$48.5 million and (3)
the aggregate amount, determined three business days prior to the
closing date, by which cash in Varity International, Inc. and its
subsidiaries and associated companies specified in the Put Option
Agreement exceeded their respective balance sheet provisions for
taxes payable. The purchase price was subject to adjustment on a
pound for pound basis to the extent that the net assets of Varity
International, Inc. and such subsidiaries and associates were
more or less than L8 million, based on a closing date net asset
statement. The obligations of LucasVarity, Inc. in the form of a
stock purchase agreement annexed to the Put Option Agreement were
guaranteed by LucasVarity; and
(D) On 11 December, 1997, in connection with each of (i) the Business
Sale Agreement, (ii) the Put Option Agreement and (iii) the Stock
Purchase Agreement, the Company, LucasVarity, Inc. and
Caterpillar entered into a tax allocation agreement (the "Tax
Allocation Agreements") pursuant to which the parties agreed the
basis on which there should be allocated amongst them the
liability for certain income, corporation and other taxes that
may be owed or asserted by United States federal, state or local
taxing authorities and United Kingdom taxing authorities. The
obligations of LucasVarity, Inc. in the Tax Allocation Agreements
were guaranteed by LucasVarity.
6. BACKGROUND TO THE OFFER
In November 1998, Joseph T. Gorman, CEO of TRW, called Victor A. Rice, Chief
Executive Officer of LucasVarity, to inquire as to whether Mr. Rice would be
interested in exploring a range of strategic options which might be available to
TRW and LucasVarity, and suggesting that a meeting be scheduled for this
purpose.
On 14 December, 1998, Mr. Gorman and Mr. Rice met in Detroit, Michigan. At this
meeting, Mr. Gorman reviewed with Mr. Rice the possible benefits of the various
strategic options involving TRW and LucasVarity. On 22 December, 1998, Mr.
Gorman and Mr. Rice had a telephone conversation to schedule a management
meeting early in 1999.
A meeting between the senior management and financial advisers of both TRW and
LucasVarity was held on 5 January, 1999. Representatives of the parties made
presentations reviewing the historic business information of both companies.
At the conclusion of that meeting, Mr. Gorman met privately with Mr. Rice and
informed him that TRW might be interested in pursuing a cash acquisition of
LucasVarity at a price of US$46.50 per LucasVarity ADS. Mr. Rice indicated to
Mr. Gorman that he believed that the price indicated by Mr. Gorman would not be
acceptable but that he would consider the matter further.
On 6 January, 1999, Mr. Rice called Mr. Gorman to inform him that LucasVarity
might be interested in continuing to explore a possible combination, but that
LucasVarity was not comfortable with the indicated price of US$46.50 per
LucasVarity ADS.
VI-14
<PAGE> 141
On 8 January, 1999, Richard A. Snell, Chairman and Chief Executive Officer of
Federal-Mogul Corporation, called Edmund A. Wallis, Chairman of LucasVarity, to
arrange a meeting.
On 14 and 15 January, 1999, Mr. Rice and Mr. Gorman met in Cleveland for a
further discussion of price, potential synergies, and a possible transaction
process.
On 18 January, 1999, Mr. Snell met with Mr. Wallis and Mr. Rice, at which time
he delivered a letter to LucasVarity to the effect that, based on public
information, Federal-Mogul was considering a proposal to acquire LucasVarity at
a price of 270p per LucasVarity share, consisting of 50% cash and 50%
Federal-Mogul shares. Federal-Mogul's proposal was subject to satisfactory
completion of due diligence and other conditions. Mr. Snell asked for
LucasVarity's response by 22 January, 1999.
On 18 January, 1999, TRW sent a letter to LucasVarity, expressing the rationale
for a combination and expressing its non-binding indication of interest at an
indicated price of US$47.50 per LucasVarity ADS, or approximately 288 pence per
LucasVarity Share, subject to satisfactory completion of due diligence, final
agreement on definitive documentation, and approval by TRW Directors.
On 19 January, 1999, the Board of Directors of LucasVarity met to consider TRW's
indication of interest and Federal-Mogul's indication of interest, as well as
other options available to LucasVarity. After lengthy discussion and after
obtaining independent advice, the Board of LucasVarity agreed to move forward on
the basis of TRW's indication of interest at US$47.50 per LucasVarity ADS and
not to pursue Federal-Mogul's proposal at that time.
On 20 January, 1999, LucasVarity sent a letter to TRW agreeing to move forward
on the basis of TRW's indication of interest at US$47.50 per ADS.
On 21 January, 1999, the parties entered into a confidentiality and exclusivity
agreement.
On 22 January, 1999, LucasVarity sent a letter to Federal-Mogul stating that it
was the Board's unanimous decision not to pursue Federal-Mogul's proposal at
that time.
On 22 January, 1999, the TRW Board of Directors met to review the details of the
possible offer, to review the package of materials on the transaction prepared
by TRW that had been sent to them on 11 January, 1999, and to receive a progress
report on the status of negotiations. Immediately thereafter, legal, financial
and operational due diligence commenced.
During the week beginning January 25, 1999, the financial and legal
representatives and advisers of LucasVarity and TRW met to negotiate the terms
and conditions for an offer.
On 25 January, 1999, Federal-Mogul issued a press release disclosing the
contents of its letter to LucasVarity of 18 January, 1999 (which set out the
share/cash proposal), and of LucasVarity's response. Federal-Mogul confirmed its
interest and raised its indicative offer to 280p per LucasVarity Share (still
consisting of 50% cash and 50% Federal-Mogul shares).
On 27 January and 28 January, 1999, a definitive proposal for an offer for all
outstanding LucasVarity Shares at a price per share of 288 pence was presented
to, and approved by, the Board of Directors of TRW and the Board of Directors of
LucasVarity. Following these approvals, TRW and LucasVarity jointly announced
the terms of the Offer.
On 29 January, 1999, LucasVarity and Federal-Mogul entered into a
confidentiality agreement pursuant to a request for information about the
LucasVarity Group by Federal-Mogul. Beginning on 30 January, 1999 and continuing
through 4 February, 1999, Federal-Mogul conducted a due diligence investigation
of LucasVarity.
7. FINANCING ARRANGEMENTS
The Offer is being financed through credit facilities initially provided by J.P.
Morgan, Bank of America and Citibank. Following completion of the acquisition of
LucasVarity, TRW will determine the most appropriate method and timeframe for
reducing its debt under these credit facilities, which may include the issuance
of commercial paper, long-term debt or equity securities and the sale of assets.
VI-15
<PAGE> 142
Credit facility agreement
On 27 January, 1999, TRW entered into a credit agreement (the "Credit
Agreement") as borrower with Morgan Guaranty Trust Company of New York as
administrative agent and lender, and Bank of America National Trust and Savings
Association and Citibank, N. A. as co-syndication agents and lenders. The Credit
Agreement provides for a two tranche unsecured U.S. dollar denominated credit
facility pursuant to which TRW (and any subsidiary that it designates as
eligible) may borrow, in the aggregate, up to US$7.4 billion. The first tranche
available under the Credit Agreement (the "Tranche One Facility") is a fully
revolving credit facility providing for maximum borrowings of US$3.7 billion and
a maturity date of 31 December, 1999. The second tranche (the "Tranche Two
Facility") is a 364-day fully revolving credit facility providing for maximum
borrowings of US$3.7 billion and a maturity date of 26 January, 2000. The
Tranche Two Facility also provides a one-year term out option pursuant to which
TRW may elect to extend the maturity date for loans outstanding under the
Tranche Two Facility in an aggregate amount up to US$2 billion until 26 January,
2001.
The proceeds of any borrowings under the Credit Agreement will be used initially
to fund the acquisition of the LucasVarity Securities pursuant to the Offer or
through open market purchases of LucasVarity Shares while the Offer is
outstanding, to refinance the debt of LucasVarity and to pay transaction costs,
including option settlement costs. After payment has been made in respect of the
initial LucasVarity Securities tendered and accepted for purchase by the
Offeror, the proceeds of borrowings under the Agreement will also be available
for general corporate purposes, but only to the extent such borrowings are not
necessary to complete the purchase of the outstanding LucasVarity Securities.
All outstanding borrowings under the Tranche One Facility are payable in full on
31 December, 1999. Prior to that date, however, subject to certain exceptions
set forth in the Agreement, the net cash proceeds of an issuance of long-term
debt or equity securities and any material asset sales by TRW or a subsidiary
must be used to repay amounts outstanding and reduce the commitments available
under the Tranche One Facility. All outstanding borrowings under the Tranche Two
Facility are payable in full on 26 January, 2000 except that TRW may elect to
extend the maturity of up to US$2 billion of the total loans then outstanding
under the Tranche Two Facility until 26 January, 2001. Prior to 26 January,
2000, and after all loans outstanding have been repaid and all commitments have
been terminated under the Tranche One Facility, subject to certain exceptions
set forth in the Agreement, fifty percent of the net cash proceeds from any
issuance of long-term debt or equity securities and any material asset sales by
TRW or a subsidiary must be used to repay amounts outstanding and reduce the
commitments available under the Tranche Two Facility. No such reduction or
repayment is required, however, if and to the extent that, before or after
giving effect thereto, the commitments available under the Tranche Two Facility
do not exceed US$2 billion.
The borrowings under the Credit Agreement will bear interest, at TRW's option at
either (i) a base rate equal to the higher of the prime rate for such day or the
sum of 1/2 of 1% plus the federal funds rate for the day or (ii) a rate of
interest determined on the basis of the rate per annum at which deposits in
dollars are offered in the London interbank market for the relevant period, plus
in each case a margin. In addition, a commitment fee will be paid to each lender
based on the amount by which its aggregate commitment under the Credit Agreement
exceeds amounts outstanding under the Facilities. There are also various fees
payable in connection with the arrangement of the Credit Agreement.
The Credit Agreement contains representations, warranties, covenants and
indemnification obligations from TRW and, in certain circumstances certain of
its subsidiaries, customary for agreements of this nature. As of 4 February,
1999 (the latest practicable date prior to publication of this document), TRW
has made no borrowings under the Agreement.
8. COMPULSORY ACQUISITION
If, within four months after the date of this document, as a result of the Offer
or otherwise, the Offeror acquires or contracts to acquire LucasVarity
Securities representing at least 90 per cent. in value of LucasVarity Securities
to which the Offer relates, then (a) the Offeror will be entitled and intends to
effect the compulsory acquisition procedures provided for in sections 428 to
430F of the Companies Act to compel the purchase of any outstanding LucasVarity
Securities on the same terms as provided in the Offer in accordance with the
relevant procedures and
VI-16
<PAGE> 143
time limits described in such Act and (b) a holder of LucasVarity Securities may
require the Offeror to purchase his LucasVarity Securities on the same terms as
provided in the Offer in accordance with the relevant procedures and time limits
described in section 430A of the Companies Act.
If for any reason the above-mentioned compulsory acquisition procedures are not
invoked, the Offeror will evaluate other alternatives to obtain the remaining
LucasVarity Securities not purchased pursuant to the Offer or otherwise. Such
alternatives could include acquiring additional LucasVarity Securities in the
open market, in privately negotiated transactions, through another offer to
purchase or by means of a scheme of arrangement under the Companies Act.
Any additional acquisitions could be for a consideration greater or less than,
or equal to, the consideration for LucasVarity Securities under the Offer.
However, under the City Code, except with the consent of the Panel, the Offeror
may not acquire any LucasVarity Securities on better terms than those of the
Offer within six months of termination of the Offer if the Offeror, together
with any persons acting in concert with it (as defined in the City Code), holds
following the Offer, shares carrying more than 50 per cent. of the voting rights
normally exercisable at general meetings of LucasVarity.
Holders of LucasVarity Securities do not have appraisal rights as a result of
the Offer. However, in the event that the compulsory acquisition procedures
referred to above are available to the Offeror, holders of LucasVarity
Securities whose LucasVarity Securities have not been purchased pursuant to the
Offer will have certain rights to object under section 430C of the Companies
Act.
For the purpose of this paragraph 8, references to "LucasVarity Securities", to
the extent they relate to LucasVarity ADSs, shall mean the LucasVarity Shares
represented by such LucasVarity ADSs.
9. CERTAIN CONSEQUENCES OF THE OFFER
(A) MARKET EFFECT
The past performance of the price of LucasVarity Shares and LucasVarity ADSs is
no guide to the future.
The purchase of LucasVarity Securities pursuant to the Offer will reduce the
number of holders of LucasVarity Securities and the number of the LucasVarity
Securities that might otherwise trade publicly and, depending upon the number of
LucasVarity Securities so purchased, is likely to adversely affect the liquidity
and market value of the remaining LucasVarity Securities held by the public. In
addition, it is intended that LucasVarity Shares will cease to be listed on the
London Stock Exchange and LucasVarity ADSs will cease to be listed on the NYSE
whether or not the Offeror is in a position to effect the compulsory acquisition
of any outstanding LucasVarity Shares in accordance with the Companies Act as
referred to above, and irrespective of the size of any outstanding minority in
LucasVarity, if the Offer becomes or is declared unconditional.
The value of all investments and the income from them can fall as well as rise
and not all the amount invested may be realised. LucasVarity Securityholders
accepting the Offer and electing to receive consideration in US dollars should
be aware that they will be exposed to foreign currency risk.
(B) PUBLIC AVAILABILITY OF INFORMATION
In the event that LucasVarity Shares continue to be listed on the London Stock
Exchange following the purchase of LucasVarity Securities pursuant to the Offer,
holders of LucasVarity Shares who have not tendered their LucasVarity Shares
pursuant to the Offer will continue to receive the same financial and other
information from LucasVarity that LucasVarity presently is required by the rules
of the London Stock Exchange to send to such holders. If LucasVarity Shares are
no longer listed on the London Stock Exchange following the Offer, LucasVarity
would no longer be required by those rules to make publicly available such
financial and other information.
LucasVarity ADSs are currently registered under the Exchange Act. Registration
of such LucasVarity ADSs may be terminated upon application of LucasVarity to
the SEC if LucasVarity ADSs are neither listed on a national securities exchange
nor held by 300 or more beneficial owners in the US. Termination of registration
of LucasVarity ADSs under the Exchange Act would substantially reduce the
information required to be furnished
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by LucasVarity to holders of LucasVarity ADSs and to the SEC and would make
certain provisions of the Exchange Act, such as the requirements of Rule 13e-3
thereunder with respect to "going private" transactions, no longer applicable to
LucasVarity. Furthermore, "affiliates" of LucasVarity and persons holding
"restricted securities" of LucasVarity may be deprived of the ability to dispose
of such securities pursuant to Rule 144 promulgated under the Securities Act.
If, as a result of the purchase of LucasVarity ADSs pursuant to the Offer and
prior to completing the compulsory acquisition procedures referred to in
paragraph 9 above, LucasVarity is not required to maintain registration of
LucasVarity ADSs under the Exchange Act, the Offeror intends to apply for
termination of such registration. If registration of LucasVarity ADSs is not
terminated prior to completion of the aforementioned compulsory acquisition
procedures, then LucasVarity ADSs will cease trading on the NYSE and the
registration of LucasVarity ADSs under the Exchange Act would be terminated
following completion of the aforementioned compulsory acquisition procedures.
(C) MARGIN SECURITIES
LucasVarity ADSs are currently "margin securities" under the regulations of the
Board of Governors of the US Federal Reserve System, which status has the
effect, among other things, of allowing US brokers to extend credit on the
collateral of LucasVarity ADSs for the purposes of buying, carrying and trading
in securities ("Purpose Loans"). Depending on factors such as the number of
holders of record of LucasVarity ADSs and the number and market value of
publicly held LucasVarity ADSs following the purchase of LucasVarity Securities
pursuant to the Offer, the LucasVarity ADSs may no longer be eligible for
listing on the NYSE. In such event, the LucasVarity ADSs would no longer
constitute margin securities and, therefore, would no longer be used as
collateral for Purpose Loans made by US brokers.
10. LEGAL AND REGULATORY MATTERS
(A) GENERAL
Except as set out herein and other than the requirement to comply with the
Panel's requirements in relation to the City Code and with US securities laws,
the Offeror is not aware of (i) any licence or regulatory permit that appears to
be material to the business of the LucasVarity Group taken as a whole, which
might be adversely affected by the Offeror's acquisition of LucasVarity
Securities as contemplated herein, or (ii) any approval or other action by any
domestic or foreign governmental, administrative or regulatory agency or
authority that appears to be material to the LucasVarity Group taken as a whole,
and is required for the acquisition or ownership of LucasVarity Securities by
the Offeror as contemplated herein. Should any such approval or other action be
required, the Offeror currently contemplates that such approval or other action
would be sought. There can be no assurance that any such approval or other
action, if needed, would be obtained without substantial conditions being
attached thereto or that failure to obtain any such approval or other action
might not result in consequences adverse to LucasVarity's business.
(B) EC MERGER CLEARANCE
The Offer gives rise to a concentration with a Community Dimension under the
Merger Regulation and it is anticipated notification will be made to the
European Commission in the near future. The Offer is conditional on, amongst
other things, the European Commission indicating in terms reasonably
satisfactory to the Offeror that it does not intend to initiate proceedings
under Article 6(1)(c) of the Merger Regulation in respect of the Offer. The
European Commission will only initiate proceedings if it finds that the
concentration arising from the Offer falls within the scope of the Merger
Regulation and raises serious doubts as to its compatibility with the Common
Market. The European Commission has one calendar month (beginning on the first
working day following the date on which a complete notification is received by
the European Commission) to make its decision (subject to extension).
Based upon an examination of information relating to the business in which
LucasVarity and its subsidiaries are engaged, the Offeror believes that the
acquisition of LucasVarity Securities pursuant to the Offer would not raise
serious doubts as to its compatibility with the Common Market, or infringe in
any other manner European Community competition law. There can be no assurance,
however, that the European Commission will not
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initiate proceedings under Article 6(1)(c) of the Merger Regulation in respect
of the Offer, or challenge the Offer in any other manner, and if the European
Commission does so, what the outcome will be.
(C) US ANTITRUST LAWS
Under the HSR Act and the rules that have been promulgated thereunder by the US
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the US Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied.
On 29 January, 1999, TRW filed with the FTC and the Antitrust Division a
Premerger Notification and Report Form in connection with the purchase of
LucasVarity Securities pursuant to the Offer. Under the provisions of the HSR
Act applicable to the Offer, the purchase of LucasVarity Securities pursuant to
the Offer may not be consummated until the expiration of a 15 calendar day
waiting period following the filing by TRW, unless both the Antitrust Division
and the FTC terminate the waiting period prior thereto. If, within such 15
calendar day waiting period, either the Antitrust Division or the FTC requests
additional information from TRW, the waiting period would be extended for an
additional 10 calendar days following substantial compliance by TRW with such
request. Thereafter, the waiting period could be extended only by court order or
with TRW and LucasVarity consent. If the acquisition of LucasVarity Securities
is delayed pursuant to a request by the FTC or the Antitrust Division for
additional information pursuant to the HSR Act, the Offer may, but need not, be
extended and in any event the purchase of and payment for LucasVarity Securities
will be deferred until at least 10 days after the request is substantially
complied with, unless the waiting period is sooner terminated by the FTC and the
Antitrust Division. Only one extension of such waiting period pursuant to a
request for additional information is authorised by the HSR Act and the rules
promulgated thereunder, except by court order. Any such extension of the waiting
period will not give rise to any withdrawal rights not otherwise provided for by
applicable law.
The FTC and the Antitrust Division frequently scrutinise the legality under the
antitrust laws of transactions such as the proposed acquisition of LucasVarity
Securities by the Offeror pursuant to the Offer. At any time before or after the
purchase by the Offeror of LucasVarity Securities pursuant to the Offer, either
of the FTC and the Antitrust Division could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the purchase of LucasVarity Securities pursuant to the Offer
or seeking the divestiture of LucasVarity Securities purchased by the Offeror or
the divestiture of substantial assets of the Offeror, its subsidiaries or
LucasVarity. Private parties and US state attorneys general may also bring legal
action under US federal or state antitrust laws under certain circumstances.
Based upon an examination of information relating to the businesses in which
LucasVarity and its subsidiaries are engaged, the Offeror believes that the
acquisition of LucasVarity Securities pursuant to the Offer would not violate
the antitrust laws. There can be no assurance, however, that a challenge to the
Offer on antitrust grounds will not be made or, if such challenge is made, what
the outcome will be. See Part A of Appendix I for Conditions to the Offer,
including Conditions with respect to litigation and certain government actions
which are relevant in this regard.
(D) US STATE TAKEOVER LAWS
A number of states of the US have adopted takeover laws and regulations which
purport, in varying degrees, to be applicable to attempts to acquire securities
of corporations which have substantial assets, shareholders, principal executive
offices or principal places of business in such states. The Offeror believes
that no such US state takeover statutes apply to the Offer and the Offeror has
not attempted to comply with any such US state takeover statutes in connection
with the Offer. The Offeror reserves the right to challenge the validity or
applicability of any US state law allegedly applicable to the Offer and nothing
in this document nor any action taken in connection herewith is intended as a
waiver of that right. In the event that any US state takeover statute is
asserted to be applicable to the Offer and an appropriate court does not
determine that such law or regulation is not applicable to the Offer, the
Offeror might be required to file certain information with, or to receive
approvals from, the relevant US state authorities and might be unable to
purchase LucasVarity Securities pursuant to the
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Offer or be delayed in continuing or consummating the Offer. In such case the
Offeror may not be obliged to purchase such LucasVarity Securities.
(E) LAWS OF OTHER JURISDICTIONS
The LucasVarity Group conducts business in certain countries in addition to the
UK and the US where regulatory filings or approvals may be required in
connection with the Offer. Certain of such filings or approvals, if required,
may not be made or obtained prior to the expiry of the Offer. There is no
assurance that any such approvals would be obtained or that adverse consequences
to the Offeror's or the LucasVarity Group's business might not result from a
failure to obtain such approvals or from conditions that might be imposed in
connection therewith.
11. UK TAXATION
THE FOLLOWING PARAGRAPHS, WHICH ARE INTENDED AS A GENERAL GUIDE ONLY AND ARE
BASED ON CURRENT LEGISLATION AND INLAND REVENUE PRACTICE SUMMARISE THE POSITION
OF LUCASVARITY SHAREHOLDERS WHO (UNLESS THE POSITION OF NON-UK RESIDENT
LUCASVARITY SHAREHOLDERS IS EXPRESSLY REFERRED TO) ARE RESIDENT OR ORDINARILY
RESIDENT IN THE UNITED KINGDOM FOR TAX PURPOSES AND WHO HOLD THEIR LUCASVARITY
SHARES AS AN INVESTMENT.
(A) TAXATION OF CHARGEABLE GAINS
Liability to United Kingdom taxation of chargeable gains will depend on a
LucasVarity Shareholder's circumstances and on the form of consideration
received.
(I) CASH
To the extent a LucasVarity Shareholder receives cash under the Offer, this will
constitute a disposal of his LucasVarity Shares for the purposes of United
Kingdom taxation of chargeable gains. Such a disposal may give rise to a
liability for United Kingdom taxation of chargeable gains depending on the
LucasVarity Shareholder's circumstances.
An alternative treatment may be possible where a LucasVarity Shareholder opts
for a mixture of cash and Loan Notes. Where the amount of cash received is
"small", as compared with the value of his LucasVarity Shares, a LucasVarity
Shareholder can, under current Inland Revenue practice, elect that the receipt
of the cash will not trigger a disposal at that time. If a LucasVarity
Shareholder makes such an election, a disposal will be triggered only when the
Loan Notes are disposed of and the amount of the cash received will be deducted
from his chargeable gains acquisition cost in the Loan Notes. Current Inland
Revenue practice is to regard a sum as "small" for these purposes if either (i)
it is 5 per cent. or less of the value of the LucasVarity Shares held by the
particular LucasVarity Shareholder; or (ii) it is L3,000 or less, regardless of
whether it satisfies the 5 per cent. test. The advisability of electing for this
alternative treatment will depend upon a LucasVarity Shareholder's individual
circumstances, in particular the availability to a LucasVarity Shareholder of
any reliefs or exemptions from tax on chargeable gains in the tax year in which
the cash is received.
(II) LOAN NOTES
To the extent a LucasVarity Shareholder receives Loan Notes under the Offer, he
should be treated as not having made a disposal of his LucasVarity Shares.
Instead, in the case of an individual or other non-corporate shareholder any
gain or loss which would otherwise have arisen on a disposal of the LucasVarity
Shares should be "rolled-over" into the Loan Notes so that the Loan Notes will
be treated as the same asset as the LucasVarity Shares, acquired at the same
time as the LucasVarity Shares and for the same acquisition cost. In the case of
a LucasVarity Shareholder within the charge to corporation tax, any gain or loss
which would otherwise have arisen on a disposal of its LucasVarity shares for a
consideration equal to market value at the time of the exchange of the
LucasVarity shares for Loan Notes will be "held over" and deemed to accrue on a
subsequent disposal (including on redemption or repayment) of the Loan Notes. A
subsequent disposal of Loan Notes may give rise to a liability to United Kingdom
taxation of chargeable gains. For a LucasVarity Shareholder who is an individual
or other non-corporate holder, the Loan Notes should not constitute qualifying
corporate bonds for the purposes of UK taxation of chargeable gains.
Accordingly, any chargeable gain or allowable loss on disposal (including on
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redemption or repayment) of the Loan Notes should be calculated taking into
account the allowable original cost of the holder of acquiring the relevant
LucasVarity Shares. Indexation allowance on that cost should be available (when
calculating a chargeable gain but not an allowable loss) in respect of any
period of ownership of the LucasVarity shares up to April 1998. Thereafter some
taper relief may be available which will reduce the amount of the chargeable
gain realised on the subsequent disposal.
For a LucasVarity shareholder within the charge to corporation tax, the Loan
Notes will be qualifying corporate bonds for the purpose of UK taxation of
chargeable gains. Accordingly, no indexation allowance will be available for the
period of ownership of the Loan Notes and, except to the extent any gain or loss
which would have otherwise arisen on the disposal of its LucasVarity shares was
"held over" and crystallises on a subsequent disposal, no chargeable gain or
allowable loss will arise.
In certain circumstances, the above rules regarding the "roll-over" of any gain
or loss will not apply to a LucasVarity Shareholder who, together with persons
connected with him, holds more than 5 per cent. of any class of shares or
debentures of LucasVarity. Such persons are advised that an application for
clearance has been made to the Inland Revenue under Section 138 of the Taxation
of Chargeable Gains Act 1982 in respect of the Offer and, provided that such
clearance is given, the benefit of the above rules regarding the "roll-over" of
any gain or loss, will be available to LucasVarity Shareholders. It is not a
condition of the Offer that such clearance is obtained.
(B) TAXATION OF INCOME
Payments of interest on the Loan Notes will be made subject to the deduction of
a sum representing United Kingdom income tax at the lower rate (currently 20 per
cent) unless the Offeror has been directed by the Inland Revenue, in respect of
a particular holding of Loan Notes, to make the payment free of deduction or
subject to a reduced rate or deduction pursuant to the terms of a double
taxation treaty. The Offeror will not gross up payments of interest on the Loan
Notes to compensate for any amount in respect of tax which it is required to
deduct at source.
The gross amount of the interest will form part of the recipient's income for
the purposes of United Kingdom income tax or corporation tax, credit being
allowed for the tax withheld. Shareholders who are taxed at the lower or basic
rate of income tax will have no further tax to pay in respect of the interest.
Corporate LucasVarity Shareholders and individual LucasVarity Shareholders taxed
at the higher rate of income tax will have further tax to pay in respect of the
interest. In certain cases, holders of Loan Notes may be able to recover from
the Inland Revenue an amount in respect of the tax withheld.
(C) OTHER DIRECT TAX MATTERS
Different tax treatment may apply to LucasVarity Shareholders who have acquired
or agreed to acquire their LucasVarity Shares by exercising options under the
LucasVarity Share Option Schemes, including a possible charge to income tax when
such an option is exercised.
(D) STAMP DUTY
No stamp duty or stamp duty reserve tax should be payable by the LucasVarity
shareholders as a result of accepting the offer or on the issue of the Loan
Notes.
THE ABOVE SUMMARY IS INTENDED ONLY AS A GENERAL GUIDE TO THE TAXATION POSITION
UNDER UK TAX LEGISLATION AND DOES NOT CONSTITUTE TAX OR LEGAL ADVICE. ANY PERSON
WHO IS IN DOUBT AS TO HIS TAXATION POSITION OR WHO REQUIRES MORE DETAILED
INFORMATION SHOULD CONSULT HIS OWN PROFESSIONAL TAX ADVISER.
12. US FEDERAL INCOME TAXATION
The following is a general summary of certain US federal income tax consequences
applicable to LucasVarity Securityholders who accept the Offer. This summary is
based on current law which is subject to change, possibly with retroactive
effect and therefore may affect the tax consequences described herein. This
summary assumes that the LucasVarity Securities have been held as capital
assets. This summary also assumes that LucasVarity is
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not and has never been either a passive foreign investment company or a
controlled foreign corporation for US federal income tax purposes. This summary
does not address the US federal income tax consequences applicable to holders
subject to special rules, such as certain financial institutions, regulated
investment companies, insurance companies, dealers in securities, exempt
organisations, or persons holding LucasVarity Securities as part of a hedge,
straddle or conversion transaction or to holders who acquired LucasVarity
Securities as a result of LucasVarity Share Option Schemes or other employment
based arrangements.
(A) US HOLDERS
Acceptance of the Offer
In general, a US Holder of LucasVarity Securities that sells such securities
pursuant to the Offer will, for US federal income tax purposes, recognise gain
or loss equal to the difference between such holder's adjusted tax basis in the
LucasVarity Securities sold and the amount realised in exchange therefor. The
amount realised by a US Holder in exchange for LucasVarity Securities will equal
the amount of US dollars received (or, if a US Holder elects to receive pounds
sterling, the dollar value of the pounds sterling received) by such holder. Such
gain or loss generally will be capital gain or loss. Net capital gain (i.e.,
generally capital gain in excess of capital loss) recognized by an individual
investor upon a disposition of a capital asset that has been held for more than
12 months will generally be subject to a maximum US federal income tax rate of
20 per cent., or, in the case of a capital asset that has been held for 12
months or less, will be subject to ordinary US federal income tax rates.
In addition, an accrual basis US Holder of LucasVarity Securities that (i)
transfers such securities pursuant to the Offer, (ii) elects to receive pounds
sterling and (iii) does not elect to be treated as a cash basis taxpayer
pursuant to the foreign currency exchange regulations may have a foreign
currency exchange gain or loss for US federal income tax purposes because of
differences between the US dollars/pounds sterling exchange rates prevailing on
the date of sale and on the date of payment. Any such currency gain or loss
would be treated as ordinary income or loss and would be in addition to gain or
loss recognised by the holder on the sale of LucasVarity Securities pursuant to
the Offer.
(B) NON-US HOLDERS
Interest on Loan Notes
A non-US Holder generally will not be subject to US federal income or
withholding tax on payments of interest on a Loan Note, provided that (i) the
holder is not (A) a direct or indirect owner of 10 per cent. or more of the
total combined voting power of all classes of stock of the Offeror entitled to
vote or (B) a controlled foreign corporation related to the Offeror actually or
constructively through stock ownership, (ii) such interest payments are not
effectively connected with the conduct by the Non-US Holder of a trade or
business within the US and (iii) the Offeror or its paying agent receives
certain information from the holder (or a financial institution that holds the
Loan Notes in the ordinary course of its trade or business) certifying that such
holder is a non-US Holder. Payments of interest not exempt from US federal
withholding tax as described above will generally be subject to withholding tax
at a rate of 30 per cent., subject to reduction under an applicable income tax
treaty (such as the US/UK double taxation treaty, pursuant to which US
withholding tax generally would not apply on payments of interest on a Loan
Note). To claim the benefit of a tax treaty, the holder must provide
certification as required by US federal income tax law. In addition, the amount
treated as interest on the Loan Notes, for US federal income tax purposes, will
be in excess of the stated interest on the Loan Notes, which will result in a
portion of the principal with respect to the Loan Notes being treated as
interest for US federal income tax purposes.
(C) INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder of LucasVarity Securities may be subject to a 31 per cent. US federal
backup withholding tax with respect to a cash payment if the holder (i) fails to
furnish a taxpayer identification number ("TIN") to the payer, which, for an
individual, would be his or her Social Security number, or establish an
exemption from backup withholding, (ii) furnishes an incorrect TIN, (iii) is
notified by the Internal Revenue Service that it has failed to report payments
of interest or dividends or (iv) under certain circumstances, fails to certify,
under penalty of
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perjury, that it has furnished a correct TIN and has been notified by the
Internal Revenue Service that it is subject to backup withholding tax for
failure to report interest or dividend payments.
In order for a US Holder to prevent backup withholding on any cash payment
delivered pursuant to the Offer, such US Holder must provide the holder's
correct taxpayer identification number and certify that such holder is not
subject to US federal backup withholding tax by completing the Substitute Form
W-9 which is included in the Letter of Transmittal or can otherwise be obtained
from the US Depositary. In order for a non-US Holder to prevent backup
withholding on any cash payment delivered pursuant to the Offer or with respect
to any payment made on a Loan Note, such non-US Holder generally must certify
that such holder is a non-US Holder.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS INTENDED TO BE
ONLY A SUMMARY OF THE PRINCIPAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE OFFER. EACH HOLDER OF LUCASVARITY SECURITIES SHOULD CONSULT SUCH HOLDER'S
TAX ADVISER CONCERNING THE UNITED STATES FEDERAL AND APPLICABLE STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES RELATED TO THE OFFER.
13. FEES AND EXPENSES
(a) Pursuant to an exchange of letters between J.P. Morgan and TRW dated 14
December, 1998 (the "Engagement Letter"), J.P. Morgan is acting as
financial adviser to the Offeror in connection with the Offer. Pursuant to
the terms of the Engagement Letter, TRW has agreed to pay J.P. Morgan fees
customary for the investment banking services provided by J.P. Morgan. In
addition, the Offeror has agreed to indemnify J.P. Morgan and any company
within its group against, inter alia, certain losses and expenses incurred
by J.P. Morgan arising out of the engagement or performance of its duties
pursuant to the Engagement Letter.
(b) Pursuant to an agreement dated 5 February, 1999 (the "US Dealer Manager
Agreement"), the Offeror has retained J.P. Morgan as the US Dealer Manager
for the Offer in the US to perform certain services in conjunction with
the Offer as are customarily performed in the US by investing banking
concerns acting as dealer manager in connection with offers of a like
nature. No additional fee will become payable by the Offeror to J.P.
Morgan under the terms of the US Dealer Manager Agreement. In addition,
under the terms of the US Dealer Manager Agreement, the Offeror has agreed
to indemnify the US Dealer Manager and certain other persons against
certain liabilities and expenses which may be incurred by the US Dealer
Manager in connection with the Offer, including liabilities under the US
federal securities laws.
(c) The Offeror has retained Computershare Services PLC as the UK Receiving
Agent, J.P. Morgan as the US Depositary Agent and Georgeson & Company Inc.
as the Information Agent for the purposes of the Offer. The Offeror will
pay the UK Receiving Agent, the US Depositary and the Information Agent
reasonable and customary compensation for their services in connection
with the Offer, together with reimbursement of out-of-pocket expenses. The
Offeror will indemnify the UK Receiving Agent, the US Depository and the
Information Agent against certain liabilities and expenses in connection
therewith including liabilities under US federal securities laws. Brokers,
dealers, commercial banks and trust companies will be reimbursed by the
Offeror for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
(d) The Offeror will not pay any fees or commissions to any broker or dealer
or any other person for soliciting acceptances of the Offer (other than to
J.P. Morgan and their associates and the Information Agent, as described
above).
(f) LucasVarity will bear the customary fees and expenses of its personnel
and advisers in connection with the Offer.
14. CASH CONFIRMATION
J.P. Morgan is satisfied that sufficient financial resources are available to
the Offeror to satisfy full acceptance of the Offer.
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15. SOURCES AND BASES OF INFORMATION
In this document, unless otherwise stated, or where the context otherwise
requires, the following sources and bases have been used:
(a) financial information concerning the LucasVarity Group has been extracted
from the published audited consolidated accounts of the LucasVarity Group
for the eight months ended 31 January, 1997 and the year ended 31
January, 1998, and the unaudited results of the LucasVarity Group for the
nine months ended 31 October, 1998;
(b) the value of the issued share capital of LucasVarity is based upon
1,396,579,710 LucasVarity Shares in issue on 27 January, 1999 and
excludes all LucasVarity Securities which could be issued upon exercise
in full of options granted under the LucasVarity Share Option Schemes;
and
(c) the average Closing Price of LucasVarity Shares over the six month period
immediately preceding the publication of this document is based on the
closing middle market prices for a LucasVarity Share, as derived from the
Daily Official List.
16. SERVICE CONTRACTS
(a) None of the Directors of LucasVarity has received any remuneration from,
or has any service agreements with, LucasVarity other than V. A. Rice, N.
D. Arnold and J. A. Gilroy who have service agreements with the
LucasVarity Group. Their base annual salaries under these service
agreements are as follows:
<TABLE>
<CAPTION>
DIRECTOR BASE SALARY
-------- ------------
<S> <C>
V. A. Rice.................................................. US$1,125,000
N. D. Arnold................................................ US$ 515,000
J. A. Gilroy................................................ US$ 760,000
</TABLE>
(i) Mr. Rice is currently employed as Chief Executive Officer of
LucasVarity under a service agreement dated 2 September, 1996 and as
Chief Executive Officer of LucasVarity Inc. under a service agreement
dated 30 August, 1996. The service agreements are terminable by
LucasVarity or Mr. Rice giving two years written notice. His service
agreements provide for a base salary at a rate per annum decided by
the LucasVarity Remuneration Committee (currently US$1,125,000 in the
aggregate), an annual incentive bonus based upon achievement of
performance targets set in advance by the LucasVarity Remuneration
Committee and eligibility to participate in other benefit programmes
and arrangements available to other senior employees, excluding any
ongoing pension arrangements. Damages payable to Mr. Rice upon
termination of his employment will not be in addition to amounts
payable under his change in control agreement.
(ii) Mr. Rice has entered into a change in control agreement with Varity
Corporation (now LucasVarity Inc.) under which, following a change in
control for the purposes of the agreement, he is entitled to benefits
in the event of an involuntary termination of his employment (other
than for Cause, as defined in the agreement) or a termination of his
employment for "good reason", as defined in the agreement. The
definition of "good reason" includes, among other things, the
assignment to Mr. Rice of duties inconsistent with, or any diminution
in, his position, authority, duties or responsibilities in relation to
the group headed by the ultimate parent company of the LucasVarity
Group. If the Offer becomes unconditional in all respects, Mr. Rice
will, if he terminates his employment, become entitled to the benefits
payable under the change in control agreement. The change in control
agreement will terminate on 5 September, 1999 unless notice of
termination of his employment has previously been given under his
employment agreement. The termination benefits to which Mr. Rice would
be entitled under his change in control agreement include (i) salary,
vacation pay and bonus compensation earned up to the date of
termination; (ii) any bonus amount carried forward from previous years
in accordance with the terms of applicable bonus plans; and (iii) a
lump sum payment equal to a multiple of 4.4 of Mr. Rice's annual cash
compensation (excluding bonuses) at the date of termination or the
occurrence of the change in control, whichever
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is greater, and the highest bonus earned during any of the previous
three financial years. All benefits accrued under supplemental
retirement, excess retirement and deferred compensation plans would
immediately vest in full. In addition, Mr. Rice could require
LucasVarity Inc. to purchase all stock options granted to him under
the Varity Corporation Executive Stock Option Plan which are
outstanding at the date of termination at a price per option equal to
the difference between the exercise price (as adjusted following the
conversion of Varity Corporation options into LucasVarity options) and
the higher of the market value of LucasVarity Shares at the date of
termination or the highest price per share paid by a person or group
in an acquisition which has resulted in a change in control.
Alternatively, Mr. Rice could exercise such options and would be
entitled to a five-year interest-free loan. Similar rights arise in
relation to outstanding options granted to Mr. Rice under the Varity
Corporation Shareholder Value Incentive Plan. Mr. Rice will also be
entitled to an additional amount as reimbursement for any tax payable
(i) under section 4999 of the US Internal Revenue Code or (ii) in
connection with such interest free loan. Additionally, Mr. Rice would
be entitled to reimbursement of any legal expenses incurred to enforce
his rights to these termination benefits.
(iii) Mr. Arnold is currently employed under a service agreement with
LucasVarity Inc. dated 18 December, 1998. The service agreement is
terminable by LucasVarity Inc. by giving two years notice or by Mr.
Arnold giving six months' notice. The service agreement provides for a
base salary at a rate per annum decided by the Remuneration Committee
(currently US$515,000). Mr. Arnold is entitled to other standard
contractual benefits, including participation in LucasVarity Group
pension plans and share schemes. Mr. Arnold also participates in
annual bonus arrangements based upon the attainment of pre-determined
bonus targets. The normative bonus payable upon attainment of 100 per
cent. of the bonus target is 60 per cent. of base salary. There is no
maximum level of bonus payable in any one year. The agreement also
provides that damages payable to Mr. Arnold upon termination of his
employment calculated in the manner set out in the agreement will not
be in addition to amounts payable to him under his change in control
agreement described below.
(iv) Mr. Gilroy is employed under a service agreement with LucasVarity
dated 27 May, 1997. The agreement is terminable by LucasVarity by
giving two years notice or by Mr. Gilroy by giving six months notice.
His service agreement provides for a base salary at the rate per annum
decided by the Board (currently US$760,000 per annum). Such salary may
not be reduced without his prior written consent. The contract also
provides for the payment to Mr. Gilroy of a bonus, if any, as may be
approved at the discretion of the Board. Mr. Gilroy is also entitled
to additional benefits, such as provision of medical expenses, other
insurance and pension payments. The service agreement also provides
that damages payable to Mr. Gilroy upon termination of his employment
will not be in addition to amounts payable to him under his change in
control agreement described below.
(v) Mr. Arnold and Mr. Gilroy have entered into change in control
agreements with LucasVarity Inc under which they are entitled to
benefits in the event of an involuntary termination of their
employment (other than for Cause, as defined in the agreements) or a
termination of their employment for "good reason" (as defined in the
agreements) prior to 1 January, 2002. If the Offer becomes
unconditional in all respects, Mr. Arnold and Mr. Gilroy will, if they
terminate their employment, become entitled to the benefits payable
under the change in control agreements. The termination benefits to
which they would be entitled under their change in control agreements
include (i) salary, vacation pay and bonus compensation earned up to
the date of termination; (ii) any bonus amount carried forward from
previous years in accordance with the terms of applicable bonus plans;
and (iii) a lump sum payment equal to a multiple of 3.35 times their
annual cash compensation (excluding bonuses) at the date of
termination or the occurrence of the change in control, whichever is
greater, and the highest bonus earned during any of the previous three
financial years. All benefits accrued under supplemental retirement,
excess retirement and deferred compensation plans would immediately
vest in full. In addition, they could require LucasVarity Inc. to
purchase all stock options granted to them under the Varity
Corporation Executive Stock Option Plan which are outstanding at the
date of termination at a price per option equal to the difference
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between the exercise price (as adjusted following the conversion of
Varity Corporation options into LucasVarity options) and the higher of
the market value of LucasVarity Shares at the date of termination or
the highest price per share paid by a person or group in an
acquisition which has resulted in a change in control. Alternatively,
they could exercise such options and would be entitled to a five-year
interest free loan. Similar rights arise in relation to outstanding
options granted to them under the Varity Corporation Shareholder Value
Incentive Plan. They will also be entitled to an additional amount as
reimbursement for any tax payable (i) under section 4999 of the US
Internal Revenue Code or (ii) in connection with such interest free
loan. Additionally, they would be entitled to reimbursement of any
legal expenses incurred to enforce their rights to these termination
benefits.
(b) Save as disclosed above, there are no existing or proposed service
agreements or arrangements relating to their terms of appointment between
any Director of LucasVarity and any member of the LucasVarity Group.
(c) The total aggregate amount of remuneration paid and benefits in kind
granted to the Directors of LucasVarity by any member of the LucasVarity
Group during the financial year ended 31 January, 1998 was L2,913,390.
(d) The estimated total aggregate amount of remuneration paid and benefits in
kind granted to the Directors of LucasVarity (including fees payable to
non-executive Directors of LucasVarity but excluding bonuses which are
conditional on performance) by the LucasVarity Group for the current
financial year under arrangements in force at the date of this document
will amount to approximately L1,805,911.
(e) There is no arrangement under which any Director of LucasVarity has
waived or agreed to waive future emoluments.
Save as disclosed above, there are no service contracts between any Director of
LucasVarity and any member of LucasVarity Group having more than twelve months
to run and no such contract has been entered into or amended within the six
months preceding the date of this document.
17. OTHER INFORMATION
(a) Save as disclosed in this document, no agreement, arrangement or
understanding exists between the Offeror or any party acting in concert
with the Offeror and any of the Directors, recent Directors, shareholders
or recent shareholders of LucasVarity having any connection with or
dependence upon the Offer.
(b) The Offeror does not intend that the payment of interest on, the
repayment of or the security for, any liability (contingent or otherwise)
will depend to any significant extent on the business of LucasVarity.
(c) No agreement, arrangement or understanding exists whereby any LucasVarity
Shares acquired in pursuance of the Offer will be transferred to any other
person, save that the Offeror reserves the right to transfer any
LucasVarity Shares to any of its subsidiaries.
(d) J.P. Morgan has given and not withdrawn its written consent to the issue
of this document with the inclusion of its letter and the references to
its name including the reference to its valuation of the Loan Notes, in
the form and context in which they appear.
(e) Lazard Brothers & Co., Limited has given and not withdrawn its written
consent to the issue of this document with the references to its name in
the form and context in which they appear.
(f) Except as disclosed in this document, there has been no material change
in the financial or trading position of the TRW Group since 31 December,
1998 (the date to which the last audited accounts of the TRW Group were
prepared).
(g) Except as disclosed in this document, there have been no material changes
in the financial or trading position of the LucasVarity Group since 31
January, 1998 (the date to which the latest audited accounts of the
LucasVarity Group were prepared).
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18. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the
offices of Allen & Overy, One New Change, London EC4M 9QQ, during usual business
hours on any weekday (Saturdays and public holidays excepted) while the Offer
remains open for acceptance:
(a) the Memorandum and Articles of Association of the Offeror;
(b) the Memorandum and Articles of Association of LucasVarity;
(c) the published audited consolidated accounts of TRW for the last two
financial years ended 31 December, 1998;
(d) the published audited consolidated accounts of the LucasVarity Group for
the eight months ended 31 January, 1997 and for the year ended 31 January,
1998;
(e) the unaudited results of the LucasVarity Group for the nine months ended
31 October, 1998;
(f) the service agreements of the Directors of LucasVarity of more than one
year's duration;
(g) the material contracts of the TRW Group referred to in paragraph 5(a)
above;
(h) the material contracts of LucasVarity Group referred to in paragraph 5(b)
above;
(i) the letter of valuation of the Loan Notes by J.P. Morgan dated 6
February, 1999;
(j) the written consents referred to in paragraph 17 above; and
(k) copies of the irrevocable undertakings to accept the Offer given by
Directors of LucasVarity.
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APPENDIX VII -- CERTAIN PROVISIONS OF THE COMPANIES ACT
PART XIIIA
TAKEOVER OFFERS
428. TAKEOVER OFFERS
(1) In this Part of this Act "takeover offer" means an offer to acquire all
the shares, or all the shares of any class or classes, in a company (other
than shares which at the date of the offer are already held by the
offeror), being an offer on terms which are the same in relation to all
the shares to which the offer relates or, where those shares include
shares of different classes, in relation to all the shares of each class.
(2) In subsection (1) "shares" means shares which have been allotted on the
date of the offer but a takeover offer may include among the shares to
which it relates all or any shares that are subsequently allotted before a
date specified in or determined in accordance with the terms of the offer.
(3) The terms offered in relation to any shares shall for the purposes of
this section be treated as being the same in relation to all the shares
or, as the case may be, all the shares of a class to which the offer
relates notwithstanding any variation permitted by subsection (4).
(4) A variation is permitted by this subsection where --
(a) the law of a country or territory outside the United Kingdom
precludes an offer of consideration in the form or any of the forms
specified in the terms in question or precludes it except after
compliance by the offeror with conditions with which he is unable to
comply or which he regards as unduly onerous; and
(b) the variation is such that the persons to whom an offer of
consideration in that form is precluded are able to receive
consideration otherwise than in that form but of substantially
equivalent value.
(5) The reference in subsection (1) to shares already held by the offeror
includes a reference to shares which he has contracted to acquire but that
shall not be construed as including shares which are the subject of a
contract binding the holder to accept the offer when it is made, being a
contract entered into by the holder either for no consideration and under
seal or for no consideration other than a promise by the offeror to make
the offer.
(6) In the application of subsection (5) to Scotland the words "and under
seal" shall be omitted.
(7) Where the terms of an offer make provision for their revision and for
acceptances on the previous terms to be treated as acceptances on the
revised terms, the revision shall not be regarded for the purposes of this
Part of this Act as the making of a fresh offer and references in this
Part of this Act to the date of the offer shall accordingly be construed
as references to the date on which the original offer was made.
(8) In this Part of this Act "the offeror" means, subject to section 430D,
the person making a takeover offer and "the company" means the company
whose shares are the subject of the offer.
429. RIGHT OF OFFEROR TO BUY OUT MINORITY SHAREHOLDERS
(1) If, in a case in which a takeover offer does not relate to shares of
different classes, the offeror has by virtue of acceptances of the offer
acquired or contracted to acquire not less than nine-tenths in value of
the shares to which the offer relates he may give notice to the holder of
any shares to which the offer relates which the offeror has not acquired
or contracted to acquire that he desires to acquire those shares.
(2) If, in a case in which a takeover offer relates to shares of different
classes, the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire not less than nine-tenths in value of the shares of
any class to which the offer relates, he may give notice to the holder of
any shares of that class which the offeror has not acquired or contracted
to acquire that he desires to acquire those shares.
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(3) No notice shall be given under subsection (1) or (2) unless the offeror
has acquired or contracted to acquire the shares necessary to satisfy the
minimum specified in that subsection before the end of the period of four
months beginning with the date of the offer; and no such notice shall be
given after the end of the period of two months beginning with the date on
which he has acquired or contracted to acquire shares which satisfy that
minimum.
(4) Any notice under this section shall be given in the prescribed manner;
and when the offeror gives the first notice in relation to an offer he
shall send a copy of it to the company together with a statutory
declaration by him in the prescribed form stating that the conditions for
the giving of the notice are satisfied.
(5) Where the offeror is a company (whether or not a company within the
meaning of this Act) the statutory declaration shall be signed by a
Director.
(6) Any person who fails to send a copy of a notice or a statutory
declaration as required by subsection (4) or makes such a declaration for
the purposes of that subsection knowing it to be false or without having
reasonable grounds for believing it to be true shall be liable to
imprisonment or a fine, or both, and for continued failure to send the
copy or declaration, to a daily default fine.
(7) If any person is charged with an offence for failing to send a copy of a
notice as required by subsection (4) it is a defence for him to prove that
he took reasonable steps for securing compliance with that subsection.
(8) When during the period within which a takeover offer can be accepted the
offeror acquires or contracts to acquire any of the shares to which the
offer relates but otherwise than by virtue of acceptances of the offer,
then, if --
(a) the value of the consideration for which they are acquired or
contracted to be acquired ("the acquisition consideration") does not
at that time exceed the value of the consideration specified in the
terms of the offer; or
(b) those terms are subsequently revised so that when the revision is
announced the value of the acquisition consideration, at the time
mentioned in paragraph (a) above, no longer exceeds the value of the
consideration specified in those terms,
the offeror shall be treated for the purposes of this section as having
acquired or contracted to acquire those shares by virtue of acceptances of
the offer; but in any other case those shares shall be treated as excluded
from those to which the offer relates.
430. EFFECT OF NOTICE UNDER S 429
(1) The following provisions shall, subject to section 430C, have effect
where a notice is given in respect of any shares under section 429.
(2) The offeror shall be entitled and bound to acquire those shares on the
terms of the offer.
(3) Where the terms of an offer are such as to give the holder of any shares
a choice of consideration the notice shall give particulars of the choice
and state --
(a) that the holder of the shares may within six weeks from the date of
the notice indicate his choice by a written communication sent to the
offeror at an address specified in the notice; and
(b) which consideration specified in the offer is to be taken as
applying in default of his indicating a choice as aforesaid;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions
applicable to the choice under the terms of the offer can still be
complied with; and if the consideration chosen by the holder of the shares
--
(a) is not cash and the offeror is no longer able to provide it; or
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(b) was to have been provided by a third party who is no longer bound or
able to provide it,
the consideration shall be taken to consist of an amount of cash payable
by the offeror which at the date of the notice is equivalent to the chosen
consideration.
(5) At the end of six weeks from the date of the notice the offeror shall
forthwith --
(a) send a copy of the notice to the company; and
(b) pay or transfer to the company the consideration for the shares to
which the notice relates.
(6) If the shares to which the notice relates are registered the copy of the
notice sent to the company under subsection (5)(a) shall be accompanied by
an instrument of transfer executed on behalf of the shareholder by a
person appointed by the offeror; and on receipt of that instrument the
company shall register the offeror as the holder of those shares.
(7) If the shares to which the notice relates are transferable by the
delivery of warrants or other instruments the copy of the notice sent to
the company under subsection (5)(a) shall be accompanied by a statement to
that effect; and the company shall on receipt of the statement issue the
offeror with warrants or other instruments in respect of the shares and
those already in issue in respect of the shares shall become void.
(8) Where the consideration referred to in paragraph (b) of subsection (5)
consists of shares or securities to be allotted by the offeror the
reference in that paragraph to the transfer of the consideration shall be
construed as a reference to the allotment of the shares or securities to
the company.
(9) Any sum received by a company under paragraph (b) of subsection (5) and
any other consideration received under that paragraph shall be held by the
company on trust for the person entitled to the shares in respect of which
the sum or other consideration was received.
(10) Any sum received by a company under paragraph (b) of subsection (5), and
any dividend or other sum accruing from any other consideration received
by a company under that paragraph, shall be paid into a separate bank
account, being an account the balance on which bears interest at an
appropriate rate and can be withdrawn by such notice (if any) as is
appropriate.
(11) Where after reasonable enquiry made at such intervals as are reasonable
the person entitled to any consideration held on trust by virtue of
subsection (9) cannot be found and twelve years have elapsed since the
consideration was received or the company is wound up the consideration
(together with any interest, dividend or other benefit that has accrued
from it) shall be paid into court.
(12) In relation to a company registered in Scotland, subsections (13) and
(14) shall apply in place of subsection (11).
(13) Where after reasonable enquiry made at such intervals as are reasonable
the person entitled to any consideration held on trust by virtue of
subsection (9) cannot be found and twelve years have elapsed since the
consideration was received or the company is wound up --
(a) the trust shall terminate;
(b) the company or, as the case may be, the liquidator shall sell any
consideration other than cash and any benefit other than cash that has
accrued from the consideration; and
(c) a sum representing --
(i) the consideration so far as it is cash;
(ii) the proceeds of any sale under paragraph (b) above; and
(iii) any interest, dividend or other benefit that has accrued from
the consideration,
shall be deposited in the name of the Accountant of Court in a bank
account such as is referred to in subsection (10) and the receipt for
the deposit shall be transmitted to the Accountant of Court.
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(14) Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent
with this Act) shall apply with any necessary modifications to sums
deposited under subsection (13) as that section applies to sums deposited
under section 57(1)(a) of that Act.
(15) The expenses of any such enquiry as is mentioned in subsection (11) or
(13) may be defrayed out of the money or other property held on trust for
the person or persons to whom the enquiry relates.
430A. RIGHT OF MINORITY SHAREHOLDER TO BE BOUGHT OUT BY OFFEROR
(1) If a takeover offer relates to all the shares in a company and at any
time before the end of the period within which the offer can be accepted
--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares to which the
offer relates; and
(b) those shares, with or without any other shares in the company which
he has acquired or contracted to acquire, amount to not less than
nine-tenths in value of all the shares in the company,
the holder of any shares to which the offer relates who has not accepted
the offer may by a written communication addressed to the offeror require
him to acquire those shares.
(2) If a takeover offer relates to shares of any class or classes and at any
time before the end of the period within which the offer can be accepted
--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares of any class to
which the offer relates; and
(b) those shares, with or without any other shares of that class which
he has acquired or contracted to acquire, amount to not less than
nine-tenths in value of all the shares of that class,
the holder of any shares of that class who has not accepted the offer may
by a written communication addressed to the offeror require him to acquire
those shares.
(3) Within one month of the time specified in subsection (1) or, as the case
may be, subsection (2) the offeror shall give any shareholder who has not
accepted the offer notice in the prescribed manner of the rights that are
exercisable by him under that subsection; and if the notice is given
before the end of the period mentioned in that subsection it shall state
that the offer is still open for acceptance.
(4) A notice under subsection (3) may specify a period for the exercise of
the rights conferred by this section and in that event the rights shall
not be exercisable after the end of that period; but no such period shall
end less than three months after the end of the period within which the
offer can be accepted.
(5) Subsection (3) does not apply if the offeror has given the shareholder a
notice in respect of the shares in question under section 429.
(6) If the offeror fails to comply with subsection (3) he and, if the offeror
is a company, every officer of the company who is in default or to whose
neglect the failure is attributable, shall be liable to a fine and for
continued contravention, to a daily default fine.
(7) If an offeror other than a company is charged with an offence for failing
to comply with subsection (3) it is a defence for him to prove that he
took all reasonable steps for securing compliance with that subsection.
430B. EFFECT OF REQUIREMENT UNDER S 430A
(1) The following provisions shall, subject to section 430C, have effect
where a shareholder exercises his rights in respect of any shares under
section 430A.
(2) The offeror shall be entitled and bound to acquire those shares on the
terms of the offer or on such other terms as may be agreed.
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(3) Where the terms of an offer are such as to give the holder of shares a
choice of consideration the holder of the shares may indicate his choice
when requiring the offeror to acquire them and the notice given to the
holder under section 430A(3) --
(a) shall give particulars of the choice and of the rights conferred by
this subsection; and
(b) may state which consideration specified in the offer is to be taken
as applying in default of his indicating a choice;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions
applicable to the choice under the terms of the offer can still be
complied with; and if the consideration chosen by the holder of the shares
--
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or
able to provide it;
the consideration shall be taken to consist of an amount of cash payable
by the offeror which at the date when the holder of the shares requires
the offeror to acquire them is equivalent to the chosen consideration.
430C. APPLICATIONS TO THE COURT
(1) Where a notice is given under section 429 to the holder of any shares the
court may, on an application made by him within six weeks from the date on
which the notice was given --
(a) order that the offeror shall not be entitled and bound to acquire
the shares; or
(b) specify terms of acquisition different from those of the offer.
(2) If an application to the court under subsection (1) is pending at the end
of the period mentioned in subsection (5) of section 430 that subsection
shall not have effect until the application has been disposed of.
(3) Where the holder of any shares exercises his rights under section 430A
the court may, on an application made by him or the offeror, order that
the terms on which the offeror is entitled and bound to acquire the shares
shall be such as the court thinks fit.
(4) No order for costs or expenses shall be made against a shareholder making
an application under subsection (1) or (3) unless the court considers --
(a) that the application was unnecessary, improper or vexatious; or
(b) that there has been unreasonable delay in making the application or
unreasonable conduct on his part in conducting the proceedings on the
application.
(5) Where a takeover offer has not been accepted to the extent necessary for
entitling the offeror to give notices under subsection (1) or (2) of
section 429 the court may, on the application of the offeror, make an
order authorising him to give notices under that subsection if satisfied
--
(a) that the offeror has after reasonable enquiry been unable to trace
one or more of the persons holding shares to which the offer relates;
(b) that the shares which the offeror has acquired or contracted to
acquire by virtue of acceptances of the offer, together with the
shares held by the person or persons mentioned in paragraph (a),
amount to not less than the minimum specified in that subsection; and
(c) that the consideration offered is fair and reasonable;
but the court shall not make an order under this subsection unless it
considers that it is just and equitable to do so having regard, in
particular, to the number of shareholders who have been traced but who
have not accepted the offer.
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430D. JOINT OFFERS
(1) A takeover offer may be made by two or more persons jointly and in that
event this Part of this Act has effect with the following modifications.
(2) The conditions for the exercise of the rights conferred by sections 429
and 430A shall be satisfied by the joint offerors acquiring or contracting
to acquire the necessary shares jointly (as respects acquisitions by
virtue of acceptances of the offer) and either jointly or separately (in
other cases); and, subject to the following provisions, the rights and
obligations of the offeror under those sections and sections 430 and 430B
shall be respectively joint rights and joint and several obligations of
the joint offerors.
(3) It shall be a sufficient compliance with any provision of those sections
requiring or authorising a notice or other document to be given or sent by
or to the joint offerors that it is given or sent by or to any of them;
but the statutory declaration required by section 429(4) shall be made by
all of them and, in the case of a joint offeror being a company, signed by
a director of that company.
(4) In sections 428, 430(8) and 430E references to the offeror shall be
construed as references to the joint offerors or any of them.
(5) In section 430(6) and (7) references to the offeror shall be construed as
references to the joint offerors or such of them as they may determine.
(6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no
longer able to provide the relevant consideration shall be construed as
references to none of the joint offerors being able to do so.
(7) In section 430C references to the offeror shall be construed as
references to the joint offerors except that any application under
subsection (3) or (5) may be made by any of them and the reference in
subsection (5)(a) to the offeror having been unable to trace one or more
of the persons holding shares shall be construed as a reference to none of
the offerors having been able to do so.
430E. ASSOCIATES
(1) The requirement in section 428(1) that a takeover offer must extend to
all the shares, or all the shares of any class or classes, in a company
shall be regarded as satisfied notwithstanding that the offer does not
extend to shares which associates of the offeror hold or have contracted
to acquire; but, subject to subsection (2), shares which any such
associate holds or has contracted to acquire, whether at the time when the
offer is made or subsequently, shall be disregarded for the purposes of
any reference in this Part of this Act to the shares to which a takeover
offer relates.
(2) Where during the period within which a takeover offer can be accepted any
associate of the offeror acquires or contracts to acquire any of the
shares to which the offer relates, then, if the condition specified in
subsection (8)(a) or (b) of section 429 is satisfied as respects those
shares they shall be treated for the purposes of that section as shares to
which the offer relates.
(3) In section 430A(1)(b) and (2)(b) the reference to shares which the
offeror has acquired or contracted to acquire shall include a reference to
shares which any associate of his has acquired or contracted to acquire.
(4) In this section "associate", in relation to an offeror means --
(a) a nominee of the offeror;
(b) a holding company, subsidiary or fellow subsidiary of the offeror or
a nominee of such a holding company, subsidiary or fellow subsidiary;
(c) a body corporate in which the offeror is substantially interested;
or
(d) any person who is, or is a nominee of, a party to an agreement with
the offeror for the acquisition of, or of an interest in, the shares
which are the subject of the takeover offer, being an agreement
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which includes provisions imposing obligations or restrictions such as
are mentioned in section 204 (2)(a).
(5) For the purposes of subsection (4)(b) a company is a fellow subsidiary of
another body corporate if both are subsidiaries of the same body corporate
but neither is a subsidiary of the other.
(6) For the purposes of subsection (4)(c) an offeror has a substantial
interest in a body corporate if --
(a) that body or its Directors are accustomed to act in accordance with
his directions or instructions; or
(b) he is entitled to exercise or control the exercise of one-third or
more of the voting power at general meetings of that body.
(7) Subsections (5) and (6) of section 204 shall apply to subsection (4)(d)
above as they apply to that section and subsections (3) and (4) of section
203 shall apply for the purposes of subsection (6) above as they apply for
the purposes of subsection (2)(b) of that section.
(8) Where the offeror is an individual his associates shall also include his
spouse and any minor child or step-child of his.
430F. CONVERTIBLE SECURITIES
(1) For the purposes of this Part of this Act securities of a company shall
be treated as shares in the company if they are convertible into or
entitle the holder to subscribe for such shares; and references to the
holder of shares or a shareholder shall be construed accordingly.
(2) Subsection (1) shall not be construed as requiring any securities to be
treated --
(a) as shares of the same class as those into which they are convertible
or for which the holder is entitled to subscribe; or
(b) as shares of the same class as other securities by reason only that
the shares into which they are convertible or for which the holder is
entitled to subscribe are of the same class.
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APPENDIX VIII -- DEFINITIONS
The following definitions apply throughout this document unless the context
otherwise requires:
"Acceptance Condition" the Condition as to acceptances set out in
paragraph (a) of Part A of Appendix I to this
document
"Acceptance Forms" the Form of Acceptance and, in respect of holders
of LucasVarity ADSs only, the Letter of Transmittal
and the Notice of Guaranteed Delivery accompanying
this document pursuant to the Offer
"Book-Entry Confirmation" the confirmation of a book-entry transfer of ADSs
into the US Depositary's account at a Book-Entry
Transfer Facility
"Book-Entry Transfer
Facility" The Depository Trust Company
"business day" a day (excluding Saturday and Sunday or a US
federal holiday or UK Bank Holiday), consisting of
the time period from 12.01 a.m. until and including
12.00 midnight (New York City time)
"certificated" or
"certificated
form" in relation to a share or other security, title to
which is recorded in the relevant register of the
share or other security as being held in
certificated form
"City Code" the City Code on Takeovers and Mergers
"Closing Price" the closing mid-price quotation on the London Stock
Exchange of a LucasVarity Share as derived from the
Daily Official List
"Companies Act" the Companies Act 1985, as amended
"Conditions" the conditions of the Offer set out in Part A of
Appendix I to this document, and "Condition" means
any one of them
"CREST" the relevant system (as defined in the Regulations)
operated by CRESTCo
"CRESTCo" CRESTCo Limited
"CREST member" a person who has been admitted by CRESTCo as a
system-member (as defined in the Regulations)
"Crest participant" a person who is, in relation to CREST, a
system-participant (as defined in the Regulations)
"Crest sponsor" a person who is, in relation to CREST, a sponsoring
system-participant (as defined in the Regulations)
"Crest sponsored member" a CREST member admitted to Crest as a sponsored
member under the sponsorship of a CREST sponsor
"Daily Official List" the Daily Official List of the London Stock
Exchange
"Eligible Institution" a financial institution which is a participant in
the Securities Transfer Agents Medallion Program,
the NYSE Medallion Program or the Stock Exchanges
Medallion Program
VIII-1
<PAGE> 162
"Exchange Act" the US Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated
thereunder
"First Closing Date" 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on 9th March, 1999, unless and until the
Offeror, with the consent of the Panel or in
accordance with the City Code, shall have extended
the Offer, in which case the term "First Closing
Date" shall mean the latest time and date at which
the Offer, as so extended by the Offeror, will
expire or, if earlier, the time at which the
Conditions are satisfied, fulfilled or, to the
extent permitted, waived
"Form of Acceptance" the Form of Acceptance, Authority and Election
relating to the Offer for use by LucasVarity
Shareholders
"HSR Act" the Hart-Scott-Rodino Antitrust Improvement Act of
1976 (as amended)
"Information Agent" Georgeson & Company Inc.
"Initial Offer Period" the period from the date of this document to and
including the First Closing Date
"Internal Revenue Code" The United States Internal Revenue Code of 1986, as
amended
"J.P. Morgan" Morgan Guaranty Trust Company of New York
"Letter of Transmittal" the Letter of Transmittal relating to the Offer for
use by holders of LucasVarity ADSs
"LIBOR" the rate of interest determined on the basis of the
arithmetic mean of the respective rates at which
any two London clearing banks, selected by the
Offeror, offer six month pound sterling deposits of
L1,000,000 to leading banks in the London
inter-bank market at or about 11 a.m. (London time)
on the first business day of the relevant interest
period as defined in paragraph 2 of Appendix II
"Loan Notes" the unsecured loan notes to be issued by the
Offeror pursuant to the Loan Note Alternative,
having the rights and being subject to the
restrictions set out in the Loan Note Instrument
"Loan Note Alternative" the alternative whereby LucasVarity Shareholders
(other than US Persons and certain other overseas
persons) validly accepting the Offer may elect to
receive Loan Notes instead of all or part of the
cash consideration to which they would otherwise be
entitled under the Offer
"Loan Note Instrument" the loan note instrument constituting the Loan
Notes, the terms of which are summarised in
Appendix II to this document (and any instruments
supplemental thereto)
"London Stock Exchange" London Stock Exchange Limited
"LucasVarity" LucasVarity plc
"LucasVarity ADRs" American Depositary Receipts evidencing interests
in LucasVarity ADSs
"LucasVarity ADSs" American Depositary Shares of LucasVarity each
representing ten LucasVarity Shares
"LucasVarity Group" LucasVarity and its subsidiary undertakings
"LucasVarity Securities" LucasVarity Shares and LucasVarity ADSs
"LucasVarity
Securityholder" a holder of LucasVarity Securities
VIII-2
<PAGE> 163
"LucasVarity Shareholder" a holder of LucasVarity Shares
"LucasVarity Share Option
Schemes" the LucasVarity 1996 Executive Share Option Scheme,
the LucasVarity 1996 Savings-Related Share Option
Scheme, the LucasVarity Global Share Plan, the
Lucas Industries 1994 Executive Share Option
Scheme, the Lucas Industries Executive Share Option
Scheme (1984), the Lucas Industries Employees' 1991
Savings-Related Share Option Scheme, the Varity
Corporation Executive Stock Option Plan and the
Varity Corporation Shareholder Value Incentive Plan
"LucasVarity Shares" the existing unconditionally allotted or issued and
fully paid ordinary shares of 25p each in the
capital of LucasVarity
"member account ID" the identification code or number attached to any
member account in CREST
"NYSE" the New York Stock Exchange, Inc.
"Noon Buying Rate" the exchange rate for pounds sterling, based on the
noon buying rate in the City of New York for cable
transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New
York, expressed in US dollars per pound sterling
"Noteholder" a holder of Loan Notes
"Notice of Guaranteed
Delivery" the Notice of Guaranteed Delivery relating to the
Offer for use by holders of LucasVarity ADSs
"Offer" the recommended cash offer made by J.P. Morgan on
behalf of the Offeror on the terms and conditions
set out in this document and the relevant
Acceptance Form(s) including, where the context
requires, the Loan Note Alternative and any
subsequent revision, variation, extension or
renewal of such offer and such alternative for all
the issued and to be issued LucasVarity Shares
"Offer Document" this document and any other document containing the
Offer
"Offer Period" the period commencing on 6 January, 1999 until
whichever of the following dates shall be the
latest: (a) 3.00 p.m. (London time), 10.00 a.m.
(New York City time) on 9 March, 1999 and (b) the
earlier of (i) the time at which the Offer lapses
and (ii) the time at which the Offer becomes
unconditional
"Offeror" TRW Automotive UK, an indirect wholly-owned
subsidiary of TRW
"Offer Price" 288 pence for each LucasVarity Share and L28.80 for
each LucasVarity ADS
"Panel" the Panel on Takeovers and Mergers
"participant ID" the identification code or membership number used
in CREST to identify a CREST member or other CREST
participant
"Regulations" the Uncertificated Securities Regulations 1995 (SI
1995 No. 95/3272)
"SEC" the US Securities and Exchange Commission
"Subsequent Offer Period" the period following the First Closing Date during
which the Offer remains open for acceptance
"subsidiary", "subsidiary
undertaking", "associated
undertaking" and
"undertaking" shall be construed in accordance with the Companies
Act (but for this
VIII-3
<PAGE> 164
purpose ignoring paragraph 20(1)(b) of Schedule 4A
thereof)
"TRW" TRW Inc., an Ohio corporation
"TRW Group" TRW and its subsidiary undertakings
"TTE Instruction" a transfer to escrow instruction (as defined by the
CREST Manual issued by CRESTCo)
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern
Ireland
"UK GAAP" generally accepted accounting principles in the
United Kingdom
"UK Receiving Agent" Computershare Services PLC in its capacity as the
UK receiving agent to the Offer
"uncertificated" or
"uncertificated
form" in relation to a share or other security, a share
or other security title to which is recorded in the
relevant register of the share or security as being
held in uncertificated form in CREST, and title to
which, by virtue of the Regulations, may be
transferred by means of CREST
"US" or "United States" the United States of America, its territories and
possessions, all areas subject to its jurisdiction
or any subdivision thereof, any State of the United
States and the District of Columbia
"US Depositary" Morgan Guaranty Trust of New York in its capacity
as depositary for the Offer in the US
"US GAAP" generally accepted accounting practices and
principles in the United States
"US Holder" a holder of LucasVarity Securities that is (a) an
individual who is a citizen or resident of the
United States, (b) a corporation, partnership or
other entity created or organised in or under the
laws of the US or any political subdivision
thereof, (c) an estate the income of which is
subject to US federal income taxation regardless of
its source or (d) a trust which is subject to the
supervision of a court within the US and the
control of a US fiduciary as described in section
7701(a)(30) of the Internal Revenue Code
"US Persons" US persons as defined in Regulation S of the US
Securities Act
"US Securities Act" the US Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder
"L" or "pounds sterling" or
"pence" the lawful currency of the United Kingdom
"US$" or "US dollar" the lawful currency of the United States
VIII-4
<PAGE> 165
ACCEPTANCES IN RESPECT OF LUCASVARITY SHARES
Duly completed Acceptance Form(s), accompanied by certificates in respect of
LucasVarity Shares and/or other documents of title, should be delivered to the
UK Receiving Agent or the US Depositary at one of the addresses set out below.
The UK Receiving Agent for the Offer is:
COMPUTERSHARE SERVICES PLC
For information call:
+44 (0)117 305 1001
<TABLE>
<S> <C>
By Mail: By Hand:
Computershare Services PLC Computershare Services PLC
PO Box 859 7th Floor Jupiter House
The Pavilions Triton Court
Bridgwater Road 14 Finsbury Square
Bristol BS99 1XZ London EC2A 1BR
</TABLE>
ACCEPTANCES IN RESPECT OF LUCASVARITY ADSS
Manually signed facsimile copies of the Letter of Transmittal will be accepted.
The Letter of Transmittal, LucasVarity ADRs and any other required documents
should be sent or delivered by each holder of LucasVarity ADSs or his broker,
dealer, commercial bank, trust company or other nominee to the US Depositary at
one of its addresses set out below.
The US Depositary for the Offer is:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Overnight Courier:
Morgan Guaranty Trust Company (781) 794-6333 Morgan Guaranty Trust Company
of New York (for Eligible Institutions of New York
Corporate Reorganization Only) Corporate Reorganization
P.O. Box 8216 40 Campanelli Drive
Boston, MA 02266-8216 Confirm by telephone: Braintree, MA 02184
(781) 794-6388
By Hand:
Morgan Guaranty Trust Company of New York
Securities Transfer & Reporting Services (STARS)
100 William Street Galleria
New York, NY 10038
</TABLE>
<PAGE> 166
ADDITIONAL INFORMATION
Any questions or requests for assistance or additional copies of this document,
the Acceptance Form(s) and the Notice of Guaranteed Delivery or the Letter of
Transmittal may be directed to Georgeson & Company Inc., the Information Agent,
at its address and telephone number listed below or to the US Depositary or UK
Receiving Agent at their respective addresses and telephone numbers mentioned
above. You may also contact your local broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Bankers and Brokers Call Collect: (212) 440-9800
ALL OTHERS CALL TOLL FREE: (800) 223-2064
THE OFFER IS BEING MADE ON BEHALF OF THE OFFEROR BY:
Morgan Guaranty Trust Company of New York
P.O. Box 61
60 Victoria Embankment
London EC4Y 0JP
+ 44 (0)171 325 1000
THE US DEALER MANAGER FOR THE OFFER IS:
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
(877) 576-2040
<PAGE> 167
(LOGO) Printed in London U39747
<PAGE> 1
Exhibit (a)(2)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. THIS LETTER OF
TRANSMITTAL MAY NOT BE USED TO ACCEPT THE OFFER FOR ORDINARY SHARES OF
LUCASVARITY PLC; THE FORM OF ACCEPTANCE, AUTHORITY AND ELECTION IS THE
APPROPRIATE DOCUMENT FOR SUCH PURPOSES. In considering what action you should
take, you are recommended immediately to seek your own financial advice from
your stockbroker, solicitor, accountant or other independent financial advisor.
If you have sold or otherwise transferred all your American Depositary
Shares ("LucasVarity ADSs") of LucasVarity plc ("LucasVarity"), please pass this
document and all accompanying documents as soon as possible to the purchaser or
transferee, or to the bank, stockbroker or other agent through whom the sale or
transfer was effected for transmission to the purchaser or transferee. However,
such documents should not be distributed, forwarded or transmitted in or into
Australia, Canada or Japan.
Morgan Guaranty Trust Company of New York ("J.P. Morgan") is acting for TRW
Automotive UK (the "Offeror") and TRW Inc. ("TRW") and no one else, in relation
to the offer to purchase, upon the terms and subject to the Conditions set forth
in the Offer to Purchase dated 6 February, 1999 (the "Offer to Purchase"), this
Letter of Transmittal and the related Form of Acceptance (collectively, and as
amended from time to time, the "Offer") (i) all outstanding ordinary shares of
25p each of LucasVarity ("LucasVarity Shares") for 288p per LucasVarity Share in
cash and (ii) all outstanding LucasVarity ADSs, each representing ten
LucasVarity Shares and evidenced by American Depositary Receipts ("LucasVarity
ADRs") for L28.80 per LucasVarity ADS in cash. J.P. Morgan will not be
responsible to anyone other than the Offeror and TRW for providing the
protections afforded to customers of J.P. Morgan nor for providing advice in
relation to the Offer. J.P. Morgan is acting through J.P. Morgan Securities Inc.
for the purpose of making the Offer in the United States.
- --------------------------------------------------------------------------------
LETTER OF TRANSMITTAL
TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
LUCASVARITY PLC
PURSUANT TO THE OFFER TO PURCHASE DATED 6 FEBRUARY, 1999
BY
J.P. MORGAN
ON BEHALF OF
TRW AUTOMOTIVE UK
A WHOLLY OWNED SUBSIDIARY OF
TRW INC.
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 PM (LONDON
TIME), 10:00 AM (NEW YORK CITY TIME) ON 9 MARCH, 1999, UNLESS EXTENDED. AT THE
CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL
CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED,
WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14
CALENDAR DAYS. HOLDERS OF LUCASVARITY SECURITIES WILL HAVE THE RIGHT TO WITHDRAW
THEIR ACCEPTANCES OF THE OFFER DURING THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF LUCASVARITY ADSS TENDERED
- ------------------------------------------------------------------------------------------------------------------
NAME(s) AND ADDRESS(es) OF REGISTERED HOLDER(s)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(s) APPEAR(s) ON ADS(s) TENDERED
ADR(s)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
ADR OF ADSs NUMBER
SERIAL REPRESENTED OF ADSs
NUMBER(s)* BY ADR(s)* TENDERED**
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed for book-entry transfers.
** Unless otherwise indicated, it will be assumed that all LucasVarity ADSs represented by the ADRs delivered to
the US Depositary are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
THE US DEPOSITARY FOR THE OFFER IS:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Overnight Courier:
Morgan Guaranty Trust Company (781) 794-6333 Morgan Guaranty Trust Company
of New York (for Eligible Institutions of New York
Corporate Reorganization Only) Corporate Reorganization
P.O. Box 8216 40 Campanelli Drive
Boston, MA 02266-8216 Confirm by telephone: Braintree, MA 02184
(781) 794-6388
</TABLE>
By Hand:
Morgan Guaranty Trust Company of New York
Securities Transfer & Reporting Services (STARS)
100 William Street Galleria
New York, NY 10038
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET OUT ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
ACCEPTING HOLDERS OF LUCASVARITY ADSs EVIDENCED BY LUCASVARITY ADRs WILL
RECEIVE PAYMENT IN DOLLARS INSTEAD OF POUNDS STERLING UNLESS THEY ELECT
OTHERWISE HEREIN TO RECEIVE PAYMENT IN POUNDS STERLING. IF YOU WISH TO RECEIVE
POUNDS STERLING INSTEAD OF DOLLARS, YOU MUST PLACE AN "X" IN THE BOX ENTITLED
"POUNDS STERLING PAYMENT ELECTION."
ACCEPTANCE OF THE OFFER IN RESPECT OF LUCASVARITY SHARES (EXCEPT INSOFAR AS
THEY ARE REPRESENTED BY LUCASVARITY ADSs EVIDENCED BY LUCASVARITY ADRs) CANNOT
BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold LucasVarity Shares
that are not represented by LucasVarity ADSs, you can obtain a Form of
Acceptance for accepting the Offer in respect of those LucasVarity Shares from
the Information Agent or the UK Receiving Agent. See Instruction 13 of this
Letter of Transmittal.
Delivery of a Letter of Transmittal, American Depositary Receipts
evidencing LucasVarity ADSs ("LucasVarity ADRs") (or book-entry transfer of such
LucasVarity ADSs evidenced by LucasVarity ADRs) and any other required documents
to the US Depositary by LucasVarity ADS holders will be deemed (without any
further action by the US Depositary) to constitute an acceptance of the Offer by
such holder with respect to such LucasVarity ADSs evidenced by LucasVarity ADRs
subject to the terms and Conditions set out in the Offer to Purchase and this
Letter of Transmittal. Capitalized terms and certain other terms used in this
Letter of Transmittal and not otherwise defined herein shall have the respective
meanings assigned to them in the Offer to Purchase.
This Letter of Transmittal is to be used either if LucasVarity ADRs
evidencing LucasVarity ADSs are to be forwarded herewith or if delivery of
LucasVarity ADSs is to be made by book-entry transfer to an account maintained
by the US Depositary at a Book-Entry Transfer Facility as defined in and
pursuant to the procedures for book-entry transfer set out in "Procedures for
tendering LucasVarity ADSs -- Book-entry transfer" in paragraph 11(c) of Part B
of Appendix I to the Offer to Purchase.
<PAGE> 3
[ ] CHECK BOX IF LUCASVARITY ADSs IN RESPECT OF WHICH THE OFFER IS BEING
ACCEPTED ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE US DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER LUCASVARITY ADSs EVIDENCED BY LUCASVARITY ADRs BY BOOK-ENTRY
TRANSFER):
Name of Delivering
Institution ________________________________________________________________
Account Number
Transaction Code
Number ____________________________________________________________________
If a holder of LucasVarity ADSs wishes to accept the Offer and LucasVarity
ADRs evidencing such LucasVarity ADSs are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis, or if
time will not permit all required documents to reach the US Depositary prior to
the expiry of the Subsequent Offer Period, such holder's acceptance of the Offer
may nevertheless be effected using the guaranteed delivery procedure set out
under "Procedures for tendering LucasVarity ADSs -- Guaranteed Delivery
Procedures" in paragraph 11(h) of Part B of Appendix I to the Offer to Purchase.
See Instruction 2 of this Letter of Transmittal. HOWEVER, RECEIPT OF A NOTICE OF
GUARANTEED DELIVERY WILL NOT BE TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF
SATISFYING THE ACCEPTANCE CONDITION.
[ ] CHECK BOX IF LUCASVARITY ADSs IN RESPECT OF WHICH THE OFFER IS BEING
ACCEPTED ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE US DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of registered
owner(s) _______________________________________________________________
Date of execution of Notice of Guaranteed
Delivery ______________________________________________
Name of institution that guaranteed
delivery ____________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby instructs the US Depositary to accept the Offer on
behalf of the undersigned with respect to the LucasVarity ADSs evidenced by
LucasVarity ADRs specified in the box entitled "Description of LucasVarity ADSs
Tendered" subject to the terms and conditions set out in the Offer to Purchase
and this Letter of Transmittal, by informing the Offeror in writing that the
Offer has been so accepted. The undersigned hereby acknowledges that delivery of
this Letter of Transmittal, the LucasVarity ADRs evidencing tendered LucasVarity
ADSs (or book-entry transfer of such LucasVarity ADSs evidenced by LucasVarity
ADRs) and any other required documents to the US Depositary by a holder of
LucasVarity ADSs will be deemed (without any further action by the US
Depositary) to constitute acceptance of the Offer by such holder in respect of
such holder's LucasVarity ADSs, subject to the terms and conditions set out in
the Offer to Purchase and this Letter of Transmittal.
The undersigned understands that acceptance of the Offer by the undersigned
pursuant to the procedures described herein and in the instructions hereto,
subject to the withdrawal rights described in the Offer to Purchase, will
constitute a binding agreement between the undersigned and the Offeror upon the
terms and subject to the conditions of the Offer. IF ACCEPTANCE HAS BEEN MADE IN
RESPECT OF THE LUCASVARITY ADSs THEN A SEPARATE ACCEPTANCE IN RESPECT OF THE
LUCASVARITY SHARES REPRESENTED BY SUCH LUCASVARITY ADSs MAY NOT BE MADE.
The undersigned hereby delivers to the US Depositary the above-described
LucasVarity ADSs evidenced by LucasVarity ADRs for which the Offer is being
accepted, in accordance with the terms and Conditions of the Offer to Purchase
and this Letter of Transmittal, receipt of which is hereby acknowledged.
Upon the terms of the Offer (including, if the Offer is extended, revised
or amended, the terms or conditions of any such extension, revision or
amendment), and effective at the time that all conditions to the Offer have been
satisfied, fulfilled or, where permitted, waived (at which time the Offeror will
give notice thereof to the US Depositary), and if he or she has not validly
withdrawn his or her acceptance, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Offeror all right, title and interest in
and to all LucasVarity ADSs evidenced by LucasVarity ADRs with respect to which
the Offer is being accepted (and any and all LucasVarity ADSs or other
securities or rights issuable in respect of such LucasVarity ADSs) and
irrevocably constitutes and appoints the US Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such LucasVarity ADSs
(and any such other LucasVarity ADSs, securities or rights), with full power of
substitution and resubstitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver LucasVarity ADRs for
such LucasVarity ADSs (and any such other LucasVarity ADSs, securities or
rights) or accept transfer of ownership of such LucasVarity ADSs (and any such
other LucasVarity ADSs, securities or rights) on the account books maintained by
a Book-Entry Transfer Facility together, in any such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Offeror,
(b) present such LucasVarity ADRs for such LucasVarity ADSs (and any other
LucasVarity ADSs, securities or rights) for transfer, and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
LucasVarity ADSs (and any such other LucasVarity ADSs, securities or rights),
all in accordance with the terms of the Offer.
The undersigned agrees that its execution hereof (together with any
signature guarantees) and its delivery to the US Depositary shall constitute an
authority to any Director of the Offeror or J.P. Morgan in accordance with the
terms of paragraph 6 of Part B of Appendix I to the Offer to Purchase.
The undersigned agrees that effective from and after the date hereof or, if
later, the date on which all conditions to the Offer are satisfied, fulfilled
or, where permitted, waived: (a) the Offeror or its agents shall be entitled to
direct the exercise of any votes attaching to LucasVarity Shares represented by
any LucasVarity ADSs evidenced by LucasVarity ADRs in respect of which the Offer
has been accepted or is deemed to have been accepted (the "Accepted ADSs") and
any other rights and privileges attaching to such LucasVarity Shares, including
any right to requisition a general meeting of LucasVarity or of any class of its
shareholders, and (b) the execution of the Letter of Transmittal by a holder of
LucasVarity ADSs (together with any signature guarantees) and its delivery to
the US Depositary shall constitute in respect of Accepted ADSs: (i) an authority
to LucasVarity or its agents from the undersigned to send any notice, circular,
warrant, document or other communications that may be required to be sent to him
as a LucasVarity ADS holder to the Offeror at its registered office, (ii) an
authority to the Offeror or its agent to sign any consent to short
<PAGE> 5
notice of a general meeting or separate class meeting on behalf of the holder of
Accepted ADSs and/or to execute a form of proxy in respect of the Accepted ADSs
appointing any person nominated by the Offeror to attend general meetings and
separate class meetings of LucasVarity or its members (or any of them) (or any
adjournments thereof) and to exercise the votes attaching to LucasVarity Shares
represented by such Accepted ADSs on his behalf and (iii) the agreement of the
undersigned not to exercise any such rights without the consent of the Offeror
and the irrevocable undertaking of the undersigned not to appoint a proxy for or
to attend general meetings or separate class meetings of LucasVarity in respect
of such Accepted ADSs.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to accept the Offer and to sell, assign and transfer
the LucasVarity ADSs evidenced by LucasVarity ADRs (and LucasVarity Shares
represented by such LucasVarity ADSs) in respect of which the Offer is being
accepted or deemed to be accepted (and any and all other LucasVarity ADSs,
securities or rights issued or issuable in respect of such LucasVarity ADSs)
and, when the same are purchased by the Offeror, the Offeror will acquire good
title thereto, free from all liens, equitable interests, charges, and
encumbrances and together with all rights attaching thereto, including voting
rights and the right to receive all dividends and other distributions declared,
made or paid on or after 5 January, 1999, (except as provided in the Offer to
Purchase) with respect to LucasVarity Shares represented by the LucasVarity
ADSs. The undersigned will, upon request, execute any additional documents
deemed by the US Depositary or the Offeror to be necessary or desirable to
complete the sale, assignment and transfer of the LucasVarity ADSs evidenced by
LucasVarity ADRs in respect of which the Offer is being accepted (and any and
all other LucasVarity ADSs, securities or rights).
The undersigned irrevocably undertakes, represents, and warrants to and
agrees with the Offeror (so as to bind him, his personal representative, heirs,
successors and assigns) to the effect that the undersigned: (i) has not received
or sent copies of this document or any Form of Acceptance or any related
documents in, into or from Canada, Australia or Japan and has not otherwise
utilized in connection with the Offer, directly or indirectly, the Canadian,
Australian or Japanese mails or any means or instrumentality (including, without
limitation, facsimile transmission, telex and telephone) of interstate or
foreign commerce, or any facilities of a national securities exchange, of
Canada, Australia or Japan, (ii) is accepting the Offer from outside Canada,
Australia or Japan and (iii) is not an agent or fiduciary acting on a
non-discretionary basis for a principal, unless such agent is an authorized
employee of such principal or such principal has given any instructions with
respect to the Offer from outside Canada, Australia or Japan.
All authority herein conferred or agreed to be conferred pursuant to this
Letter of Transmittal shall be binding upon the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and shall
not be affected by, and shall survive, the death or incapacity of the
undersigned. Except as stated in the Offer to Purchase, this acceptance is
irrevocable.
Unless otherwise indicated herein under "Special Payment Instructions," the
undersigned hereby instructs the US Depositary to issue, or cause to be issued,
the check for the purchase price in the name(s) of the registered holder(s)
appearing under "Description of LucasVarity ADSs Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," the undersigned
hereby instructs the US Depositary to mail, or cause to be mailed, the check for
the purchase price and/or return, or cause to be returned, any LucasVarity ADRs
evidencing LucasVarity ADSs in respect of which the Offer is not being accepted
or which are not purchased (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of
LucasVarity ADSs Tendered." In the event that the "Special Payment Instructions"
and/or the "Special Delivery Instructions" are completed, the undersigned hereby
instructs the US Depositary to (i) issue and/or mail, or cause to be issued
and/or mailed, the check for the purchase price, if any, in the name of, and/or
to the address of, the person or persons so indicated, and/or (ii) return, or
cause to be returned, any LucasVarity ADRs evidencing LucasVarity ADSs in
respect of which the Offer is not being accepted or which are not purchased, if
any, to the person at the address so indicated. In the case of a book-entry
delivery of LucasVarity ADSs evidenced by LucasVarity ADRs, the undersigned
hereby instructs the US Depositary to credit the account maintained at the
Book-Entry Transfer Facility with any LucasVarity ADSs in respect of which the
Offer is not being accepted or which are not purchased. The undersigned
recognizes that the US Depositary will not transfer any LucasVarity ADSs which
are not purchased pursuant to the Offer from the name of the registered holder
thereof to any other person.
<PAGE> 6
If the box headed "Pounds Sterling Payment Election" is not checked, the
undersigned hereby instructs the relevant payment agent (either the US
Depositary or the UK Receiving Agent) to convert all amounts payable pursuant to
the Offer from pounds sterling to US dollars at the exchange rate obtainable by
the relevant payment agent (either the US Depositary or the UK Receiving Agent)
on the spot market in London at approximately 12:00 noon (London time) on the
date the cash consideration is made available by the Offeror to the relevant
payment agent for delivery to holders of LucasVarity ADSs and pay such amounts
by check payable in US dollars. The actual amount of US dollars received will
depend upon the exchange rate prevailing on the day funds are made available to
the relevant payment agent by the Offeror. LucasVarity ADS holders should also
be aware that the US dollar/pound sterling exchange rate which is prevailing at
the date on which the undersigned executes this Letter of Transmittal and on the
date of dispatch of payment may be different from that prevailing on the day
funds are made available to the relevant payment agent by the Offeror. In all
cases, fluctuations in the US dollar/pounds sterling exchange rate are at the
risk of accepting LucasVarity ADS holders who do not elect to receive their
consideration in pounds sterling. Such currency exchange will be effected by the
relevant payment agent on behalf of the requesting LucasVarity ADS holder and
the Offeror shall have no responsibility or obligation with respect thereto.
SUBJECT TO THE TERMS OF THE OFFER TO PURCHASE, THIS LETTER OF TRANSMITTAL
SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND PAYMENT OF CONSIDERATION
PURSUANT TO THE OFFER SHALL NOT BE MADE, UNTIL LUCASVARITY ADRs EVIDENCING THE
LUCASVARITY ADSs IN RESPECT OF WHICH THE OFFER IS BEING ACCEPTED AND ALL OTHER
REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US DEPOSITARY AS PROVIDED IN
THE OFFER TO PURCHASE AND THIS LETTER OF TRANSMITTAL.
[ ] CHECK HERE IF ANY LUCASVARITY ADRs REPRESENTING LUCASVARITY ADSs THAT YOU
OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 12.
Number of LucasVarity ADSs represented by the lost, stolen or destroyed
LucasVarity ADRs ______
<PAGE> 7
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
[ ] Check box ONLY if the check for the purchase price with respect to
LucasVarity ADSs purchased is to be issued in the name of someone
other than the undersigned.
Issue to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
[ ] Check box ONLY if the check for the purchase price with respect to
LucasVarity ADSs purchased and/or LucasVarity ADRs evidencing
LucasVarity ADSs in respect of which the Offer is not accepted or
which are not purchased are to be mailed to someone other than the
undersigned, or to the undersigned at an address other than that
shown above.
Mail [ ] Check [ ] ADR certificates to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
POUNDS STERLING PAYMENT ELECTION
[ ] Check box ONLY if you wish to receive all (but not part) of the amount of
cash consideration to be paid by a check in pounds sterling. If you do
not check this box you will receive payment by a check in US dollars and
the relevant payment agent (either the US Depositary or the UK Receiving
Agent) will arrange for the conversion of the pound sterling amounts
payable to you to US dollars at the exchange rate obtainable by the
relevant payment agent on the spot market in London at approximately
12:00 noon (London time) on the date the cash consideration is made
available by the Offeror to the relevant payment agent for delivery to
holders of LucasVarity ADSs.
<PAGE> 8
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
Dated:
- ----------------------, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
LucasVarity ADRs evidencing LucasVarity ADSs or by person(s) to whom LucasVarity
ADRs surrendered have been assigned and transferred, as evidenced by
endorsement, stock powers and other documents transmitted herewith. If signature
is by any trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or others acting in a fiduciary or representative capacity,
please set forth the following and see Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------
Tax Identification or Social Security No.:
- ---------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on the
Letter of Transmittal if (a) the Letter of Transmittal is signed by the
registered holder(s) of the LucasVarity ADSs evidenced by LucasVarity ADRs in
respect of which the Offer is being accepted herewith and such holder(s) have
not completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
the Offer is being accepted in respect of such LucasVarity ADSs for the account
of an Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by a financial institution (including most banks,
savings and loan associations and brokerage houses) which is a participant in
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Program or the Stock Exchange Medallion Program (an "Eligible
Institution"). See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND LUCASVARITY ADSS. This Letter of
Transmittal is to be completed either if LucasVarity ADRs evidencing LucasVarity
ADSs are to be forwarded herewith or if delivery is to be made by book-entry
transfer to an account maintained by the US Depositary at a Book-Entry Transfer
Facility pursuant to the procedures for book-entry transfer set out in
"Procedures for tendering LucasVarity ADSs -- Book-entry transfer" in paragraph
11(c) of Part B of Appendix I to the Offer to Purchase. LucasVarity ADRs
evidencing LucasVarity ADSs or confirmation of a book-entry transfer of such
LucasVarity ADSs into the US Depositary's account at a Book-Entry Transfer
Facility, as well as a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) together with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message and any other documents required by this Letter of Transmittal, must be
delivered to the US Depositary at one of its addresses set forth herein.
LucasVarity ADS holders whose LucasVarity ADRs are not immediately
available or who cannot deliver their LucasVarity ADRs and all other required
documents to the US Depositary or complete the procedures for book-entry
transfer prior to the expiration of the Subsequent Offer Period may accept the
Offer with respect to their LucasVarity ADSs by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set out in "Procedures for tendering LucasVarity ADSs -- Guaranteed
Delivery Procedures" in paragraph 11(h) of Part B of Appendix I to the Offer to
Purchase. Pursuant to the guaranteed delivery procedures (a) acceptance must be
made by or through an Eligible Institution, (b) a properly completed and duly
executed Notice of Guaranteed Delivery substantially in the form provided by the
Offeror must be received by the US Depositary prior to the expiration of the
Subsequent Offer Period and (c) LucasVarity ADRs evidencing the LucasVarity ADSs
in respect of which the Offer is being accepted (or, in the case of LucasVarity
ADSs held in book-entry form, timely confirmation of the book-entry transfer of
such LucasVarity ADSs into the US Depositary's account at a Book-Entry Transfer
Facility as described in the Offer to Purchase) together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message and any other documents required by this
Letter of Transmittal, are received by the US Depositary within three business
days after the date of execution of such Notice of Guaranteed Delivery. For
these purposes, a "business day" is any day on which the New York Stock Exchange
is open for business.
THE METHOD OF DELIVERY OF LUCASVARITY ADSs EVIDENCED BY LUCASVARITY ADRs
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF
LUCASVARITY ADSs ACCEPTING THE OFFER AND THE DELIVERY WILL BE MADE ONLY WHEN
ACTUALLY RECEIVED BY THE US DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY
TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
<PAGE> 10
No alternative, conditional or contingent acceptance will be accepted and
no fractional LucasVarity ADSs will be purchased. All accepting LucasVarity ADS
holders, by execution of this Letter of Transmittal, waive any right to receive
any notice of the acceptance of their LucasVarity ADSs for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
serial numbers of the certificates and/or the number of LucasVarity ADSs should
be listed on a separate schedule attached hereto.
4. PARTIAL ACCEPTANCES (NOT APPLICABLE TO BOOK-ENTRY TRANSFERS). If the
Offer is to be accepted in respect of less than all of the LucasVarity ADSs
evidenced by any LucasVarity ADRs delivered to the US Depositary herewith, fill
in the number of LucasVarity ADSs in respect of which the Offer is being
accepted in the box entitled "Number of ADSs Tendered." In such case, a new
LucasVarity ADR for the remainder of the LucasVarity ADSs (in respect of which
the Offer is not being accepted) represented by the old LucasVarity ADR will be
sent to the registered holder as promptly as practicable following the date on
which the LucasVarity ADSs in respect of which the Offer has been accepted are
purchased.
The Offer will be deemed to have been accepted in respect of all
LucasVarity ADSs evidenced by LucasVarity ADRs delivered to the US Depositary
unless otherwise indicated. In the case of partial acceptances, LucasVarity ADSs
in respect of which the Offer was not accepted will not be reissued to a person
other than the registered holder.
5. SIGNATURE ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
LucasVarity ADSs in respect of which the Offer is being accepted hereby, the
signature(s) must correspond with the name(s) as written on the face of the
certificates without any change whatsoever.
If any of the LucasVarity ADSs evidenced by LucasVarity ADRs in respect of
which the Offer is being accepted hereby are owned of record by two or more
owners, all such owners must sign this Letter of Transmittal.
If any of the LucasVarity ADSs in respect of which the Offer is being
accepted are registered in different names on different LucasVarity ADRs, it
will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of LucasVarity ADRs.
If this Letter of Transmittal or any LucasVarity ADRs or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and submit proper
evidence satisfactory to TRW of their authority to so act.
When this Letter of Transmittal is signed by the registered holder(s) of
the LucasVarity ADSs listed and transmitted hereby, no endorsements of
certificates or separate stock powers are required unless payment of the
purchase price is to be issued to a person other than the registered holder(s).
Signatures on such LucasVarity ADRs or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the LucasVarity ADSs listed, LucasVarity ADRs must be
endorsed or accompanied by appropriate stock powers signed exactly as the
name(s) of the registered holder(s) appear(s) on LucasVarity ADRs evidencing
such LucasVarity ADSs. Signatures on such LucasVarity ADRs or stock powers must
be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Offeror will pay or cause to be paid any
stock transfer taxes with respect to the transfer and sale to it or its order of
LucasVarity ADSs evidenced by LucasVarity ADRs pursuant to the Offer. If,
however, payment of the purchase price is to be made to any persons other than
the registered holder(s), or if LucasVarity ADSs in respect of which the Offer
is being accepted are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s) or such person(s)) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to LucasVarity ADRs listed in this Letter of
Transmittal.
<PAGE> 11
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price is to be issued in the name of a person other than the signer of
this Letter of Transmittal or if the check for the purchase price is to be sent
and/or any LucasVarity ADRs evidencing LucasVarity ADSs in respect of which the
Offer is not being accepted or which are not purchased are to be returned to a
person other than the signer of this Letter of Transmittal or to an address
other than that shown on the reverse, the boxes labeled "Special Payment
Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal should be completed.
8. POUNDS STERLING PAYMENT ELECTION. If the check for the purchase price
is to be issued in pounds sterling, please check the box marked "Pounds Sterling
Payment Election." If you do not check such box all pound sterling amounts
payable pursuant to the Offer will be converted by the relevant payment agent
(either the US Depositary or the UK Receiving Agent) into US dollars at the
exchange rate obtainable by the relevant payment agent on the spot market in
London at approximately 12:00 noon (London time) on the date the cash
consideration is made available by the Offeror to the relevant payment agent for
delivery to holders of LucasVarity ADSs.
9. WAIVER OF CONDITIONS. The Offeror reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer, in whole
or in part, to the extent permitted by applicable law and the rules of the City
Code.
10. 31% US BACKUP WITHHOLDING. In order to avoid "backup withholding" of
US federal income tax on any cash payment received upon the surrender of
LucasVarity ADSs pursuant to the Offer, a LucasVarity ADS holder must, unless an
exemption applies, provide the US Depositary with his or her correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9 on this Letter of
Transmittal and certify, under penalties of perjury, that such number is correct
and that he or she is not subject to backup withholding. If the correct TIN is
not provided, a $50 penalty may be imposed by the Internal Revenue Service
("IRS") and cash payments made in exchange for the surrendered LucasVarity ADSs
may be subject to backup withholding. If backup withholding applies, the US
Depositary is required to withhold 31% of any payment made pursuant to the
Offer.
Backup withholding is not an additional US federal income tax. Rather, the
US federal income tax liability of persons subject to backup withholding will be
reduced by the amount of such tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be applied for from the IRS.
The TIN that is to be provided on the Substitute Form W-9 is that of the
registered holder(s) of the LucasVarity ADSs or of the last transferee appearing
on the transfer attached to, or endorsed on, the LucasVarity ADSs. The TIN for
an individual is his or her social security number. Each tendering LucasVarity
ADS holder generally is required to notify the US Depositary of his or her
correct TIN by completing the Substitute Form W-9 contained herein, certifying
that the TIN provided on Substitute Form W-9 is correct (or that such holder is
awaiting a TIN) and that (1) such holder has not been notified by the IRS that
such holder is subject to backup withholding as a result of a failure to report
all interest or dividends or (2) the IRS has notified such holder that such
holder is no longer subject to backup withholding (see Part III of Substitute
Form W-9). Notwithstanding that the "TIN Applied For" box is checked (and the
certification is completed), the US Depositary will withhold 31% on any cash
payment of the purchase price for the LucasVarity ADSs made prior to the time it
is provided with a properly certified TIN.
Exempt persons (including, among others, corporations) are not subject to
backup withholding. A foreign individual or foreign entity may qualify as an
exempt person by submitting a statement (on Form W-8), signed under penalties of
perjury, certifying such person's foreign status. Form W-8 can be obtained from
the US Depositary. A LucasVarity ADS holder should consult his or her tax
advisor as to his or her qualification for an exemption from backup withholding
and the procedure for obtaining such exemption.
For additional guidance, see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the US Depositary at the address and telephone number set forth
above, to the Information Agent or the
<PAGE> 12
Dealer Manager at the addresses and telephone numbers set forth below, or to the
UK Receiving Agent at the appropriate address and telephone number set forth in
the Offer to Purchase.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any LucasVarity ADR
evidencing LucasVarity ADSs has been lost, destroyed or stolen, the holder
thereof should promptly notify the US Depositary by checking the box immediately
preceding the special payment/special delivery instructions boxes and indicating
the number of LucasVarity ADSs evidenced by such lost, destroyed or stolen
LucasVarity ADRs. The holder thereof will then be instructed as to the steps
that must be taken in order to replace such LucasVarity ADRs. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen LucasVarity ADRs have been followed.
13. HOLDERS OF LUCASVARITY SHARES NOT REPRESENTED BY LUCASVARITY
ADSS. Holders of LucasVarity Shares have been sent a Form of Acceptance with
the Offer to Purchase and may not accept the Offer in respect of LucasVarity
Shares pursuant to this Letter of Transmittal except insofar as those shares are
represented by LucasVarity ADSs. If any holder of LucasVarity Shares which are
not represented by LucasVarity ADSs needs to obtain a copy of a Form of
Acceptance, such holder should contact the UK Receiving Agent at the appropriate
address and telephone number set forth in the Offer to Purchase or the
Information Agent.
<PAGE> 13
PAYER'S NAME: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS DEPOSITARY AGENT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SUBSTITUTE PART I -- Taxpayer Identification Number (TIN) -------------------------------
FORM W-9 Please enter your correct number in the Social Security Number
DEPARTMENT OF THE appropriate box below. NOTE: if the account is or
TREASURY more than one name, see the chart on the
INTERNAL REVENUE SERVICE enclosed form, Guidelines for Certification of -------------------------------
Taxpayer Identification Number on Substitute Employer Identification Number
PAYER'S REQUEST FOR TAXPAYER Form W-9, for guidance on which number to If you do not have a TIN, see the
IDENTIFICATION NUMBER enter. instructions "How to Get a TIN" and
AND CERTIFICATION check the box below.
TIN Applied For [ ]
----------------------------------------------------------------------------------------
PART II -- For Payees Exempt from Backup Withholding (see instructions)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PART III CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued
to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to
report all interest and dividends or (c) the IRS has notified me that I am no longer subject to backup withholding,
and
(3) All other information provided on this form is true, correct and complete.
Certification Instructions. You must cross out Item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because you have failed to report all interest and dividends on your tax return. Please
indicate the taxpayer's name associated with the TIN if other than the first name appearing in the registration:
(X)
______________________________________________________________________________________________________________________
(Please Print)
(X) Signature(s) Date ____________
(Please Sign)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
THE INFORMATION AGENT FOR THE OFFER IS:
f
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
Georgeson
All Others Call Toll-Free: (800) 223-2064
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN SECURITIES INC.
60 Wall Street
New York, New York 10260
(877) 576-2040
<PAGE> 14
(LOGO) Printed in London U39773
<PAGE> 1
Exhibit (a)(3)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. THIS FORM MAY
NOT BE USED TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES OF LUCASVARITY
PLC; THE LETTER OF TRANSMITTAL IS THE APPROPRIATE DOCUMENT FOR SUCH PURPOSES. IF
YOU ARE IN ANY DOUBT ABOUT THE OFFER OR THE ACTION YOU SHOULD TAKE, YOU ARE
RECOMMENDED IMMEDIATELY TO SEEK YOUR OWN PERSONAL FINANCIAL ADVICE FROM YOUR
STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL
ADVISER DULY AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986.
THIS FORM OF ACCEPTANCE, AUTHORITY AND ELECTION (THE "FORM") SHOULD BE READ IN
CONJUNCTION WITH THE ACCOMPANYING OFFER TO PURCHASE DATED 6 FEBRUARY, 1999 (THE
"OFFER TO PURCHASE"). The definitions used in the Offer to Purchase apply in
this Form, unless otherwise defined herein. The provisions of Appendix I to the
Offer to Purchase are deemed to be incorporated in and form part of this Form
and should be read carefully by each LucasVarity Shareholder.
IF YOU HAVE SOLD OR OTHERWISE TRANSFERRED ALL YOUR LUCASVARITY SHARES, PLEASE
SEND THIS FORM, THE OFFER TO PURCHASE AND THE REPLY-PAID ENVELOPE AS SOON AS
POSSIBLE TO THE PURCHASER OR TRANSFEREE OR TO THE STOCKBROKER, BANK OR OTHER
AGENT THROUGH WHOM THE SALE OR TRANSFER WAS EFFECTED, FOR DELIVERY TO THE
PURCHASER OR TRANSFEREE. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE FORWARDED OR
TRANSMITTED IN OR INTO CANADA, AUSTRALIA OR JAPAN.
IF YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD REFER TO YOUR CREST SPONSOR
BEFORE COMPLETING THE FORM.
The Offer is not being made, directly or indirectly, in or into, or by use of
the mails of, or by any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of, or any
facility of a national securities exchange of, Canada, Australia or Japan and
will not be capable of acceptance by any such use, means, instrumentality or
facility. Accordingly, neither this Form nor the Offer to Purchase is being or
may be mailed or otherwise forwarded, distributed or sent in, into or from
Canada, Australia or Japan. All LucasVarity Shareholders (including custodians,
nominees and trustees) who would, or otherwise intend to, forward this Form
and/or the Offer to Purchase, should read the further details in this regard
which are contained in paragraphs 8 and 10 of Part B of Appendix I to the Offer
to Purchase before taking any action.
The Loan Notes which may be issued pursuant to the Offer have not been, and will
not be, listed on any stock exchange. The Loan Notes have not been, and will not
be, registered under the US Securities Act or under the laws of any State of the
United States and may not be offered, sold or delivered, directly or indirectly,
in or into the United States or to, or for the account or benefit of, any US
Person. The Loan Notes may not be offered, sold or delivered, directly or
indirectly, in or into Canada, Australia or Japan.
FORM OF ACCEPTANCE, AUTHORITY AND ELECTION
RECOMMENDED CASH OFFER FOR ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
of
LUCASVARITY PLC
by
J.P. MORGAN
on behalf of
TRW AUTOMOTIVE UK
a wholly owned subsidiary of
TRW INC.
ACCEPTANCES OF THE OFFER MUST BE RECEIVED BY
3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) on 9 MARCH, 1999
PROCEDURE FOR ACCEPTANCE
o If you wish to accept the Offer, use this Form and follow the
instructions set out on pages 2, 3 and 4. All LucasVarity Shareholders
who are individuals must sign in the presence of a witness who must
also sign where indicated. If you hold LucasVarity Shares jointly with
others, you must arrange for all your co-holders to sign this Form.
o The information on page 4 of this Form may help to answer queries you
may have about the Form and the procedure for responding to the Offer.
o Please send this Form, duly completed and signed (AND ACCOMPANIED, IF
YOUR LUCASVARITY SHARES ARE IN CERTIFICATED FORM, BY YOUR LUCASVARITY
SHARE CERTIFICATE(S) and/or other document(s) of title (if you are a
non-US holder)) either by post or by hand to Computershare Services
PLC, P.O. Box 859, The Pavilions, Bridgwater Road, Bristol BS99 1XZ, or
by hand (during normal business hours only) to Computershare Services
PLC, 7th Floor, Jupiter House, Triton Court, 14 Finsbury Square, London
EC2A 1BR, or (if you are a US holder) by post to Morgan Guaranty Trust
Company of New York, Corporate Reorganization, P.O. Box 8216, Boston,
MA 02266-8216, by courier to Morgan Guaranty Trust Company of New York,
Corporate Reorganization, 40 Campanelli Drive, Braintree, MA 02184, or
by hand to Morgan Guaranty Trust Company of New York, Securities
Transfer & Reporting Services (STARS), 100 William Street Galleria, New
York, NY 10038, as soon as possible but in any event to be received NO
LATER THAN 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) ON
9 MARCH, 1999. A first class reply-paid envelope (only for use in the
UK or the US, as the case may be) is enclosed for this purpose.
o If your LucasVarity Shares are in uncertificated form (that is, in
CREST), you should follow the instructions set out in paragraph 9(d) of
Part B of Appendix I to the Offer to Purchase in order to transfer your
LucasVarity Shares to an escrow balance. For this purpose, the
participant ID of Computershare Services PLC, which will act as escrow
agent, is 3RA39, the member account ID of Computershare Services PLC is
LUCAS and the Form of Acceptance Reference Number of this Form (for
insertion in the first eight characters of the shared note field on the
TTE Instruction) is shown next to Box 5 on page 3 of this Form. You
should ensure that the transfer to escrow settles NO LATER THAN 3.00
P.M (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) ON 9 MARCH, 1999.
o If you hold LucasVarity Shares in both certificated and uncertificated
form, you should complete a separate Form for each holding. Similarly,
you should complete a separate Form for each different member account
ID under which LucasVarity Shares are held in uncertificated form and
for each different designation under which LucasVarity Shares are held
in certificated form. You can obtain further Forms by contacting
Computershare Services PLC or Georgeson & Co Inc. on one of the
telephone numbers set out below.
o If you hold LucasVarity Shares in certificated form and your share
certificate(s) and/or other document(s) of title is/are not readily
available or is/are lost, this Form should nevertheless be completed,
signed and returned as stated above so as to be received NO LATER THAN
3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) ON 9 MARCH,
1999 and the share certificate(s) and/or other document(s) of title or
an indemnity satisfactory to the Offeror should be lodged as soon as
possible thereafter with Computershare Services PLC or Morgan Guaranty
Trust Company of New York at any of the addresses set out above (as the
case may be).
DO NOT DETACH ANY PART OF THIS FORM
IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THIS FORM, PLEASE CONTACT
COMPUTERSHARE SERVICES PLC ON +44 (0) 117 305 1001,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ON (781) 794-6388
OR GEORGESON & CO INC. ON (800) 223-2064
<PAGE> 2
PAGE 2
HOW TO COMPLETE THIS FORM
1 THE OFFER
To accept the Offer, insert in Box 1 the total number of LucasVarity Shares for
which you wish to accept the Offer, whether or not you wish to elect for the
Loan Note Alternative and/or the US dollar alternative. You must also sign Box 8
which will constitute your acceptance of the Offer and, if relevant, Boxes 4, 5,
6 and/or 7.
If no number or a number greater than your registered holding of LucasVarity
Shares is written in Box 1 and you have signed Box 8, you will be deemed to have
inserted in Box 1, and to have accepted the Offer in respect of your entire
registered holding of LucasVarity Shares (being your entire holding under the
name and address specified in Box 1A) or, if your LucasVarity Shares are in
CREST, under the participant ID and member account ID specified in Box 5. CREST
participants are requested to insert in Box 1 the same number of LucasVarity
Shares as entered on the related TTE Instruction.
Box 1A should include your full name(s) and address(es). Box 1B includes the
details of the number of LucasVarity Shares held in your name on the LucasVarity
register. If there is no name and address in Box 1A, please insert the full
name and address of the first named holder and the name(s) of any joint holders
who are accepting the Offer in Box 4.
If you have changed your address, please write your correct address in Box 4.
If your details are incorrect in some other respect, please see note 6 on page
4.
If you put "NO" in Box 6, you may be deemed not to have accepted the Offer.
COMPLETE HERE
PLEASE ENSURE YOUR SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENTS
OF TITLE ARE ENCLOSED.
2 THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative you should first complete Box 1 and then
write in Box 2 the number of LucasVarity Shares for which you wish to elect to
receive Loan Notes rather than cash under the Offer. You must also sign Box 8
and complete, if relevant, Boxes 4, 5, 6 and/or 7. If you are electing for the
US dollar alternative in respect of any of your cash consideration, you must
also complete Box 3 with the relevant figure.
If a number greater than the number of LucasVarity Shares inserted or deemed to
be inserted in Box 1 is written in Box 2 and you have signed Box 8, you will be
deemed to have elected for the Loan Note Alternative in respect of the number
inserted or deemed to be inserted in Box 1.
If you put "NO" in Box 6, you may not accept the Loan Note Alternative and must
leave Box 2 blank. If you put "NO" in Box 6 and complete Box 2, your
instructions in Box 2 will be disregarded. Each person electing for the Loan
Notes will be deemed to represent and warrant that he/she is not a US Person, a
Canadian person, an Australian person or a Japanese person and is not acquiring,
and will not be holding such Loan Notes for the account or benefit of a US
Person, a Canadian person, an Australian person or a Japanese person or with a
view to the offer, sale or delivery, directly or indirectly, of such Loan Notes
in, into or from the United States, Canada, Australia or Japan or to, or for the
account or benefit of, any US Person, Canadian person, Australian person or
Japanese person or any other person whom such transferee has reason to believe
is purchasing for the purpose of such offer, sale or delivery. Any person unable
to give such a representation and warranty is not permitted to accept the Loan
Note Alternative and in the case of any US Person will be deemed to have
accepted the Offer for cash and without electing for the Loan Note Alternative.
COMPLETE HERE
3 US DOLLAR ALTERNATIVE
To elect to receive all of your cash consideration in US dollars instead of
pounds sterling, in accordance with paragraph 12 of Part B of Appendix I to the
Offer to Purchase, please place a mark in Box 3. You may elect to receive all of
your cash consideration in US dollars only in respect of your whole holding of
LucasVarity Shares in respect of which you accept the Offer and in respect of
which you are entitled to receive cash consideration. If you are entitled to
receive cash consideration, you may elect to receive all (but not part) of your
cash consideration in US dollars.
PLEASE READ PARAGRAPH 12 OF PART B OF APPENDIX I TO THE OFFER TO PURCHASE BEFORE
ELECTING TO RECEIVE YOUR CASH CONSIDERATION IN US DOLLARS.
COMPLETE HERE
4 INCORRECT NAME/CHANGE OF ADDRESS
If your name and/or address as pre-printed in Box 1A of this Form are
incorrect, read note 6 on page 4 and insert the correct details in Box 4.
If your name and address are not printed in Box @@@, please complete Box 4. In
any event, please write your daytime telephone number in the space provided in
case there is a need to contact you regarding this Form.
COMPLETE HERE
5 PARTICIPANT ID AND MEMBER ACCOUNT ID
If your LucasVarity Shares are in CREST, you must insert in Box 5 the
participant ID and the member account ID under which such shares are held by you
in CREST.
You must also transfer (or procure the transfer of) the LucasVarity Shares
concerned to an escrow balance, specifying in the TTE Instruction the
participant ID and member account ID inserted in Box 5 and the Form of
Acceptance Reference Number of this Form and the other information specified in
paragraph 9(d) of Part B of Appendix I to the Offer to Purchase. The Form of
Acceptance Reference Number appears next to Box 5 on page 3 of this Form.
COMPLETE HERE
6 OVERSEAS PERSONS
If you are unable to give the representations and warranties set out in
paragraph 10(b) of Part B of Appendix I to the Offer to Purchase, you must put
"NO" in Box 6. If you do not put "NO" in Box 6, you will be deemed to have given
such representations and warranties.
COMPLETE HERE
7 ADDRESS FOR DESPATCH OF CONSIDERATION
If you wish the consideration and/or other documents to be sent to someone other
than the registered holder at the address pre-printed in Box 1A (e.g. your bank
manager or stockbroker), you should complete Box 7. Box 7 must be completed by
holders with registered addresses in, or who have completed Box 4 with an
address in, Canada, Australia or Japan (and, if electing for the Loan Note
Alternative, in the United States). You must not insert in Box 7 an address in
Canada, Australia or Japan (and, if electing for the Loan Note Alternative, in
the United States).
COMPLETE HERE
8 SIGNATURES
You must sign Box 8 and, in the case of a joint holding, arrange for ALL other
joint holders to do likewise. All registered holders who are individuals MUST
SIGN IN THE PRESENCE OF A WITNESS who must also sign Box 8 where indicated. The
witness must be over 18 years of age and should not be another joint holder
signing the Form. The same witness may witness each signature of the joint
holders. The witness should also print his/her name where indicated.
A company may execute under seal, the seal being affixed and witnessed in
accordance with its Articles of Association or other regulations. Alternatively,
a company to which section 36A of the Companies Act 1985 applies may execute the
Form by a director and the company secretary or by two directors of the company
signing the Form and a company incorporated outside Great Britain may sign in
accordance with the laws of the relevant territory in which the relevant company
is incorporated. In both cases, execution should be expressed to be by the
company and each person signing the Form should state the office which he/she
holds and insert the name of the company above or alongside his/her signature.
If the Form is not signed by the registered holder(s), insert the name(s) and
capacity (e.g. attorney or executor(s)) of the person(s) signing the Form. Such
person should also deliver evidence of his/her authority in accordance with the
notes on page 4.
SIGN AND WITNESS HERE
<PAGE> 3
PAGE 3
PLEASE COMPLETE AS EXPLAINED ON PAGES 2 AND 4
1 TO ACCEPT THE OFFER BOX 1B
----------------------------
----------------------------
Number of LucasVarity Shares
Whether or not you wish to elect for the Loan Note Alternative or the US dollar
alternative, complete Box 1 (and, if relevant, Boxes 4, 5, 6 and/or 7)
and sign Box 8 below. Your details as at 2 February, 1999.
BOX 1A
Names(s) and address(es) or registered holder(s)
BOX 1
----------------------------
----------------------------
Number of LucasVarity Shares
for which you are accepting
the Offer
FOR OFFICE USE
HOLDER CODE
--------------
H
--------------
C
--------------
Q
--------------
PLEASE ENSURE YOUR CERTIFICATE(S) ARE ENCLOSED TO COVER THE NUMBER OF
LUCASVARITY SHARES COMPLETED IN BOX 1.
2 TO ELECT FOR THE LOAN NOTE ALTERNATIVE BOX 2
----------------------------
----------------------------
Number of LucasVarity Shares
Having completed Box 1 (and, if relevant, Boxes 4, 5, 6 and/or 7), complete Box
2 and sign Box 8 below.
3 TO SELECT FOR THE US DOLLAR ALTERNATIVE BOX 3
------------------------
------------------------
Place a mark in this Box to receive all of your cash consideration in US dollars
instead of pounds sterling.
4 INCORRECT NAME/CHANGE OF ADDRESS (TO BE COMPLETED IN BLOCK CAPITALS)
BOX 4
1. Forenames..................................................................
(Mr, Mrs, Ms or Title)
Surname........................................................................
Address........................................................................
...............................................................................
Postcode.......................................................................
2. Forenames..................................................................
(Mr, Mrs, Ms or Title)
Surname........................................................................
Address........................................................................
...............................................................................
Postcode.......................................................................
In case of query, please state your daytime telephone number...................
5 PARTICIPANT ID AND MEMBER ACCOUNT ID
Complete this Box only if your LucasVarity Shares are in CREST
The Form of Acceptance Reference Number of this Form is:
BOX 5
Participant ID___________________________________
Member account ID________________________________
6 OVERSEAS PERSONS BOX 6
-----------------------
-----------------------
If you are unable to give the representations and warranties in paragraph 10(b)
of Part B of Appendix I to the Offer to Purchase, you must put "NO" in Box 6.
7 ADDRESS FOR THE DESPATCH OF CONSIDERATION BOX 7
Address outside Canada, Australia and Japan (and, if electing for the Loan Note
Alternative, outside the United States) to which consideration and/or other
documents are to be sent instead of the address pre-printed in Box or completed
in Box 4.
Name...........................................................................
Address........................................................................
...............................................................................
....................................Postcode...................................
8 ALL REGISTERED HOLDERS TO SIGN HERE TO ACCEPT THE OFFER BOX 8
EXECUTION BY INDIVIDUALS
Signed and delivered as a deed by: In the presence of:
...............................................................................
Signature Signature of Witness Name of Witness
...............................................................................
Signature (joint holder) Signature of Witness Name of Witness
...............................................................................
Signature (joint holder) Signature of Witness Name of Witness
...............................................................................
Signature (joint holder) Signature of Witness Name of Witness
IMPORTANT: EACH REGISTERED HOLDER WHO IS AN INDIVIDUAL MUST SIGN IN THE
PRESENCE OF A WITNESS WHO MUST ALSO SIGN AND PRINT HIS/HER NAME WHERE INDICATED.
IN THE CASE OF JOINT HOLDERS, ALL MUST SIGN.
**Executed as a deed under the common seal of the company named below/Executed
as a deed on behalf of the company named below** in the presence of/acting by:
...............................................................................
Name of Company Signature Name of Director
...................................................
**Delete as appropriate Signature Name of Director/Secretary**
(TO BE COMPLETED IN BLOCK CAPITALS)
<PAGE> 4
PAGE 4
FURTHER NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM
In order to be effective, this Form must, except as mentioned below, be signed
personally by the registered holder or, in the case of a joint holding, by ALL
the joint holders and each individual signature must be independently witnessed.
A company must execute this Form under its common seal, the seal being affixed
and witnessed in accordance with its Articles of Association or other
regulations. Alternatively, a company to which section 36A of the Companies Act
1985 applies may execute this Form by a director and the company secretary or by
two directors of the company signing the Form and a company incorporated outside
Great Britain may sign in accordance with the laws of the relevant territory in
which the relevant company is incorporated. In both cases, execution should be
expressed to be by the company and each person signing the Form should state the
office which he/she holds and insert the name of the company above or alongside
his/her signature.
In order to avoid delay and inconvenience to yourself, the following points may
assist you:
1 IF THE SOLE HOLDER HAS DIED
If a grant of probate or letters of administration has/have been
registered with LucasVarity's registrar, this Form must be signed by
the personal representative(s) of the deceased holder, in the presence
of a witness, and returned either by post or by hand (in the case of a
non-US holder) to Computershare Services PLC, P.O Box 859, The
Pavilions, Bridgwater Road, Bristol BS99 1XZ, or by hand (during normal
business hours only) to Computershare Services PLC, 7th Floor, Jupiter
House, Triton Court, 14 Finsbury Square, London EC2A 1BR, or (in the
case of a US holder) by post to Morgan Guaranty Trust Company of New
York, Corporate Reorganization, P.O. Box 8216, Boston, MA 02266-8216,
by courier to Morgan Guaranty Trust Company of New York, Corporate
Reorganization, 40 Campanelli Drive, Braintree, MA 02184, or by hand to
Morgan Guaranty Trust Company of New York, Securities Transfer &
Reporting Services (STARS), 100 William Street Galleria, New York, NY
10038. If a grant of probate or letters of administration has/have not
been registered with LucasVarity's registrar, the personal
representative(s) or the prospective personal representative(s) should
sign the Form, in the presence of a witness, and return it as
aforesaid. However, the grant of probate or letters of administration
must be lodged with Computershare Services PLC or Morgan Guaranty Trust
Company of New York at any such address (as the case may be) before the
consideration due can be despatched.
2 IF ONE OF THE JOINT HOLDERS HAS DIED
This Form must be signed by all surviving holders in the presence of a
witness and lodged with Computershare Services PLC or Morgan Guaranty
Trust Company of New York at any of the addresses set out in paragraph
1 above (as the case may be), accompanied by the death certificate, the
grant of probate or letters of administration in respect of the
deceased holder.
3 IF YOUR LUCASVARITY SHARES ARE IN CERTIFICATED FORM AND THE
CERTIFICATE(S) IS/ARE HELD BY YOUR BANK OR SOME OTHER AGENT
If your share certificate(s) and/or other document(s) of title is/are
not readily available, the completed Form should be lodged with
Computershare Services PLC or Morgan Guaranty Trust Company of New York
at any of the addresses set out in paragraph 1 above (as the case may
be), together with a note saying e.g. "certificates to follow" and you
should arrange for the share certificate(s) and/or other document(s) of
title to be forwarded as soon as possible thereafter.
4 IF YOUR LUCASVARITY SHARES ARE IN CERTIFICATED FORM AND ANY SHARE
CERTIFICATE IS NOT READILY AVAILABLE OR HAS BEEN LOST
The completed Form, and any share certificate(s) which you may have
available, should be lodged with Computershare Services PLC or Morgan
Guaranty Trust Company of New York at any of the addresses set out in
paragraph 1 above (as the case may be), accompanied by a letter stating
that the balance will follow (and, if applicable, that you have lost
one or more of your share certificates). At the same time, you should
write to LucasVarity's registrar, Lloyd's TSB Registrars, 54 Pershore
Road South, Kings Norton, Birmingham B22 1AD, requesting that a letter
of indemnity be sent to you which, when completed in accordance with
the instructions given, should be lodged with Computershare Services
PLC or Morgan Guaranty Trust Company of New York at any of the
addresses set out in paragraph 1 above (as the case may be), as soon as
possible thereafter.
5 IF THE FORM HAS BEEN SIGNED UNDER POWER OF ATTORNEY
The completed Form should be lodged with Computershare Services PLC or
Morgan Guaranty Trust Company of New York at any of the addresses set
out in paragraph 1 above (as the case may be) accompanied by the
original power of attorney (or a copy thereof duly certified in
accordance with the Powers of Attorney Act 1971). The power of attorney
will be noted by Computershare Services PLC or Morgan Guaranty Trust
Company of New York and returned as directed.
6 IF YOUR NAME OR OTHER PARTICULARS ARE SHOWN INCORRECTLY ON THE SHARE
CERTIFICATE(S)
e.g. Name on the certificates...............................James Smith
Correct name..........................................James Smythe
Box 4 of the Form should be completed in your correct name and lodged
with Computershare Services PLC or Morgan Guaranty Trust Company of New
York at any of the addresses set out in paragraph 1 above (as the case
may be) with your share certificate(s) and accompanied by a letter from
your bank, stockbroker or solicitor confirming that the person in whose
name the LucasVarity Shares are registered is one and the same as the
person who has signed the Form. If an incorrect address is shown, the
correct address should be written in Box 4 on the Form. If you have
changed your name, complete Box 4 of the Form in your correct name and
lodge your marriage certificate or deed poll or, in the case of a
company, a copy of the certificate of incorporation on change of name
with this Form for noting.
7 IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY)
Send this Form and the Offer to Purchase by the quickest means (e.g.
air mail) to the holder for execution (provided that such documents are
not forwarded or transmitted, by any means, in or into Canada,
Australia or Japan) or, if he/she has executed a power of attorney
giving sufficient authority, the attorney should sign the Form and the
original power of attorney (or a copy thereof duly certified in
accordance with the Powers of Attorney Act 1971) should be lodged with
this Form for noting (see paragraph 5 above). No other signatures are
acceptable.
8 IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR LUCASVARITY SHARES
If you have sold or transferred all your LucasVarity Shares, please
send this Form and the Offer to Purchase at once to the purchaser or
transferee or to the stockbroker, bank or other agent through whom the
sale or transfer was effected for delivery to the purchaser or
transferee. However, this Form and the Offer to Purchase (and any other
offer documentation) should not be forwarded or transmitted in or into
Canada, Australia or Japan.
9 IF YOU ARE NOT RESIDENT IN THE UK
The attention of LucasVarity Shareholders not resident in the UK is
drawn, in particular, to paragraphs 8 and 10(b) of Part B of Appendix I
to the Offer to Purchase.
10 IF YOUR LUCASVARITY SHARES ARE IN CREST
You should take the action set out in paragraph 9(d) of Part B of
Appendix I to the Offer to Purchase to transfer your LucasVarity Shares
to an escrow balance. You are reminded to keep a record of the Form of
Acceptance Reference Number (which appears next to Box 5 on page 3 of
this Form) so that such Form of Acceptance Reference Number can be
inserted into the TTE Instruction.
If you are a CREST sponsored member, you should refer to your CREST
sponsor before completing this Form, as only your CREST sponsor will be
able to send the necessary TTE instruction to CRESTCo.
WITHOUT PREJUDICE TO PARAGRAPHS 6(D) AND 7 OF PART B OF APPENDIX I TO THE OFFER
TO PURCHASE, THE OFFEROR RESERVES THE RIGHT TO TREAT AS VALID ANY ACCEPTANCE OF
THE OFFER WHICH IS NOT ENTIRELY IN ORDER OR WHICH IS NOT ACCOMPANIED BY THE
RELEVANT TRANSFER TO ESCROW OR (AS APPROPRIATE) THE RELEVANT SHARE
CERTIFICATE(S) AND/OR OTHER DOCUMENT(S) OF TITLE. IN THAT EVENT, NO
CONSIDERATION DUE UNDER THE OFFER WILL BE SENT UNTIL AFTER THE RELEVANT TRANSFER
TO ESCROW HAS BEEN MADE OR (AS APPROPRIATE) THE RELEVANT SHARE CERTIFICATE(S)
AND/OR OTHER DOCUMENT(S) OF TITLE OR INDEMNITIES SATISFACTORY TO THE OFFEROR
HAVE BEEN RECEIVED BY COMPUTERSHARE SERVICES PLC OR MORGAN GUARANTY TRUST
COMPANY OF NEW YORK AT ANY OF THE ADDRESSES SET OUT IN PARAGRAPH 1 ABOVE (AS THE
CASE MAY BE). NOTWITHSTANDING THAT NO SHARE CERTIFICATE(S) AND/OR OTHER
DOCUMENT(S) OF TITLE IS/ARE DELIVERED WITH THIS FORM, THE FORM, IF OTHERWISE
VALID AND ACCOMPANIED BY AN APPROPRIATE ENDORSEMENT OR CERTIFICATION TO THE
EFFECT THAT THE LUCASVARITY SHARES REFERRED TO THEREIN ARE AVAILABLE FOR
ACCEPTANCE AND SIGNED ON BEHALF OF THE LONDON STOCK EXCHANGE OR LUCASVARITY'S
REGISTRAR AND DELIVERED TO COMPUTERSHARE SERVICES PLC OR MORGAN GUARANTY TRUST
COMPANY OF NEW YORK AT ANY OF THE ADDRESSES SET OUT IN PARAGRAPH 1 ABOVE (AS THE
CASE MAY BE), MAY BE TREATED AS VALID FOR THE PURPOSES, INCLUDING AN ELECTION
FOR THE LOAN NOTE ALTERNATIVE.
c
o Printed in London I39768
<PAGE> 1
Exhibit (a)(4)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. In considering
what action you should take, you are recommended immediately to seek your own
financial advice from your stockbroker, solicitor, accountant or other
independent financial advisor.
If you have sold or otherwise transferred all your American Depositary Shares
("LucasVarity ADSs") of LucasVarity plc ("LucasVarity"), please pass this
document and all accompanying documents as soon as possible to the purchaser or
transferee, or to the bank, stockbroker or other agent through whom the sale or
transfer was effected for transmission to the purchaser or transferee. HOWEVER,
SUCH DOCUMENTS SHOULD NOT BE DISTRIBUTED, FORWARDED OR TRANSMITTED IN OR INTO
AUSTRALIA, CANADA OR JAPAN.
Morgan Guaranty Trust Company of New York ("J.P. Morgan") is acting for TRW
Automotive UK (the "Offeror") and TRW Inc. ("TRW") in relation to the Offer (as
defined in the Letter of Transmittal) and no one else, and will not be
responsible to anyone other than the Offeror and TRW for providing the
protections afforded to customers of J.P. Morgan nor for providing advice in
relation to the Offer. J.P. Morgan is acting through J.P. Morgan Securities Inc.
for the purpose of making the Offer in the United States.
- --------------------------------------------------------------------------------
NOTICE OF GUARANTEED DELIVERY
TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
LUCASVARITY PLC
PURSUANT TO THE OFFER TO PURCHASE DATED 6 FEBRUARY, 1999
BY
J.P. MORGAN
ON BEHALF OF
TRW AUTOMOTIVE UK
A WHOLLY OWNED SUBSIDIARY OF
TRW INC.
- --------------------------------------------------------------------------------
As set out in "Procedures for tendering LucasVarity ADSs" in paragraph 11 of
Part B of Appendix I to the Offer to Purchase, this form or one substantially
equivalent hereto must be used for acceptance of the Offer in respect of
LucasVarity ADSs if American Depositary Receipts evidencing LucasVarity ADSs
("LucasVarity ADRs") are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis or if time will not
permit all required documents to reach the US Depositary prior to the expiration
of the Subsequent Offer Period (as defined in the Offer to Purchase). Such form
may be delivered by hand or mailed to the US Depositary and must include a
signature guarantee by an Eligible Institution (as defined in the Offer to
Purchase) in the form set out herein. See "Procedures for tendering LucasVarity
ADSs-Guaranteed Delivery Procedures" in paragraph 11(h) of Part B of Appendix I
to the Offer to Purchase.
<PAGE> 2
TO: MORGAN GUARANTY TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Overnight Courier:
Morgan Guaranty Trust Company (781) 794-6333 Morgan Guaranty Trust Company
of New York (for Eligible Institutions of New York
Corporate Reorganization Only) Corporate Reorganization
P.O. Box 8216 40 Campanelli Drive
Boston, MA 02266-8216 Confirm by telephone: Braintree, MA 02184
(781) 794-6388
By Hand:
Morgan Guaranty Trust Company of New York
Securities Transfer & Reporting Services (STARS)
100 William Street Galleria
New York, NY 10038
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a Letter
of Transmittal is required to be guaranteed by an Eligible Institution under the
instructions thereto, such signature guarantee must appear in the applicable
space provided in the signature box on the Letter of Transmittal.
Acceptance of the Offer (as defined in the Offer to Purchase) in respect of
LucasVarity Shares (except insofar as they are represented by LucasVarity ADSs)
may not be made with this form and pursuant to the guaranteed delivery
procedures.
Capitalized terms and certain other terms used herein and not otherwise defined
herein shall have the respective meanings assigned to them in the Offer to
Purchase.
Ladies and Gentlemen:
The undersigned hereby accepts the Offer in respect of LucasVarity ADSs upon the
terms and subject to the conditions set forth below pursuant to the guaranteed
delivery procedures set out in "Procedures for tendering LucasVarity
ADSs-Guaranteed Delivery Procedures" in paragraph 11(h) of Part B of Appendix I
to the Offer to Purchase.
The undersigned understands that the Acceptance of the Offer in respect of
LucasVarity ADSs pursuant to the guaranteed delivery procedures will not be
treated as a valid acceptance for the purpose of satisfying the Acceptance
Condition (as defined in the Offer to Purchase). See "Procedures for tendering
LucasVarity ADSs-Guaranteed Delivery Procedures" in paragraph 11(h) of Part B of
Appendix I to the Offer to Purchase. To be counted towards satisfaction of the
Acceptance Condition, the LucasVarity ADRs evidencing such LucasVarity ADSs
must, prior to the First Closing Date (as defined in the Offer to Purchase), be
received by the US Depositary or, if applicable, timely confirmation of a
book-entry transfer of such LucasVarity ADSs into the US Depositary's account at
the Book-Entry Transfer Facility pursuant to the procedures set out in
"Procedures for tendering LucasVarity ADSs-Book-entry transfer" in paragraph
11(c) of Part B of Appendix I to the Offer to Purchase must be received by the
US Depositary, together with a duly executed Letter of Transmittal (or a
manually signed facsimile thereof) with any required signature guarantees or, in
the case of a book-entry transfer, an Agent's Message and any other required
documents.
<TABLE>
<S> <C>
Signature(s): Address(es) (Include Zip Code):
- ------------------------------------------------------ ------------------------------------------------------
- ------------------------------------------------------ ------------------------------------------------------
------------------------------------------------------
Name of Record Holder(s) (Please Type or Print):
- ------------------------------------------------------ Area Code(s) and Telephone Number(s):
Number of LucasVarity ADSs: ------------------------------------------------------
- ------------------------------------------------------
LucasVarity ADR No.(s) (if available): [ ] Check box if LucasVarity ADSs will be tendered by
- ------------------------------------------------------ book-entry transfer.
Dated:
- ------------------------------------------------------ Account Number:
------------------------------------------------------
</TABLE>
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchange
Medallion Program, hereby guarantees that the undersigned will deliver to the US
Depositary either the LucasVarity ADRs representing the LucasVarity ADSs with
respect to which the Offer is being accepted hereby, in proper form for
transfer, or confirmation of the book-entry transfer of such LucasVarity ADSs
into the US Depositary's account at The Depository Trust Company, in any such
case together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof) with any required signature guarantees
or, in the case of a book-entry transfer, an Agent's Message and any other
required documents, all within three New York Stock Exchange trading days after
the date hereof.
<TABLE>
<S> <C>
Name of Firm, Agent or Trustee: Authorized Signature:
- -------------------------------------------- --------------------------------------------
Address (Include Zip Code): Name (Please Type or Print):
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- Title:
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- Date:
Area Code and Telephone Number: --------------------------------------------
- --------------------------------------------
</TABLE>
NOTE:
DO NOT SEND LUCASVARITY ADRS WITH THIS FORM; LUCASVARITY ADRS SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
Exhibit (a)(5)
RECOMMENDED CASH OFFER FOR
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
LUCASVARITY PLC
BY
J.P. MORGAN
ON BEHALF OF
TRW AUTOMOTIVE UK
A WHOLLY OWNED SUBSIDIARY OF
TRW INC.
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 PM (LONDON
TIME), 10:00 AM (NEW YORK CITY TIME) ON 9 MARCH, 1999, UNLESS EXTENDED. AT THE
CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL
CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED,
WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14
CALENDAR DAYS. HOLDERS OF LUCASVARITY SECURITIES WILL HAVE WITHDRAWAL RIGHTS
DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING
THE SUBSEQUENT OFFER PERIOD.
6 February, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
J.P. Morgan Securities Inc. has been appointed by TRW Automotive UK (the
"Offeror") to act as dealer manager in the United States (the "Dealer Manager")
in connection with an offer by Morgan Guaranty Trust Company of New York ("J.P.
Morgan"), on behalf of the Offeror, to purchase, upon the terms and subject to
the Conditions set forth in the Offer to Purchase dated 6 February, 1999 (the
"Offer to Purchase") and the accompanying Acceptance Forms (collectively, the
"Offer"), all outstanding ordinary shares of 25p each ("LucasVarity Shares") of
LucasVarity plc ("LucasVarity") for 288p in cash per LucasVarity Share,
including all American Depositary Shares ("LucasVarity ADSs") of LucasVarity,
each representing ten LucasVarity Shares and evidenced by American Depositary
Receipts ("LucasVarity ADRs"), for L28.80 in cash per LucasVarity ADS.
For your information and for forwarding to those of your clients for whom
you hold LucasVarity ADSs registered in your name or in the name of your
nominee, we are enclosing the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal to be used by holders of LucasVarity ADSs
to accept the Offer;
3. The Notice of Guaranteed Delivery;
4. A printed form of letter that may be sent to your clients for whose
account you hold LucasVarity ADSs registered in your name or in the name
of a nominee, with space provided for obtaining such clients'
instructions with regard to the Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. The return envelope addressed to the US Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENT AS PROMPTLY
AS POSSIBLE.
THE OFFER CANNOT BE ACCEPTED IN RESPECT OF LUCASVARITY SHARES BY MEANS OF A
LETTER OF TRANSMITTAL. A FORM OF ACCEPTANCE FOR ACCEPTING THE OFFER IN RESPECT
OF LUCASVARITY SHARES CAN BE OBTAINED FROM THE INFORMATION AGENT OR THE UK
RECEIVING AGENT (AS EACH SUCH TERM IS DEFINED IN THE OFFER TO PURCHASE).
<PAGE> 2
In all cases, payment for LucasVarity ADSs purchased pursuant to the Offer
will be made only after timely receipt by the US Depositary of LucasVarity ADRs
evidencing such LucasVarity ADSs or a confirmation of book-entry transfer,
together with the Letter of Transmittal properly completed and duly executed,
and any other documents required by the Letter of Transmittal.
If holders of LucasVarity ADSs wish to tender, but it is impracticable for
them to forward their LucasVarity ADRs or other required documents on or prior
to the expiration of the Subsequent Offer Period or to comply with the
book-entry transfer procedures on a timely basis, a tender may be effected by
following the guaranteed delivery procedures specified in paragraph 11(h) of
Part B of Appendix I of the Offer to Purchase.
The Offeror will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager and the Information Agent as
described in the Offer to Purchase) in connection with the solicitation of
acceptances of the Offer with respect to LucasVarity ADSs evidenced by
LucasVarity ADRs. You will, however, be reimbursed for customary mailing and
handling expenses incurred by you in forwarding the enclosed materials to your
client.
Inquiries you may have with respect to the Offer should be addressed to the
Information Agent or the Dealer Manager, at the respective addresses and
telephone numbers set forth in the Offer to Purchase. Additional copies of the
enclosed materials may be obtained from the Information Agent or the Dealer
Manager.
Capitalized terms and certain other terms used herein and not otherwise
defined herein shall have the respective meanings assigned to them in the Offer
to Purchase.
Very truly yours,
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
(877) 576-2040
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF J.P. MORGAN, THE OFFEROR, TRW INC., THE US
DEPOSITARY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE UK RECEIVING AGENT
OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED
IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
Exhibit (a)(6)
This document should not be forwarded or transmitted in or into Australia,
Canada or Japan.
RECOMMENDED CASH OFFER FOR
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
LUCASVARITY PLC
BY
J.P. MORGAN
ON BEHALF OF
TRW AUTOMOTIVE UK
A WHOLLY OWNED SUBSIDIARY OF
TRW INC.
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 P.M. (LONDON
TIME), 10:00 A.M. (NEW YORK CITY TIME) ON 9 MARCH, 1999, UNLESS EXTENDED. AT THE
CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL
CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED,
WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14
CALENDAR DAYS. HOLDERS OF LUCASVARITY SECURITIES WILL HAVE WITHDRAWAL RIGHTS
DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING
THE SUBSEQUENT OFFER PERIOD.
6 February, 1999
To Our Clients:
Enclosed for your consideration is the Offer to Purchase dated 6 February,
1999 (the "Offer to Purchase"), the Letter of Transmittal and Notice of
Guaranteed Delivery relating to an offer by Morgan Guaranty Trust Company of New
York ("J.P. Morgan"), acting in the United States through J.P. Morgan Securities
Inc., and on behalf of TRW Automotive UK (the "Offeror"), to purchase, upon the
terms and subject to the Conditions set forth in the Offer to Purchase and the
accompanying Acceptance Forms (as defined in the Offer to Purchase)
(collectively, the "Offer"), all outstanding ordinary shares of 25p each
("LucasVarity Shares") of LucasVarity plc ("LucasVarity") for 288p in cash per
LucasVarity Share, including all LucasVarity Shares represented by American
Depositary Shares ("LucasVarity ADSs") of LucasVarity, each representing ten
LucasVarity Shares and evidenced by American Depositary Receipts ("LucasVarity
ADRs"), for L28.80 in cash per LucasVarity ADS.
We are the holder of record of LucasVarity ADSs evidenced by LucasVarity
ADRs held by us for your account. An acceptance of the Offer in respect of such
LucasVarity ADSs can be made only by us as the holder of record and pursuant to
your instructions. Accordingly, we request instructions as to whether you wish
to have us accept the Offer on your behalf in respect of any or all LucasVarity
ADSs held by us for your account pursuant to the terms and subject to the
Conditions set forth in the Offer to Purchase.
Your attention is invited to the following:
1. The Offer is being made for all LucasVarity Shares and LucasVarity
ADSs evidenced by LucasVarity ADRs and has been unanimously recommended
by the Directors of LucasVarity (other than Dr. R.M. Gates, who, due to
his role as a Director of both LucasVarity and TRW Inc., has not
participated in any discussions or decisions of the Directors of
LucasVarity and TRW Inc. in relation to the Offer).
2. The Offer is on the terms and subject to the Conditions set forth in
Appendix I to the Offer to Purchase.
3. The Initial Offer Period will expire at 3:00 p.m. (London time),
10:00 a.m. (New York City time) on 9 March, 1999, unless extended (in
accordance with the terms thereof).
<PAGE> 2
4. At the conclusion of the Initial Offer Period, including any
extension thereof, if all Conditions of the Offer have been satisfied,
fulfilled or, where permitted, waived, the Offer will be extended for a
Subsequent Offer Period of at least 14 calendar days.
5. LucasVarity ADS holders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes applicable to a sale of
LucasVarity ADSs evidenced by LucasVarity ADRs to the Offeror.
If you wish to have us accept the Offer in respect of any or all of the
LucasVarity ADSs evidenced by LucasVarity ADRs held by us for your account,
please so instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize us to accept the
Offer in respect of your LucasVarity ADSs evidenced by LucasVarity ADRs, the
Offer will be accepted in respect of all such LucasVarity ADSs unless otherwise
indicated in such instruction form. Please forward your instruction form to us
in ample time to permit us to accept the Offer on your behalf prior to the
expiration of the Offer. The specimen Letter of Transmittal is furnished to you
for your information only and cannot be used by you to accept the Offer in
respect of LucasVarity ADSs evidenced by LucasVarity ADRs held by us for your
account.
Capitalized terms and certain other terms used herein and not otherwise
defined herein shall have the respective meanings assigned to them in the Offer
to Purchase.
INSTRUCTIONS WITH RESPECT TO THE OFFER FOR ALL LUCASVARITY SHARES AND
LUCASVARITY ADSS EVIDENCED BY LUCASVARITY ADRS
The undersigned acknowledge(s) receipt of your letter and the Offer to
Purchase dated 6 February, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal relating to an offer by J.P. Morgan, on behalf of the
Offeror, to purchase, upon the terms and subject to the Conditions set forth in
the Offer to Purchase and the accompanying Letter of Transmittal (collectively,
the "Offer") all outstanding ordinary shares of 25p each ("LucasVarity Shares")
of LucasVarity plc ("LucasVarity") for 288p in cash per LucasVarity Share,
including all LucasVarity Shares represented by American Depositary Shares
("LucasVarity ADSs") of LucasVarity, each representing ten LucasVarity Shares
and evidenced by American Depositary Receipts, for L28.80 in cash per
LucasVarity ADS.
This will instruct you to accept the Offer in respect of the number of
LucasVarity ADSs indicated below (or, if no numbers indicated below, all
LucasVarity ADSs) held by you for the account of the undersigned, upon the terms
and subject to the Conditions set forth in the Offer to Purchase.
<TABLE>
<S> <C>
Dated: , 1999 -----------------------------------------
- ----------------------------------------- -----------------------------------------
Number of LucasVarity ADSs Signature(s)
to be tendered*
-----------------------------------------
-----------------------------------------
Please print name(s)
-----------------------------------------
-----------------------------------------
Address(es)
-----------------------------------------
Area Code and Telephone Number
-----------------------------------------
Employer Identification or
Social Security No.
</TABLE>
* Unless otherwise indicated, it will be assumed that the Offer is to be
accepted in respect of all LucasVarity ADSs held by us for your account.
<PAGE> 1
Exhibit (a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------ ------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF--
- ------------------------------------------------------ ------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
funds, any one of the individuals(1)
3. Husband and wife (joint account) The actual owner of the account or, if joint
funds, either person(1)
4. Custodian account of a minor (Uniform Gift to The minor(2)
Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor(1)
6. Account in the name of guardian or committee for The ward, minor or incompetent person(3)
a designated ward, minor or incompetent person
7. (a) The usual revocable savings trust account The grantor-trustee(1)
(grantor is also trustee)
(b) So-called trust account that is not a legal The actual owner(1)
or valid trust under State law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------ ------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF--
- ------------------------------------------------------ ------------------------------------------------------
9. A valid trust, estate or pension trust The legal entity (do not furnish the identifying
number of the personal representative or trustee
unless the legal entity itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable or educational The organization
organization account
12. Partnership The partnership
13. Association, club or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in The public entity
the name of a public entity (such as a State or
local government, school district or prison)
that receives agricultural program payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends not generally subject to backup withholding include the
following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers who
must report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
<PAGE> 1
Exhibit (a)(10)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell LucasVarity Securities. The Offer is made in the United States solely by
the Offer To Purchase, dated February 6, 1999, and related Letter of
Transmittal and related Form of Acceptance and is not being made to, nor will
acceptances be accepted from or on behalf of, holders of LucasVarity Securities
in any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In those United
States jurisdictions whose securities laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of the
Offeror by J.P. Morgan Securities Inc. or one or more registered brokers or
dealers licensed under the laws of those jurisdictions. The Offer To Purchase,
the Letter of Transmittal, the Form of Acceptance and related materials should
not be forwarded or transmitted in or into Canada, Australia or Japan.
NOTICE OF RECOMMENDED CASH OFFER FOR
ALL OUTSTANDING ORDINARY SHARES AND
AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS OF
LUCASVARITY PLC
BY
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, LONDON BRANCH
ON BEHALF OF
TRW AUTOMOTIVE UK
A WHOLLY OWNED SUBSIDIARY OF
TRW INC.
Morgan Guaranty Trust Company of New York, London Branch, acting in the United
States through J.P. Morgan Securities Inc., on behalf of TRW Automotive UK
("Offeror"), an indirect wholly owned subsidiary of TRW Inc., is offering to
purchase, on the terms and subject to the Conditions set forth in the Offer To
Purchase, dated February 6, 1999 (the "Offer To Purchase"), the related Letter
of Transmittal and related Form of Acceptance (which, as amended or supplemented
from time to time, together constitute the "Offer"), (i) all outstanding
ordinary shares of 25 pence each (the "LucasVarity Shares") of LucasVarity plc
("LucasVarity") for 288 pence per LucasVarity Shares, and (ii) all outstanding
American Depositary Shares of LucasVarity, each representing ten LucasVarity
Shares ("ADSs") and evidenced by American Depositary Receipts ("ADRs"), for
pounds sterling 28.80 per ADS, net to the seller in cash without interest
thereon. LucasVarity Shares and ADSs evidenced by ADRs are referred to
collectively as "LucasVarity Securities".
THE INITIAL OFFER PERIOD WILL EXPIRE AT 3:00 P.M. (LONDON TIME), 10:00 A.M.
(NEW YORK CITY TIME), ON TUESDAY, MARCH 9, 1999, UNLESS THE OFFER IS EXTENDED
(THE "INITIAL OFFER PERIOD"). AT THE CONCLUSION OF THE INITIAL OFFER PERIOD,
INCLUDING ANY EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFER HAVE BEEN
SATISFIED, FULFILLED OR, WHERE PERMITTED, WAIVED, THE OFFER WILL BE EXTENDED
FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS (THE "SUBSEQUENT
OFFER PERIOD"). HOLDERS OF LUCASVARITY SECURITIES WILL HAVE THE RIGHT TO
WITHDRAW THEIR ACCEPTANCES OF THE OFFER DURING THE INITIAL OFFER PERIOD,
INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
The Directors of LucasVarity (other than Dr. R.M. Gates who is also a Director
of TRW and has taken no part in any discussions by the Directors of LucasVarity
in relation to the Offer), who have been so advised by Lazard Brothers & Co.,
Limited ("Lazard"), consider the terms of the Offer to be fair and reasonable.
In providing advice to the Directors of LucasVarity, Lazard has taken into
account the commercial assessments of such Directors. Accordingly, the
Directors of LucasVarity unanimously (except as noted above) recommend all
holders of LucasVarity Securities to accept the Offer.
The Directors of the Offeror listed in the Offer to Purchase accept
responsibility for the information contained in this advertisement save for that
relating to LucasVarity and, to the best of their knowledge and belief (having
taken all reasonable care to ensure that such is the case), the information
contained in this advertisement for which they accept responsibility is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
The Directors of LucasVarity (other than Dr. R.M. Gates for the reasons stated
above), whose names are listed in the Offer to Purchase, accept responsibility
for the information contained in this advertisement relating to LucasVarity. Dr.
R.M. Gates accepts responsibility for the factual information relating to
LucasVarity contained in this advertisement, but not for any recommendation made
in connection with the Offer. To the best of the knowledge and belief of such
Directors of LucasVarity (having taken all reasonable care to ensure that such
is the case), such information (on the basis described herein) is in accordance
with the facts and does not omit anything likely to affect the import of such
information.
The Offer is conditioned upon, among other things, valid acceptances being
received (and not, where permitted, withdrawn) by the expiration of the Initial
Offer Period in respect of not less than 90% in nominal value of LucasVarity
Securities to which the Offer relates (or such lower percentage as Offeror may
decide), provided that such condition (the "Acceptance Condition") will not be
satisfied unless Offeror and/or its wholly owned subsidiaries shall have
acquired or agreed to acquire (whether pursuant to the Offer or otherwise),
LucasVarity Securities carrying in the aggregate more than 50% of the voting
rights normally exercisable at general meetings of LucasVarity. Offeror reserves
the right to reduce the percentage of LucasVarity Securities required to satisfy
the Acceptance Condition at any time prior to all of the conditions being
satisfied, fulfilled or, where permitted, waived. At least five
<PAGE> 2
recommendation made in connection with the Offer. To the best of the knowledge
and belief of such Directors of LucasVarity (having taken all reasonable care to
ensure that such is the case), such information (on the basis described herein)
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
The Offer is conditional upon, among other things, valid acceptances being
received (and not, where permitted, withdrawn) by the expiration of the Initial
Offer Period in respect of not less than 90% in nominal value of LucasVarity
Securities to which the Offer relates (or such lower percentage as Offeror may
decide), provided that such condition (the "Acceptance Condition") will not be
satisfied unless Offeror and/or its wholly owned subsidiaries shall have
acquired or agreed to acquire (whether pursuant to the Offer or otherwise),
LucasVarity Securities carrying in the aggregate more than 50% of the voting
rights normally exercisable at general meetings of LucasVarity. Offeror reserves
the right to reduce the percentage of LucasVarity Securities required to satisfy
the Acceptance Condition at any time prior to all of the conditions being
satisfied, fulfilled or, where permitted, waived. At least five business days
prior to any such reduction, Offeror will announce that it has reserved the
right to reduce the Acceptance Condition. Such announcement will state the
percentage to which the Acceptance Condition may be reduced and will state that
such reduction is possible but that the Offeror need not declare its actual
intentions until it is required to do so under the City Code on Takeovers and
Mergers of the UK (the "City Code"). Offeror will not make such an announcement
unless Offeror determines there is a significant possibility that sufficient
LucasVarity Securities will be tendered to permit the Acceptance Condition to be
satisfied at such reduced level. Such announcement will also state that holders
of LucasVarity Securities who are not willing to accept the Offer if the
Acceptance Condition is reduced to the minimum permitted level should either not
accept the Offer until the Subsequent Offer Period or be prepared to withdraw
their acceptances promptly following an announcement by Offeror of its
reservation of the right to reduce such condition. Other conditions of the Offer
are set out in Part A of Appendix 1 of the Offer To Purchase.
Offeror reserves the right (but will not be obligated) at any time to extend the
Initial Offer Period, provided that Offeror may not extend the Initial Offer
Period beyond April 7, 1999 without the consent of the Panel on Takeovers and
Mergers of the UK (the "Panel"). Offeror reserves the right, if appropriate, to
secure the Panel's approval to extend the final date for expiration of the
Initial Offer Period to April 28, 1999, or such later date as the Panel may
agree. A public announcement of any such extension will be made no later than
8:30 a.m. (London time) in the UK and by 8:30 a.m. (New York City time) in the
US on the next business day after the previously scheduled expiration of the
Initial Offer Period (other than an extension required by the City Code or US
federal securities laws) prior to its scheduled expiration if the Acceptance
Condition and all other conditions to the Offer have been satisfied, fulfilled
or, where permitted, waived. In that case, the Initial Offer Period and
consequently withdrawal rights, except in certain limited circumstances, will
terminate immediately.
If all of the conditions to the Offer are satisfied, fulfilled or, where
permitted, waived at the expiration of the Initial Offer Period, the
consideration for LucasVarity Securities purchased pursuant to the Offer will be
paid within 14 calendar days after the later of the expiration of the Initial
Offer Period and the receipt of a complete and valid acceptance of the Offer.
Under no circumstances will interest on the cash purchase price for LucasVarity
Securities be paid, regardless of any extension of the Offer or delay in making
such payment. In all cases, payment of LucasVarity Securities purchased pursuant
to the Offer will be made only after timely receipt by either the Morgan
Guaranty Trust Company of New York in its capacity as depositary for the Offer
in the United States (the "US Depositary") or Computershare Services PLC in its
capacity as the UK receiving agent (the "UK Receiving Agent"), as the case may
be, of (i) certificates representing the LucasVarity Shares, ADRs representing
the ADSs, or (only in the case of ADSs) timely confirmation of a book-entry
transfer of such ADSs evidenced by ADRs into the US Depositary's account at The
Depository Trust Company ("Book-Entry Transfer Facility") pursuant to the
procedures set forth in the Offer To Purchase, (ii) the Letter of Transmittal
(in the case of acceptances relating to ADSs) or the relevant Form of Acceptance
(in the case of acceptances relating to LucasVarity Shares), properly completed
and duly executed, with any required signature guarantees, and (iii) any other
documents required by the Letter of Transmittal or the relevant Form of
Acceptance. Although the Offer price is denominated in pounds sterling,
accepting holders of LucasVarity Shares will be entitled to have their cash
consideration converted into US dollars at the exchange rate obtainable by the
relevant payment agent (either the US Depositary or the UK Receiving Agent) on
the spot market in London at approximately 12:00 noon (London time) on the date
the cash consideration is made available by Offeror to the relevant payment
agent for delivery to holders of LucasVarity Shares. Unless they elect to
receive pounds sterling, ADS holders will receive consideration converted into
dollars as described above, as if such holders of ADSs had elected to receive
dollars.
If, as a result of the Offer and subject to certain conditions, the Offeror
acquires or contracts to acquire LucasVarity Securities representing at least 90
percent in value of the LucasVarity Securities to which the Offer relates, then,
provided such requirement is achieved within four months of February 6, 1999,
Offeror will be entitled and intends to effect the compulsory acquisition
procedures provided for in Sections 428 to 430F of the Companies Act 1985 (as
amended) of England and Wales to compel the purchase of any outstanding
LucasVarity Securities on the same terms as provided in the Offer, in accordance
with the relevant procedures and time limits described in such Act.
If a holder of ADSs wishes to accept the Offer in respect of ADSs and the ADRs
evidencing such ADSs are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis, or if time will not
permit all required documents to reach the US Depositary prior to the
expiration of the Subsequent Offer Period, such holder's acceptance of the Offer
in respect of ADSs may nevertheless be effected by following the guaranteed
delivery procedures set forth in the Offer To Purchase.
Except as described below and in the Offer To Purchase, acceptances of the Offer
for LucasVarity Securities are irrevocable. Acceptances of the Offer may be
withdrawn pursuant to the procedures set out below at any time during the
Initial Offer Period, including any extension thereof, but not during the
Subsequent Offer Period, except in certain limited circumstances as described in
the Offer To Purchase. To be effective, a written notice of withdrawal must be
timely received by the party (either the UK Receiving Agent or the US
Depositary) to whom the acceptance was originally sent at one of the addresses
set forth in the Offer To Purchase and must specify the name of the person who
has tendered LucasVarity Securities, the number of LucasVarity Securities to be
withdrawn and (if a Share certificate or ADSs have been tendered) the name of
the registered holder of the LucasVarity Securities, if different from the name
of the person whose acceptance is to be withdrawn. In respect of ADSs, if ADRs
have been delivered or otherwise identified to the US Depositary then, prior to
the physical release of such ADRs, the serial numbers shown on such ADRs must be
submitted, and, unless the ADSs evidenced by such ADRs have been delivered by an
Eligible Institution (as defined in Instruction 1 of the Letter of Transmittal)
or by means of a Letter of Transmittal, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution of ADSs evidenced by
ADRs have been delivered pursuant to the procedures for book-entry transfer set
forth in the Offer To Purchase, any notice of withdrawal must also specify the
name and number of account at the Book-Entry Transfer Facility to be credited
with the withdrawn ADSs and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the validity (including time of
receipt) of any notice of withdrawal will be determined by Offeror, whose
determination (except as required by the Panel) shall be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General
Rules and Regulations under the US Securities Exchange Act of 1934, as amended,
is contained in the Offer To Purchase and incorporated herein by reference.
LucasVarity has provided the Offeror with LucasVarity's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of LucasVarity Securities. The Offer To Purchase, the Letter of Transmittal
and/or the Form of Acceptance are being mailed to holders of record of
LucasVarity Securities and are being furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names or the names of whose
nominees appear as holders of record for subsequent transmittal to beneficial
owners of LucasVarity Securities.
THE OFFER TO PURCHASE AND RELATED MATERIALS CONTAIN IMPORTANT INFORMATION WHICH
SHOULD BE READ CAREFULLY BEFORE ANY DECISIONS ARE MADE WITH RESPECT TO THE
OFFER.
Requests for assistance or copies of the Offer To Purchase, the Letter of
Transmittal, the Forms of Acceptance and all other related materials may be
directed to the Dealer Manager or the Information Agent as set forth below, and
copies will be furnished promptly at the Offeror's expense. No fees or
commissions will be paid to brokers, dealers or other persons (other than the
Dealer Manager and the Information Agent) for soliciting tenders of LucasVarity
Securities pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC.]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect: 212.440.9800
All others call toll free: 800.223.2064
The U.S. Dealer Manager for the Offer is:
J.P. MORGAN SECURITIES INC.
60 Wall Street
New York, New York 10260
877.576.2040 (Toll Free)
February 6, 1999
4
<PAGE> 1
Exhibit (a)(11)
Recommended Cash Offer For
All Ordinary Shares and American Depositary Shares
Evidenced by American Depositary Receipts
of
LUCASVARITY PLC
by
J.P. MORGAN
on behalf of
TRW AUTOMOTIVE UK
a wholly owned subsidiary of
TRW INC.
Morgan Guaranty Trust Company of New York ("J.P. Morgan") announces on behalf of
TRW Automotive UK (the "Offeror") a recommended cash offer (the "Offer") to
acquire the whole of the issued and to be issued ordinary share capital of
LucasVarity plc ("LucasVarity").
The full terms and conditions of the Offer and the Loan Note Alternative
(including details of how the Offer may be accepted) are set out in the Offer to
Purchase dated and posted 6 February, 1999 (the "Offer to Purchase") and in the
Acceptance Forms. Terms defined in the Offer to Purchase have the same meanings
in this advertisement.
A LucasVarity Securityholder who validly accepts the Offer will receive:
FOR EACH LUCASVARITY SHARE -- 288 PENCE
IN CASH
FOR EACH LUCASVARITY ADS -- L28.80 IN
CASH
The Offer values the entire issued share capital of LucasVarity at L4.0 billion.
Instead of choosing to receive the cash consideration under the Offer,
LucasVarity Shareholders (other than US Persons and certain other overseas
persons) who validly accept the Offer will be entitled to exchange all or part
of their holdings of LucasVarity Shares for Loan Notes. The Loan Notes will be
issued on the basis of L1 nominal of Loan Notes for every L1 of cash otherwise
available under the Offer. Copies of the Offer to Purchase and Acceptance Forms
are available for collection as provided in the Offer to Purchase, including
from Computershare Services PLC, 7th Floor, Jupiter House, Triton Court, 14
Finsbury Square, London EC2A 1BR; Morgan Guaranty Trust Company of New York,
Securities Transfer & Reporting Services, 100 William Street Galleria, New York,
New York 10038; and Georgeson & Company Inc., Wall Street Plaza, New York, New
York 10005.
The Offer is being made to all LucasVarity Securityholders, including those to
whom the Offer to Purchase may not be despatched, who hold LucasVarity
Securities or who are entitled to have LucasVarity Securities unconditionally
allotted or issued to them. The Offer will be open for acceptance until 3.00
p.m. (London time) or 10.00 a.m. (New York City time) on 9 March, 1999 (or such
later time(s) and/or date(s) as the Offeror, subject to the rules of the City
Code, may decide).
The Directors of LucasVarity (other than Dr. R.M. Gates who, due to his role as
a Director of both LucasVarity and TRW Inc. ("TRW"), has not participated in any
discussions or decisions of the Directors of LucasVarity or TRW in relation to
the Offer), who have been so advised by Lazard Brothers & Co., Limited, have
stated that they consider the terms of the Offer to be fair and reasonable and
those Directors unanimously recommend LucasVarity Securityholders to accept the
Offer. In providing advice to those Directors of LucasVarity, Lazard Brothers &
Co., Limited has taken into account the commercial assessments of such
Directors.
Directors of LucasVarity have irrevocably undertaken to accept the Offer in
respect of their holdings amounting, in the aggregate, to 1,852,100 LucasVarity
Shares representing 0.13 per cent. of LucasVarity's issued share capital as of
28 January, 1999.
The Offer is not being made, directly or indirectly, in or into or by use of the
mails of, or by any means or instrumentality of interstate or foreign commerce
(including facsimile transmission, e-mail, telex and telephone) of, or of any
facility of a national securities exchange of Canada, Australia or Japan and the
Offer is not capable of acceptance from within Canada, Australia or Japan.
Neither the Offer to Purchase nor the Acceptance Forms (or any related offering
documentation) are being mailed or otherwise distributed or sent in or into
Canada, Australia or Japan.
This advertisement is not being published or otherwise distributed or sent to,
into or from Canada, Australia or Japan. Persons reading this advertisement
(including nominees, trustees and custodians) must not distribute or send this
advertisement, the Offer to Purchase or any Acceptance Form (or any related
offering documentation) in, into or from Canada, Australia or Japan nor use
Canadian, Australian or Japanese mails for any purpose, directly or indirectly,
in connection with the Offer and doing so may invalidate any purported
acceptance of the Offer. The Loan Notes to be issued pursuant to the Offer have
not been, and will not be, registered under the US Securities Act or under any
relevant securities laws of any state or other jurisdiction of the United
States. Accordingly, the Loan Notes may not be offered, sold or delivered,
directly or indirectly, in or into the US or to, or for the account or benefit
of, any US Person. The Loan Notes may not be offered, sold or delivered,
directly or indirectly, in or into Canada, Australia or Japan, or any other
jurisdiction if to do so would constitute a violation of the relevant laws in
such jurisdiction. The obligations of the Offeror as issuer of the Loan Notes
are guaranteed by TRW but are not further guaranteed or secured.
J.P. Morgan, which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for TRW and the Offeror and for no one else in
connection with the Offer and will not be responsible to anyone other than TRW
and the Offeror for providing the protections afforded to its customers or for
giving advice in relation to the Offer.
Lazard Brothers & Co., Limited, which is regulated in the UK by The Securities
and Futures Authority Limited, is acting for LucasVarity and for no one else in
connection with the Offer and will not be responsible to anyone other than
LucasVarity for providing the protections afforded to its customers or for
giving advice in relation to the Offer.
The Directors of the Offeror listed in the Offer to Purchase accept
responsibility for the information contained in this advertisement save for that
relating to LucasVarity and, to the best of their knowledge and belief (having
taken all reasonable care to ensure that such is the case), the information
contained in this advertisement for which they accept responsibility is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
The Directors of LucasVarity (other than Dr. R.M. Gates for the reason stated
above), whose names are listed in the Offer to Purchase, accept responsibility
for the information contained in this advertisement relating to LucasVarity. Dr.
R.M. Gates accepts responsibility for the factual information relating to
LucasVarity contained in this advertisement, but not for any recommendation made
in connection with the Offer. To the best of the knowledge and belief of such
Directors of LucasVarity (having taken all reasonable care to ensure that such
is the case), such information (on the basis described herein) is in accordance
with the facts and does not omit anything likely to affect the import of such
information.
6 February, 1999
Morgan Guaranty Trust Company of New York (London Branch) has approved this
advertisement for issue in the UK solely for the purposes of section 57 of the
Financial Services Act 1986. Morgan Guaranty Trust Company of New York (London
Branch) is regulated by The Securities and Futures Authority Limited.
<PAGE> 1
EXHIBIT (b)(1)
$7,400,000,000
CREDIT AGREEMENT
dated as of
January 27, 1999
among
TRW Inc.
The Eligible Subsidiaries Referred to Herein
The Lenders Party Hereto
Bank of America National Trust and Savings Association
and
Citibank, N.A.,
as Co-Syndication Agents
Morgan Guaranty Trust Company of New York,
as Administrative Agent
-----------------------------
J.P. Morgan Securities Inc.
Lead Arranger and Bookrunner
NationsBanc Montgomery Securities LLC
Salomon Smith Barney Inc.
Co-Arrangers
<PAGE> 2
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
SECTION 1.02. Accounting Terms and Determinations............................18
SECTION 1.03. Classes and Types of Loans and Borrowings......................18
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend............................................19
SECTION 2.02. Method of Borrowing............................................19
SECTION 2.03. Maturity of Loans; Contingent Prepayments of Loans.............21
SECTION 2.04. Interest Rates.................................................22
SECTION 2.05. Method of Electing Interest Rates..............................23
SECTION 2.06. Commitment Fees................................................25
SECTION 2.07. Mandatory Termination and Reduction of Commitments.............25
SECTION 2.08. Optional Termination or Reduction of Commitments...............26
SECTION 2.09. Optional Prepayments...........................................26
SECTION 2.10. General Provisions as to Payments..............................27
SECTION 2.11. Funding Losses.................................................28
SECTION 2.12. Computation of Interest and Fees...............................28
SECTION 2.13. Notes..........................................................28
SECTION 2.14. Judgment Currency..............................................29
SECTION 2.15. Designation of Subsidiary as a Borrower;
Termination of Designation.....................................29
SECTION 2.16. Foreign Subsidiary Costs.......................................30
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing........................................................31
SECTION 3.02. Borrowings to Finance Acquisition of Target Shares.............32
SECTION 3.03. Borrowings for Other Corporate Purposes........................33
SECTION 3.04. Borrowings.....................................................33
SECTION 3.05. First Borrowing by Each Eligible Subsidiary....................34
<PAGE> 3
PAGE
----
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Organization.........................................35
SECTION 4.02. Authorization; No Conflict.....................................35
SECTION 4.03. Validity and Binding Nature....................................35
SECTION 4.04. Financial Statements...........................................35
SECTION 4.05. Litigation.....................................................36
SECTION 4.06. Compliance with ERISA..........................................36
SECTION 4.07. Environmental Matters..........................................36
SECTION 4.08. Taxes..........................................................36
SECTION 4.09. Government Regulation..........................................36
SECTION 4.10. Year 2000 Compliance...........................................37
SECTION 4.11. Eligible Subsidiaries..........................................37
ARTICLE 5
COVENANTS
SECTION 5.01. Reports, Certificates and Other Information....................38
SECTION 5.02. Mergers; Consolidations; Sales.................................39
SECTION 5.03. Use of Proceeds................................................39
SECTION 5.04. Liens..........................................................40
SECTION 5.05. Debt of Subsidiaries...........................................42
SECTION 5.06. Leverage Ratio.................................................42
SECTION 5.07. Net Worth......................................................42
SECTION 5.08. Sale and Leaseback.............................................43
SECTION 5.09. Most Favored Lender............................................43
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default..............................................44
SECTION 6.02. Notice of Default..............................................48
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization..................................48
SECTION 7.02. Agents and Affiliates..........................................48
SECTION 7.03. Action by Administrative Agent.................................48
SECTION 7.04. Consultation with Experts......................................48
ii
<PAGE> 4
PAGE
----
SECTION 7.05. Liability of Agents............................................49
SECTION 7.06. Indemnification................................................49
SECTION 7.07. Credit Decision................................................49
SECTION 7.08. Successor Administrative Agent.................................50
SECTION 7.09. Agents'Fee.....................................................50
SECTION 7.10. Other Agents...................................................50
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair...........................................50
SECTION 8.02. Illegality.....................................................51
SECTION 8.03. Increased Cost and Reduced Return..............................52
SECTION 8.04. Taxes..........................................................53
SECTION 8.05. Base Rate Loans Substituted for Affected
Euro-Dollar Loans..............................................55
SECTION 8.06. Substitution of Lender.........................................56
ARTICLE 9
GUARANTY
SECTION 9.01. The Guaranty...................................................56
SECTION 9.02. Notice of Non-Payment..........................................57
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices.......................................................57
SECTION 10.02. No Waivers....................................................58
SECTION 10.03. Expenses; Indemnification.....................................58
SECTION 10.04. Set-Offs......................................................59
SECTION 10.05. Amendments and Waivers........................................60
SECTION 10.06. Successors; Participations and Assignments....................60
SECTION 10.07. Designated Lenders............................................62
SECTION 10.08. No Reliance on Margin Stock...................................63
SECTION 10.09. Governing Law; Judicial Proceedings...........................63
SECTION 10.10. Counterparts; Effectiveness...................................64
SECTION 10.11. WAIVER OF JURY TRIAL..........................................65
iii
<PAGE> 5
COMMITMENT SCHEDULE
PRICING SCHEDULE
EXHIBIT A - NOTE
EXHIBIT B - OPINION OF COUNSEL FOR THE COMPANY
EXHIBIT C - OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENTS
EXHIBIT D - FORM OF ELECTION TO PARTICIPATE
EXHIBIT E - FORM OF ELECTION TO TERMINATE
EXHIBIT F - OPINION OF COUNSEL FOR ELIGIBLE SUBSIDIARY
EXHIBIT G - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT H - DESIGNATION AGREEMENT
EXHIBIT I - COMPLIANCE CERTIFICATE
iv
<PAGE> 6
AGREEMENT dated as of January 27, 1999 among TRW INC., the ELIGIBLE
SUBSIDIARIES referred to herein, the LENDERS party hereto, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION and CITIBANK, N.A., as Co-Syndication
Agents and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent.
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ACQUISITION CLOSING DATE" means the date on which the Company
Percentage becomes 100%.
"ACQUISITION SUBSIDIARY" means a wholly-owned Subsidiary of the Company
formed under English law in order to implement the Offer.
"ACQUISITION TRANSACTIONS" means the acquisition of Target Shares
pursuant to open market purchases, the Offer and the Completion Procedures,
refinancing outstanding indebtedness of Target and payment of related fees and
expenses.
"ADJUSTED LONDON INTERBANK OFFERED RATE" has the meaning specified in
Section 2.04(b).
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New York,
in its capacity as administrative agent for the Lenders hereunder, and its
successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent,
completed by such Lender and returned to the Administrative Agent (with a copy
to the Company).
"AGENTS" means the Administrative Agent and the Co-Syndication Agents
and "AGENT" means any or all of the foregoing, as the context may require.
"APPLICABLE LENDING OFFICE" means, with respect to any Lender, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office; provided that any
Lender may from time to time by notice to the Company and the Administrative
Agent designate separate Applicable Lending Offices for its Loans to different
<PAGE> 7
Borrowers, in which case all references herein to the Applicable Lending Office
of such Lender shall be deemed to refer to any or all of such offices, as the
context may require.
"ASSET SALE" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) (each, a
"DISPOSITION") by the Company or any of its Subsidiaries of any asset, including
without limitation any sale-leaseback transaction, whether or not involving a
capital lease, but excluding (i) any disposition of inventory, cash, cash
equivalents and other cash management investments and obsolete and unused or
unnecessary equipment, in each case in the ordinary course of business, (ii) any
disposition to the Company or any of its Subsidiaries, (iii) any disposition (or
series of related dispositions) the Net Cash Proceeds of which do not exceed
$10,000,000 on an individual basis, (iv) any disposition if the Company notifies
the Administrative Agent promptly after the receipt of the proceeds thereof that
such proceeds will be committed by the Company and its Subsidiaries to be used
to purchase similar assets within 90 days of the date of such notice and will be
so used within 180 days of the date of such notice, but only to the extent such
proceeds are actually so used, (v) any disposition of Margin Stock for fair
value in cash or cash equivalents and (vi) any disposition (other than any
disposition described in the foregoing clauses) made by the Company or any of
its Subsidiaries so long as the Net Cash Proceeds thereof, when aggregated with
the Net Cash Proceeds of all other such dispositions made by the Company or any
of its Subsidiaries on or after the date hereof, do not exceed $100,000,000.
Asset securitization transactions shall, for purposes of determinations
hereunder relating to Reduction Events, be treated as incurrences of Debt and
not Asset Sales.
"ASSIGNEE" has the meaning specified in Section 10.06(c).
"ASSIGNMENT DATE" means the date designated by the Agents by notice to
the Company as the third Euro-Dollar Business Day following completion of
syndication of the Commitments.
"ATTRIBUTABLE DEBT" means, as to any particular lease under which any
Person is liable at the time and at any date as of which the amount thereof is
to be determined, the lesser of (a) the fair value of the property subject to
such lease (as determined by the Directors of the Company) or (b) the total net
amount of rent required to be paid by such Person under such lease during the
remaining term thereof, discounted from the respective due dates thereof to such
date at the actual interest factor included in such rent. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of the rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments,
2
<PAGE> 8
water rates and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"BASE RATE LOAN" means a Loan that bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the last sentence of Section 2.05(a) or Article 8.
"BASE RATE MARGIN" means a rate per annum determined in accordance with
the Pricing Schedule.
"BORROWER" means the Company or any Eligible Subsidiary, as the context
may require, and their respective successors, and "BORROWERS" means all of the
foregoing. When used in connection with a specific Loan or Borrowing, the term
"BORROWER" means the borrower (or proposed borrower) of such Loan or Borrowing.
Unless the context otherwise requires, the terms "BORROWER" and "BORROWERS"
include the Company in its capacity as guarantor of the obligations of the
Eligible Subsidiaries hereunder.
"BORROWING" has the meaning specified in Section 1.03.
"CLASS" has the meaning specified in Section 1.03.
"CLOSING DATE" means the date on or after the Effective Date on which
all of the conditions specified in Section 3.01 shall have been satisfied.
"CODE" has the meaning specified in Section 4.06.
"COMMITMENT" means any Tranche One Commitment or Tranche Two
Commitment, and "COMMITMENTS" means all or any combination of the foregoing, as
the context may require.
"COMMITMENT FEE RATE" has the meaning set forth in the Pricing
Schedule.
"COMMITMENT SCHEDULE" means the Schedule attached hereto denominated as
such.
3
<PAGE> 9
"COMPANY" means TRW Inc., an Ohio corporation, and its successors.
"COMPANY'S 1997 FORM 10-K" means the Company's annual report on Form
10-K for the Fiscal Year ended December 31, 1997, as filed with the SEC pursuant
to the Exchange Act.
"COMPANY'S LATEST FORM 10-Q" means the Company's quarterly report on
Form 10-Q for the Fiscal Quarter ended September 30, 1998, as filed with the SEC
pursuant to the Exchange Act.
"COMPANY PERCENTAGE" has the meaning set forth in the definition of
Consolidated EBITDA.
"COMPLETION PROCEDURES" means procedures pursuant to section 428 et
seq. Companies Act 1985 whereby Acquisition Subsidiary, after having validly
acquired or agreed to acquire at least 90% in nominal value of the Target Shares
to which the Offer relates and having complied with certain other requirements,
may acquire the remainder of such Target Shares.
"COMPLIANCE CERTIFICATE" has the meaning specified in Section 5.01(c).
"CONSOLIDATED DEBT" means, at any date, the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date;
provided that if the Target is a Consolidated Subsidiary but the Company
Percentage is less than 75%, Consolidated Debt shall be reduced by the lesser of
(i) the consolidated Debt of the Target and (ii) the consolidated cash balances
of the Target.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) income tax expense, (iii) depreciation, amortization and other
non-cash charges (other than Transaction Costs) which do not represent a cash
item in such period or any future period and (iv) Transaction Costs incurred or
accrued during such period and prior to the first anniversary of the Offer
Funding Date up to an aggregate of $500,000,000 for such period and any prior
period. In the event of any material acquisition (including, without limitation,
the Acquisition Transactions) or disposition during any period for which
Consolidated EBITDA is to be determined, such determination shall be made on a
pro forma basis as if such acquisition or disposition had occurred on the first
day of such period. Consolidation of Target shall be effected on the following
basis: for so long as the Target is a Subsidiary but the Company owns directly
or indirectly less than 75% of the Target Shares, Consolidated EBITDA shall
include a percentage (the
4
<PAGE> 10
"COMPANY PERCENTAGE") of the Consolidated Net Income (determined in
accordance with the definition of such term as if the Target were the Company)
of the Target equivalent to the Company's direct or indirect proportionate
ownership of the Target Shares; for so long as the Company Percentage is 75% or
higher, Consolidated EBITDA shall include the Company Percentage of the
Consolidated EBITDA (determined in accordance with the definition of such term
as if the Target were the Company) of the Target.
"CONSOLIDATED FUNDED DEBT" means the Funded Debt of the Company and its
Consolidated Subsidiaries consolidated in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Company and its Consolidated Subsidiaries, determined on a
consolidated basis for such period.
"CONSOLIDATED NET INCOME" means, for any period, the net income of the
Company and its Consolidated Subsidiaries, determined on a consolidated basis
for such period, adjusted to exclude the effect of any extraordinary gain or
loss and any gain or loss on Asset Sales.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total of all assets of the
Company and its Consolidated Subsidiaries appearing on a consolidated balance
sheet prepared in accordance with GAAP, including the equity in and the net
amount of advances to other Subsidiaries, after deducting therefrom (without
duplication of deductions) as shown on such balance sheet, the sum of:
(i) intangible assets, including goodwill, cost of acquired businesses
in excess of recorded net assets at acquisition dates, patents, licenses,
trademarks, trade names, copyrights, unamortized debt discount and expense less
unamortized debt premium, and corporate organization expense (but excluding
deferred charges and prepaid expense);
(ii) any write-up of the book value of any assets (other than equity in
Subsidiaries which are not Consolidated Subsidiaries and other than as a result
of currency revaluations) resulting from the revaluation thereof subsequent to
March 31, 1992;
(iii) all liabilities of the Company and its Consolidated Subsidiaries
other than: Debt; capital stock; surplus; surplus reserves; reserves for
deferred Federal income taxes arising from accelerated depreciation, investment
and other tax credits, and similar provisions; and contingency reserves not
allocated for any particular purpose;
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(iv) reserves for depreciation and amortization and other reserves
(other than the reserves referred to in the preceding clause (iii); and
(v) any minority interest in the shares of stock and surplus of any
Consolidated Subsidiary.
"CONSOLIDATED NET WORTH" means, at any date, the sum of the
consolidated shareholders' investment and minority interests of the Company and
its Consolidated Subsidiaries, determined as of such date. Consolidated
shareholders' investment and minority interests of the Company shall be as
included in the annual and quarterly financial statements of the Company, as
applicable.
"CONSOLIDATED SUBSIDIARY" means each Subsidiary other than any
Subsidiary the accounts of which (i) are not required by GAAP to be consolidated
with those of the Company for financial reporting purposes and (ii) were not
consolidated with those of the Company in the Company's then most recent Annual
Report to Shareholders and are not intended by the Company to be consolidated
with those of the Company in its next Annual Report to Shareholders.
"CO-SYNDICATION AGENTS" mean Bank of America National Trust and Savings
Association and Citibank, N.A., each in its capacity as co-syndication agent in
connection with the credit facility provided under this Agreement, and
"CO-SYNDICATION AGENT" means any or all of the foregoing, as the context may
require.
"COVENANT" means, with respect to any agreement or instrument
representing or governing Debt, any covenant (whether expressed as a covenant or
an event of default) contained therein.
"CREDIT EXPOSURE" means, with respect to any Lender at any time, the
sum, without duplication, of (i) the aggregate amount of its Commitments
(whether used or unused) at such time plus (ii) the aggregate outstanding
principal amount of its Loans at such time.
"DEBT" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all non-contingent obligations (and, for purposes of
Section 5.04
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<PAGE> 12
and the definition of Other Debt, all contingent obligations) of such
Person to reimburse any bank or other Person in respect of amounts paid under a
letter of credit or similar instrument, (vi) all Debt secured by a mortgage or
lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vii) all Guarantees by such Person of Debt of
another Person (each such Guarantee to constitute Debt in an amount equal to the
amount of such other Person's Debt Guaranteed thereby).
"DEBT INCURRENCE" means (i) the issuance by the Company or a Subsidiary
of long-term debt securities in the public or private capital markets or (ii)
the incurrence by the Company or a Subsidiary (other than a Foreign Subsidiary)
of Debt under one or more committed bank credit facilities (other than this
Agreement) in an aggregate amount exceeding the aggregate amount of the
commitments under the Existing Credit Facilities as in effect on the date
hereof. Commercial paper supported by a committed bank credit facility shall for
purposes of this definition be deemed Debt incurred under such facility. Asset
securitization transactions involving dispositions of assets by the Company or a
Subsidiary ("SELLER") to Persons, other than the Company or a Subsidiary
("PURCHASERS"), which finance such acquisitions through issuance of commercial
paper or other Debt shall be treated for purposes of this definition as if the
principal amount of such Debt of Purchaser were incurred by Seller.
"DESIGNATED LENDER" means, with respect to any Designating Lender, an
Eligible Designee designated by it pursuant to Section 10.07(a) as a Designated
Lender for purposes of this Agreement.
"DESIGNATING LENDER" means, with respect to each Designated Lender, the
Lender that designated such Designated Lender pursuant to Section 10.07(a).
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Company and the Administrative Agent.
"DOMESTIC SUBSIDIARY" means each Consolidated Subsidiary other than:
(a) any Consolidated Subsidiary which the Directors of the Company reasonably
determine not to be material to the business or financial condition of the
Company; (b) any Consolidated Subsidiary the major portion of the assets of
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<PAGE> 13
which are located, or the major portion of the business of which is carried on,
outside the United States of America, its territories and possessions; (c) any
Consolidated Subsidiary which, during the 12 most recent calendar months (or
such shorter period as shall have elapsed since its organization) derived the
major portion of its gross revenues from sources outside the United States of
America; (d) any Consolidated Subsidiary the major portion of the assets of
which consists of securities or obligations, or both, of one or more
corporations (whether or not Consolidated Subsidiaries) of the types described
in the preceding clauses (b) and (c); and (e) any Consolidated Subsidiary
organized after March 31, 1992 which the Company intends shall be operated in
such manner as to come within one or more of the preceding clauses (b), (c) and
(d).
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 10.10.
"ELECTION TO PARTICIPATE" means an Election to Participate
substantially in the form of Exhibit D hereto.
"ELECTION TO TERMINATE" means an Election to Terminate substantially in
the form of Exhibit E hereto.
"ELIGIBLE DESIGNEE" means a special purpose corporation that (i) is
organized under the laws of the United States or any state thereof, (ii) is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and (iii) issues (or the parent of which issues)
commercial paper rated at least A-1 or the equivalent thereof by S&P or at least
P-1 or the equivalent thereof by Moody's.
"ELIGIBLE SUBSIDIARY" means any Subsidiary as to which (i) an Election
to Participate shall have been delivered to the Administrative Agent and (ii) an
Election to Terminate shall not have been delivered to the Administrative Agent.
"EQUITY ISSUANCE" means the issuance of any equity securities by the
Company or any of its Subsidiaries (other than equity securities issued (i) to
the Company or any of its Subsidiaries or (ii) in the ordinary course of
business pursuant to employee benefit plans, including the Company's matching
contribution under the TRW Employee Stock Ownership and Savings Plan).
"ERISA" has the meaning specified in Section 4.06.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
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"EURO-DOLLAR LENDING OFFICE" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan that bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"EXCLUDED SUBSIDIARY DEBT" has the meaning set forth in Section 5.05.
"EXEMPTED INDEBTEDNESS" means, as of any particular time, the sum of
(i) the aggregate principal amount of all then outstanding indebtedness for
borrowed money of the Company and Domestic Subsidiaries incurred after July 1,
1992 and secured by any mortgage, security interest, pledge or lien other than
those permitted by paragraphs (i)-(vii) of Section 5.04 and (ii) all
Attributable Debt pursuant to Sale and Leaseback Transactions (as defined in
Section 5.08) incurred by the Company and Domestic Subsidiaries after July 1,
1992 at such time
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<PAGE> 15
outstanding other than that which is not prohibited by or is permitted
pursuant to Section 5.08(a).
"EXISTING CREDIT FACILITY" means any of (i) the Revolving Credit
Agreement dated as of December 10, 1997 among the Company and the financial
institutions listed on the signature pages thereof, (ii) the Multi-Year
Revolving Credit Agreement as amended and restated as of May 8, 1996 among the
Company and the financial institutions listed on the signature pages thereof,
and (iii) the Multi-Currency Revolving Credit Facility Agreement as amended and
restated as of August 7, 1997 among TRW Finance International, Barclays Bank PLC
and the financial institutions named therein, in each case as amended from time
to time, and "EXISTING CREDIT FACILITIES" means all or any combination of the
foregoing, as the context may require.
"FISCAL QUARTER" means a fiscal quarter of the Company.
"FISCAL YEAR" means a fiscal year of the Company.
"FOREIGN SUBSIDIARY" means any Subsidiary (i) organized under the laws
of a jurisdiction outside the United States and (ii) the major portion of the
assets of which are located, or the major portion of the business of which is
carried on, outside the United States.
"FUNDED DEBT" means all Debt of the type described in clauses (i) and
(ii) of the definition thereof having a maturity of more than 12 months from the
date such Debt was incurred or having a maturity of 12 months or less but by its
terms being renewable or extendable beyond 12 months from the date such Debt was
incurred at the option of the Borrower.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i)
all Loans to the same Borrower which are Base Rate Loans at such time or (ii)
all Euro-Dollar Loans to the same Borrower which have the same Interest Period
at such time; provided that, if a Loan of any particular Lender is converted to
or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included
in the same Group or Groups of Loans from time to time as it would have been in
if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
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<PAGE> 16
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by virtue of an agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise), (ii) to reimburse a bank for amounts drawn
under a letter of credit for the purpose of paying such Debt or (iii) entered
into for the purpose of assuring in any other manner the holder of such Debt or
other obligation of the payment thereof or to protect such holder against loss
in respect thereof (in whole or in part); provided that the term "GUARANTEE"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "GUARANTEE" used as a verb has a corresponding meaning.
"INDEMNITEE" has the meaning specified in Section 10.03(b).
"INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending (i) for any Interest Period commencing prior to the
Assignment Date, one week thereafter and (ii) for any other Interest Period,
one, two, three or six months thereafter, as the Borrower may elect in such
notice; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall, subject to clauses (c)
and (d) below, be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day in a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clauses (c) and (d) below, end on
the last Euro-Dollar Business Day in a calendar month;
(c) no Interest Period for any Tranche One Revolving Loan or
Tranche Two Revolving Loan shall extend beyond the Tranche One
Termination Date or Tranche Two Termination Date, respectively; and
(d) no Interest Period for any Tranche Two Term Loan shall
extend beyond the Tranche Two Term-Out Maturity Date.
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"LENDER" means any Tranche One Lender or Tranche Two Lender, and
"LENDERS" means any or all of the foregoing, as the context may require.
"LENDER PARTIES" means the Lenders and the Agents.
"LEVERAGE RATIO" means, at any date, the ratio of (i) Consolidated Debt
at such date to (ii) Consolidated EBITDA for the four consecutive Fiscal
Quarters ending on, or most recently prior to, such date.
"LOAN" means any Tranche One Revolving Loan or Tranche Two Loan, and
"LOANS" means any or all of the foregoing, as the context may require.
"LONDON INTERBANK OFFERED RATE" has the meaning specified in
Section 2.04(b).
"MAJORITY LENDERS" means, at any time, Lenders having at least 51% in
aggregate amount of the Credit Exposures at such time.
"MARGIN REGULATIONS" means Regulations T, U and X of the Board of
Governors of the Federal Reserve System, as amended and in effect from time to
time.
"MARGIN STOCK" means "margin stock" as defined in Regulation U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
consolidated financial condition of the Company and its Consolidated
Subsidiaries, taken as a whole.
"MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $100,000,000.
"MATERIAL SUBSIDIARY" has the meaning set forth in Section 6.01(c).
"MOODY'S" means Moody's Investors Service, Inc.
"NET CASH PROCEEDS" means, with respect to any Reduction Event, an
amount equal to the cash proceeds received by the Company or any of its
Subsidiaries from or in respect of such Reduction Event (including, when
received, any cash proceeds received as income or other proceeds of any noncash
proceeds of any Asset Sale), less (x) any investment banking and underwriting
fees and any other expenses reasonably incurred by such Person in respect of
such Reduction Event, (y) if such Reduction Event is an Asset Sale, (I) the
amount of any Debt secured by a Lien on any asset disposed of in such Asset Sale
and
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discharged from the proceeds thereof and (II) any taxes actually paid or to
be payable by such Person (as estimated by a senior financial or accounting
officer of the Company, giving effect to the overall tax position of the
Company) in respect of such Asset Sale and (z) if the cash proceeds of such
Reduction Event are received by a Subsidiary which is not a wholly-owned
Subsidiary, Net Cash Proceeds shall include only the portion thereof
proportionately equivalent to the Company's direct and indirect interest in such
Subsidiary. The Net Cash Proceeds of Debt Incurrences under a revolving facility
shall be calculated to avoid duplication.
"NOTES" means promissory notes of a Borrower, substantially in the form
of Exhibit A hereto, evidencing such Borrower's obligation to repay the Loans
made to it, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02.
"NOTICE OF INTEREST RATE ELECTION" has the meaning specified in
Section 2.05.
"OFFER" means the offer by Acquisition Subsidiary to purchase all
Target Shares on the terms and conditions specified in the form of offer
heretofore delivered by the Company to the Lenders.
"OFFER FUNDING DATE" means the first date, if any, on which payment is
made in respect of the initial Target Shares offered to and accepted by
Acquisition Subsidiary pursuant to the Offer.
"OFFER TERMINATION DATE" means the earliest date on which all of the
following have occurred: (i) all payments in respect of acceptances of the Offer
have been made in full, (ii) the Offer is closed for acceptance and (iii) all
Completion Procedures which are capable of being implemented have been completed
and all payments pursuant thereto to shareholders in Target have been made in
full.
"OTHER DEBT" means Debt of the Company (other than the Loans) in an
aggregate principal amount in excess of $100,000,000.
"PARENT" means, with respect to any Lender, any Person controlling
such Lender.
"PARTICIPANT" has the meaning specified in Section 10.06(b).
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" has the meaning specified in Section 4.06.
"PRICING SCHEDULE" means the Schedule attached hereto denominated as
such.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"PRINCIPAL PROPERTY" means any single manufacturing plant, engineering
facility or research facility owned or leased by the Company or a Domestic
Subsidiary other than any such plant or facility or portion thereof which the
Board of Directors reasonably determines not to be of material importance to the
Company and its Subsidiaries taken as a whole.
"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30
and December 31.
"REDUCTION EVENT" means (i) any Asset Sale, (ii) any Debt Incurrence or
(iii) any Equity Issuance.
"REDUCTION PERCENTAGE" means (i) when used to determine the amount by
which the Tranche One Commitments are to be reduced pursuant to Section
2.07(b)(i), 100% and (ii) when used to determine the amount by which the Tranche
Two Commitments are to be reduced pursuant to Section 2.07(b)(ii), 50%.
"REFERENCE LENDERS" means the principal London offices of Morgan
Guaranty Trust Company of New York, Bank of America National Trust and Savings
Association and Citibank, N.A., and "REFERENCE LENDER" means any one of such
Reference Lenders.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
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"RESET DATE" means the first date following the Offer Termination Date
on which (a) the Company's long-term unsecured debt is rated at least A- by S&P
and A3 by Moody's or (b)(i) the Company's long-term unsecured debt is rated at
least BBB+ by S&P and Baa1 by Moody's and (ii) the Tranche One Commitments shall
have terminated in their entirety, the Tranche One Revolving Loans shall have
been repaid in full and the Tranche Two Commitments shall have terminated in
their entirety or shall have been reduced to an aggregate amount not exceeding
$2,000,000,000.
"RESPONSIBLE OFFICER" means the President, the chief financial officer,
the chief accounting officer, the Treasurer, the General Counsel and any other
officer of the Company whose responsibilities include monitoring compliance with
this Agreement.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "SUBSIDIARY" means a Subsidiary of the Company.
"SUBSTITUTE LENDER" has the meaning specified in Section 8.06.
"TARGET" means LucasVarity plc, an English company.
"TARGET SHARES" means the ordinary shares of 25p nominal value each of
the Target. References to the Target Shares include, as the context may require,
the American Depositary Shares representing 10 such ordinary shares.
"TRANCHE ONE COMMITMENT" means (i) with respect to each Tranche One
Lender listed on the Commitment Schedule, the amount set forth opposite such
Lender's name on the Commitment Schedule under the heading "Tranche One
Commitment", (ii) with respect to each Substitute Lender which becomes a Tranche
One Lender pursuant to Section 8.06, the amount of the Tranche One Commitment
assumed by it pursuant to Section 8.06 and (iii) with respect to any Assignee
which becomes a Tranche One Lender pursuant to Section 10.06(c), the amount of
the transferor Tranche One Lender's Tranche One Commitment assigned to it
pursuant to Section 10.06(c), in each case as such amount may be changed from
time to time pursuant to Section 2.07, 2.08 or 10.06(c); provided
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that, if the context so requires, the term "TRANCHE ONE COMMITMENT"
means the obligation of a Tranche One Lender to extend credit up to such amount
to the Borrowers hereunder.
"TRANCHE ONE LENDER" means (i) each bank or other institution listed on
the Commitment Schedule as having a Tranche One Commitment, (ii) each Assignee
which becomes a Tranche One Lender pursuant to Section 10.06(c), (iii) each
Substitute Lender which becomes a Tranche One Lender pursuant to Section 8.06
and (iv) their respective successors.
"TRANCHE ONE REVOLVING CREDIT PERIOD" means the period from and
including the Effective Date to but not including the Tranche One Termination
Date.
"TRANCHE ONE REVOLVING LOAN" means a loan made by a Tranche One Lender
pursuant to Section 2.01(a).
"TRANCHE ONE TERMINATION DATE" means December 31, 1999 or, if such day
is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"TRANCHE TWO COMMITMENT" means (i) with respect to each Tranche Two
Lender listed on the Commitment Schedule, the amount set forth opposite such
Lender's name on the Commitment Schedule under the heading "Tranche Two
Commitment", (ii) with respect to each Substitute Lender which becomes a Tranche
Two Lender pursuant to Section 8.06, the amount of the Tranche Two Commitment
assumed by it pursuant to Section 8.06 and (iii) with respect to any Assignee
which becomes a Tranche Two Lender pursuant to Section 10.06(c), the amount of
the transferor Tranche Two Lender's Tranche Two Commitment assigned to it
pursuant to Section 10.06(c), in each case as such amount may be changed from
time to time pursuant to Section 2.07, 2.08 or 10.06(c); provided that, if the
context so requires, the term "TRANCHE TWO COMMITMENT" means the obligation of a
Tranche Two Lender to extend credit up to such amount to the Borrowers
hereunder.
"TRANCHE TWO LENDER" means (i) each bank or other institution listed on
the Commitment Schedule as having a Tranche Two Commitment, (ii) each Assignee
which becomes a Tranche Two Lender pursuant to Section 10.06(c), (iii) each
Substitute Lender which becomes a Tranche Two Lender pursuant to Section 8.06
and (iv) their respective successors.
"TRANCHE TWO LOAN" means a Tranche Two Revolving Loan or a Tranche Two
Term Loan.
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"TRANCHE TWO REVOLVING CREDIT PERIOD" means the period from and
including the Effective Date to but not including the Tranche Two Termination
Date.
"TRANCHE TWO REVOLVING LOAN" means a loan made by a Tranche Two Lender
pursuant to Section 2.01(b)(i).
"TRANCHE TWO TERMINATION DATE" means January 26, 2000 or, if such day
is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"TRANCHE TWO TERM LOAN" means a loan made by a Tranche Two Lender
pursuant to Section 2.01(b)(ii).
"TRANCHE TWO TERM-OUT MATURITY DATE" means January 26, 2001 or, if such
day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business
Day.
"TRANSACTION COSTS" means employee severance costs, write-downs and
write-offs and other extraordinary charges and fees, expenses and other costs
related to the Acquisition Transactions.
"TRW GROUP" has the meaning specified in Section 4.06.
"TYPE" has the meaning specified in Section 1.03.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America.
"UNMATURED EVENT OF DEFAULT" means any condition or event which with
the giving of notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
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"WHOLLY OWNED DOMESTIC SUBSIDIARY" means each Domestic Subsidiary all
the outstanding shares of which, other than directors' qualifying shares, shall
at the time be owned by the Company, or by the Company and one or more Wholly
Owned Domestic Subsidiaries, or by one or more Wholly Owned Domestic
Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
provided that, if the Company notifies the Administrative Agent that the Company
wishes to amend any provision hereof to eliminate the effect of any change in
GAAP (or if the Administrative Agent notifies the Company that the Majority
Lenders wish to amend any provision hereof for such purpose), then such
provision shall be applied on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such provisions are amended in a manner satisfactory to the Company and the
Majority Lenders.
SECTION 1.03. Classes and Types of Loans and Borrowings. The term
"BORROWING" denotes the aggregation of Loans of one or more Lenders to be made
to the same Borrower pursuant to Article 2 on the same date, all of which Loans
are of the same Class and Type (subject to Article 8) and, in the case of
Euro-Dollar Loans, have the same initial Interest Period. Loans hereunder are
distinguished by "CLASS" and by "TYPE". The "CLASS" of a Loan (or of a
Commitment to make such a Loan or of a Borrowing comprised of such Loans) refers
to the determination whether such Loan is a Tranche One Revolving Loan, Tranche
Two Revolving Loan or Tranche Two Term Loan, each of which constitutes a Class.
The "TYPE" of a Loan refers to the determination whether such Loan is a
Euro-Dollar Loan or a Base Rate Loan, each of which constitutes a "Type".
Identification of a Loan (or a Borrowing) by both Class and Type (e.g., a
"Euro-Dollar Tranche One Revolving Loan") indicates that such Loan is both a
Tranche One Revolving Loan and a Euro-Dollar Loan (or that such Borrowing is
comprised of such Loans).
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ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Tranche One Facility. Each Tranche
One Lender severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrowers pursuant to this subsection (a) from
time to time during the Tranche One Revolving Credit Period; provided that,
immediately after each such loan is made, the aggregate outstanding principal
amount of the Tranche One Revolving Loans held by such Lender shall not exceed
its Tranche One Commitment. Within the foregoing limits, and subject to Sections
2.07 and 2.08, the Borrowers may borrow under this subsection (a), prepay
Tranche One Revolving Loans to the extent permitted by Section 2.09 and reborrow
at any time during the Tranche One Revolving Credit Period under this subsection
(a).
(b) Tranche Two Facility. (i) Tranche Two Revolving Loans. Each Tranche
Two Lender severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrowers pursuant to this subsection (b)(i)
from time to time during the Tranche Two Revolving Credit Period; provided that,
immediately after each such loan is made, the aggregate outstanding principal
amount of the Tranche Two Revolving Loans held by such Lender shall not exceed
its Tranche Two Commitment. Within the foregoing limits, and subject to Sections
2.07 and 2.08, the Borrowers may borrow under this subsection (b)(i), prepay
Tranche Two Revolving Loans to the extent permitted by Section 2.09 and reborrow
at any time during the Tranche Two Revolving Credit Period under this subsection
(b)(i).
(ii) Tranche Two Term Loans. Each Tranche Two Lender severally agrees,
on the terms and conditions set forth in this Agreement, to make a loan to any
Borrower on the Tranche Two Termination Date in an aggregate principal amount up
to but not exceeding the amount of such Lender's Tranche Two Commitment;
provided that the aggregate principal amount of Tranche Two Term Loans shall not
exceed $2,000,000,000.
(c) Minimum Borrowings. Each Borrowing under this Section 2.01 shall be
in an aggregate principal amount of $25,000,000 or any larger multiple of
$5,000,000 (except that any such Borrowing may be in the aggregate amount of the
unused Commitments of the relevant Class) and shall be made from the several
Lenders ratably in proportion to their respective Commitments of such Class.
SECTION 2.02. Method of Borrowing. (a The Borrower shall give the
Administrative Agent notice (a "NOTICE OF BORROWING") not later than 10:30 A.M.
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(New York City time) on (x) the date of each Base Rate Borrowing and (y) the
third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the Class and initial Type of Loans comprising such
Borrowing; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
In no event shall the total number of Groups of Loans at any one time
outstanding exceed 20.
(b) Promptly after receiving a Notice of Borrowing, the Administrative
Agent shall notify each Lender having a Commitment of the relevant Class of the
contents thereof and of such Lender's ratable share of such Borrowing and such
Notice of Borrowing shall not thereafter be revocable by the Borrower.
(c) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Lender having a Commitment of the relevant Class shall make
available its ratable share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Administrative Agent at its
address specified in or pursuant to Section 10.01. Unless the Administrative
Agent determines that any applicable condition specified in Article 3 has not
been satisfied, the Administrative Agent will make the funds so received from
the Lenders available to the Borrower at the Administrative Agent's aforesaid
address.
(d) If any Tranche Two Lender makes a Tranche Two Term Loan hereunder
on a day on which any Borrower is to repay all or any part of an outstanding
Tranche Two Revolving Loan from such Tranche Two Lender, such Tranche Two Lender
shall apply the proceeds of its Tranche Two Term Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Tranche Two
Lender to the Administrative Agent as provided in Section 2.02(b), or remitted
by the relevant Borrower to the Administrative Agent as provided in Section
2.10, as the case may be.
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(e) Unless the Administrative Agent shall have received notice from a
Lender having a Commitment of the relevant Class before the date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender's share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available to the Administrative Agent on the
date of such Borrowing in accordance with Section 2.02(c) and (d) and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such share available to the Administrative Agent,
such Lender and the Borrower severally agree to repay to the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
the Federal Funds Rate. If such Lender shall repay to the Administrative Agent
such corresponding amount, the Borrower shall not be required to repay such
amount and the amount so repaid by such Lender shall constitute such Lender's
Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.03. Maturity of Loans; Contingent Prepayments of Loans.
(a) Scheduled Maturity. (i) Tranche One Revolving Loans. Each Tranche
One Revolving Loan shall mature, and the principal amount thereof shall be due
and payable in full together with accrued interest thereon, on the Tranche One
Termination Date.
(ii) Tranche Two Revolving Loans. Each Tranche Two Revolving Loan shall
mature, and the principal amount thereof shall be due and payable in full
together with accrued interest thereon, on the Tranche Two Termination Date.
(iii) Tranche Two Term Loans. Each Tranche Two Term Loan shall mature,
and the principal amount thereof shall be due and payable in full together with
accrued interest thereon, on the Tranche Two Term-Out Maturity Date.
(b) Contingent Prepayments. On the date of effectiveness (determined
pursuant to Section 2.07(c)) of any reduction of the Tranche One Commitments or
the Tranche Two Commitments pursuant to Section 2.07(b), the Borrowers shall
prepay Tranche One Revolving Loans or Tranche Two Revolving Loans, as the case
may be, in such aggregate principal amount (together with accrued interest
thereon) as shall be necessary so that, after giving effect to such prepayment,
the aggregate outstanding principal amount of the Tranche One Revolving Loans or
the Tranche Two Revolving Loans, as the case may be, does not exceed the
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Tranche One Commitments or Tranche Two Commitments, as the case may be,
as then reduced.
(c) Notice of Prepayments. The Company shall give the Administrative
Agent at least three Euro-Dollar Business Days' notice of each prepayment of the
Loans required pursuant to subsection (b). Promptly after receiving a notice
pursuant to this subsection, the Administrative Agent shall notify each affected
Lender of the contents thereof, and such notice shall not thereafter be
revocable by the Company.
SECTION 2.04. Interest Rates. (a) Each Base Rate Loan of each Class
shall bear interest on the outstanding principal amount thereof, for each day
from the date such Loan is made until it becomes due, at a rate per annum equal
to the sum of (x) the Base Rate Margin plus (y) the Base Rate for such day. Such
interest shall be payable at maturity, quarterly in arrears on each Quarterly
Payment Date prior to maturity and, with respect to the principal amount of any
Base Rate Loan that is prepaid or converted to a Euro-Dollar Loan, on the date
of such prepayment or conversion. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to
such Base Rate Loan for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof and, with respect to the principal
amount of any Euro-Dollar Loan that is prepaid, on the date of such prepayment.
The "ADJUSTED LONDON INTERBANK OFFERED RATE" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/100 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each Reference Lender in the London interbank market at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Euro-
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Dollar Loan of such Reference Lender to which such Interest Period is to apply
and for a period of time comparable to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Loan on
the day before such payment was due and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x)
the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of
the respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Administrative Agent may select)
deposits in dollars in an amount approximately equal to such overdue payment due
to each Reference Lender are offered to such Reference Lender in the London
interbank market for the applicable period determined as provided above by (y)
1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause 8.01(a) or 8.01(b) shall exist, at a rate per annum equal to
the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such
day).
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall promptly
notify the Borrower and the participating Lenders of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(e) Each Reference Lender agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Lender does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Lenders or Lenders or, if none
of such quotations is available on a timely basis, the provisions of Section
8.01 shall apply.
SECTION 2.05. Method of Electing Interest Rates. (a) The Loans included
in each Borrowing shall initially be of the Type specified by the Borrower in
the applicable Notice of Borrowing. Thereafter, the Borrower may from time to
time elect to change or continue the Type of each Group of Loans (subject to
Section 2.05(d) and the provisions of Article 8), as follows:
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(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect, as of the end of any Interest Period applicable thereto, to
convert such Loans to Base Rate Loans, or to continue such Loans as
Euro-Dollar Loans for an additional Interest Period.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent not later than 10:30 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each at least $25,000,000 (unless such portion is comprised of Base
Rate Loans). If no such notice is timely received before the end of an Interest
Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed to have
elected that such Group of Loans be converted to Base Rate Loans at the end of
such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of Section 2.05(a);
(iii) if the Loans comprising such Group are to be converted,
the new Type of Loans and, if the Loans resulting from such conversion
are to be Euro-Dollar Loans, the duration of the next succeeding
Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans
for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
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(c) Promptly after receiving a Notice of Interest Rate Election from a
Borrower pursuant to Section 2.05(a), the Administrative Agent shall notify each
relevant Lender of the contents thereof and such notice shall not thereafter be
revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any such Loans for an additional Interest Period as, Euro-Dollar
Loans if (x) the aggregate principal amount of any Group of Euro-Dollar Loans
created or continued as a result of such election would be less than $25,000,000
or (y) an Event of Default shall have occurred and be continuing when the
Borrower delivers notice of such election to the Administrative Agent or when
such conversion or continuation would otherwise be effective.
SECTION 2.06. Commitment Fees. (a) The Company shall pay to the
Administrative Agent, for the account of the Lenders ratably in proportion to
their Commitments of each Class, a commitment fee calculated for each day at the
Commitment Fee Rate for such day (determined in accordance with the Pricing
Schedule) on the amount by which the aggregate amount of the Commitments of such
Class exceeds the aggregate outstanding principal amount of the Loans of such
Class on such day. Such commitment fee shall accrue from and including the
Effective Date to but excluding the date on which the Commitments of such Class
terminate in their entirety.
(b) Fees accrued for the account of the Lenders under this Section
shall be payable quarterly in arrears on each Quarterly Payment Date and, with
respect to the Commitments of any Class, on the day on which such Commitments
terminate in their entirety.
SECTION 2.07. Mandatory Termination and Reduction of Commitments. (a)
Scheduled Termination. Unless previously terminated, (i) the Tranche One
Commitments shall terminate in their entirety on the Tranche One Termination
Date and (ii) the Tranche Two Commitments shall terminate in their entirety on
the Tranche Two Termination Date.
(b) Contingent Reductions. (i) Tranche One Commitments. In the event
that the Company or any of its Subsidiaries shall at any time, or from time to
time, receive after the date hereof any Net Cash Proceeds of any Reduction
Event, the Tranche One Commitments shall be reduced by an amount equal to the
Reduction Percentage of such Net Cash Proceeds.
(ii) Tranche Two Commitments. In the event that the Company or any of
its Subsidiaries shall at any time, or from time to time after the termination
of the Tranche One Commitments, receive any Net Cash Proceeds of any Reduction
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Event, the Tranche Two Commitments shall be reduced by an amount equal to the
Reduction Percentage of such Net Cash Proceeds; provided that no such reduction
of the Tranche Two Commitments shall be required to be made pursuant to this
subsection (b)(ii) with the Net Cash Proceeds in respect of any Reduction Event
if and to the extent, before or after giving effect thereto, the Tranche Two
Commitments do not exceed $2,000,000,000.
(c) Timing of Reductions. Any reduction of the Commitments pursuant to
subsection (b) shall be effective on and as of the date of receipt of the
relevant Net Cash Proceeds; provided that (i) if the Reduction Percentage of the
Net Cash Proceeds in respect of any Reduction Event is less than $10,000,000,
such reduction shall be effective upon receipt of proceeds such that, together
with all other such amounts not previously applied, the Reduction Percentage of
such Net Cash Proceeds is equal to at least $10,000,000; and (ii) if any such
reduction would otherwise require prepayment of Euro-Dollar Loans or portions
thereof pursuant to Section 2.03(b) prior to the last day of the related
Interest Period, such reduction (or portion thereof) shall, unless the
Administrative Agent otherwise notifies the Company upon the instructions of the
Majority Lenders, be deferred to such last day.
(d) Notice of Reductions. The Company shall give the Administrative
Agent at least three Euro-Dollar Business Days' notice of each reduction of the
Commitments required pursuant to this Section. Promptly after receiving a notice
pursuant to this subsection, the Administrative Agent shall notify each affected
Lender of the contents thereof, and such notice shall not thereafter be
revocable by the Company.
SECTION 2.08. Optional Termination or Reduction of Commitments. The
Company may, upon at least three Domestic Business Days' notice to the
Administrative Agent, (i) terminate the Commitments of any Class at any time, if
no Loans of such Class are outstanding at such time, or (ii) ratably reduce from
time to time by an aggregate amount of $25,000,000 or any larger multiple of
$5,000,000, the aggregate amount of the Commitments of any Class in excess of
the aggregate outstanding principal amount of the Loans of such Class. Promptly
after receiving a notice pursuant to this Section, the Administrative Agent
shall notify each Lender having a Commitment of the relevant Class of the
contents thereof, and such notice shall not thereafter be revocable by the
Company.
SECTION 2.09. Optional Prepayments. (a) Subject in the case of
Euro-Dollar Loans to Section 2.11, a Borrower may (i) upon at least one Domestic
Business Day's notice to the Administrative Agent, prepay any Group of Base Rate
Loans or (ii) upon at least three Euro-Dollar Business Days' notice to the
Administrative Agent, prepay any Group of Euro-Dollar Loans, in each case in
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whole at any time, or from time to time in part in amounts aggregating
$25,000,000 or any larger multiple of $5,000,000, by paying the principal amount
to be prepaid together with interest accrued thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Lenders included in such Group of Loans.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Administrative Agent shall notify each affected Lender of the
contents thereof and of such Lender's ratable share of such prepayment, and such
notice shall not thereafter be revocable by the Borrower.
SECTION 2.10. General Provisions as to Payments. (a) The Borrowers
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder not later than 2:00 P.M. (New York City time) on the date when due, in
Federal or other funds immediately available in New York City, to the
Administrative Agent at its address specified in or pursuant to Section 10.01.
The Administrative Agent will promptly distribute to each Lender its ratable
share (if any) of each such payment received by the Administrative Agent for the
account of the Lenders. Whenever any payment of principal of, or interest on,
the Base Rate Loans or any payment of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless a Borrower notifies the Administrative Agent before the date
on which any payment is due from such Borrower to the Lenders hereunder that
such Borrower will not make such payment in full, the Administrative Agent may
assume that such Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance on such
assumption, cause to be distributed to each relevant Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent that such
payment shall not have been so made by such Borrower (or by the Company as
guarantor thereof), each such Lender shall repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
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SECTION 2.11. Funding Losses. If a Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (whether such payment or conversion is pursuant to
Article 2, 6 or 8 or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.04(c), or if a Borrower fails to borrow, prepay,
convert or continue any Euro-Dollar Loan after notice has been given to any
Lender in accordance with Section 2.02(b), 2.03(c), 2.05(c) or 2.09(b), such
Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any net loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after such payment or conversion or
failure to borrow, prepay, convert or continue; provided that such Lender shall
have delivered to such Borrower a certificate as to the amount of such loss or
expense, which certificate shall set forth the basis for the calculations of the
amount of such loss or expense being claimed and shall be conclusive absent
manifest error.
SECTION 2.12. Computation of Interest and Fees. Commitment fees and
interest based on the Prime Rate hereunder shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and paid for the actual number of
days elapsed (including the first day but excluding the last day). All other
interest shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.13. Notes. (a) Each Borrower's obligation to repay the
Loans made to it by each Lender shall be evidenced by a single Note of such
Borrower payable to the order of such Lender for the account of its Applicable
Lending Office.
(b) Each Lender may, by notice to a Borrower and the Administrative
Agent, request that such Borrower's obligation to repay such Lender's Loans of a
particular Type or Class to such Borrower be evidenced by a separate Note. Each
such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it relates solely to Loans of
the relevant Type. Each reference in this Agreement to the "NOTE" of such
Borrower payable to the order of such Lender shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Promptly after it receives a Note for any Lender pursuant to
Section 3.01(a) or Section 3.05(a), the Administrative Agent shall forward such
Note to such Lender. Each Lender shall record the date, amount and maturity of
each
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Loan made by it to each Borrower and the date and amount of each payment of
principal made with respect thereto, and may, if such Lender so elects in
connection with any transfer or enforcement of its Note of any Borrower, endorse
on the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each of its Loans to such Borrower then
outstanding; provided that a Lender's failure to make (or any error in making)
any such recordation or endorsement shall not affect any Borrower's obligations
hereunder or under its Notes. Each Lender is hereby irrevocably authorized by
each Borrower so to endorse such Borrower's Note payable to the order of such
Lender and to attach to and make a part of such Note a continuation of any such
schedule as and when required.
SECTION 2.14. Judgment Currency. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from any Borrower
hereunder or under any Note in United States dollars ("DOLLARS") into another
currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase dollars with such other currency at the Administrative Agent's New York
office on the Domestic Business Day preceding that on which final judgment is
given. The obligations of each Borrower in respect of any sum due to any Lender
or the Administrative Agent hereunder or under any Note shall, notwithstanding
any judgment in a currency other than dollars be discharged only to the extent
that, on the Domestic Business Day following receipt by such Lender or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency, such Lender or the Administrative Agent (as the case may
be) may in accordance with normal banking procedures purchase dollars with such
other currency. If the amount of dollars so purchased is less than the sum
originally due to such Lender or the Administrative Agent, as the case may be,
in dollars, the relevant Borrower agrees, to the fullest extent that it may
effectively do so, as a separate obligation and notwithstanding any such
judgment, to indemnify such Lender or the Administrative Agent, as the case may
be, against such loss. If the amount of dollars so purchased exceeds (a) the sum
originally due to any Lender or the Administrative Agent, as the case may be,
and (b) any amounts shared with other Lenders as a result of allocations of such
excess as a disproportionate payment to such Lender under Section 10.04, such
Lender or the Administrative Agent, as the case may be, agrees to remit such
excess to such Borrower.
SECTION 2.15. Designation of Subsidiary as a Borrower; Termination of
Designation. (a) The Company may from time to time designate any Subsidiary as
an Eligible Subsidiary for purposes of this Agreement by delivering to the
Administrative Agent an Election to Participate duly executed on behalf of such
Subsidiary and the Company in such number of copies as the Administrative
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Agent may request. The Administrative Agent shall promptly notify the Lenders
of its receipt of any Election to Participate.
(b) The Company may at any time terminate the status of any
Subsidiary as an Eligible Subsidiary for purposes of this Agreement by
delivering to the Administrative Agent an Election to Terminate duly executed on
behalf of such Subsidiary and the Company in such number of copies as the
Administrative Agent may request. The delivery of such an Election to Terminate
shall not affect any obligation of such Subsidiary theretofore incurred under
this Agreement and its Notes or any rights of the Lenders and the Administrative
Agent against such Subsidiary or against the Company in its capacity as
guarantor of the obligations of such Subsidiary. The Administrative Agent shall
promptly notify the Lenders of its receipt of any Election to Terminate.
SECTION 2.16. Foreign Subsidiary Costs. (a) If the cost to any Lender
of making or maintaining any Loan to an Eligible Subsidiary is increased (or the
amount of any sum received or receivable by any Lender (or its Applicable
Lending Office) is reduced) by an amount deemed in good faith by such Lender to
be material, by reason of the fact that such Eligible Subsidiary is incorporated
in, or conducts business in, a jurisdiction outside the United States, such
Eligible Subsidiary shall indemnify such Lender for such increased cost or
reduction within 15 days after demand by such Lender (with a copy to the
Administrative Agent). A certificate of such Lender claiming compensation under
this subsection and setting forth the additional amount or amounts to be paid to
it hereunder (and the basis for the calculation of such amount or amounts) shall
be conclusive in the absence of manifest error.
(b) Each Lender will promptly notify the Company and the
Administrative Agent of any event of which it has knowledge that will entitle
such Lender to additional interest or payments pursuant to subsection 2.16(a),
but in any event within 45 days after such Lender obtains actual knowledge
thereof; provided that (i) if any Lender fails to give such notice within 45
days after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 2.16 in respect of any
costs resulting from such event, only be entitled to payment under this Section
2.16 for costs incurred from and after the date 45 days prior to the date that
such Lender does give such notice and (ii) each Lender will designate a
different Applicable Lending Office, if, in the judgment of such Lender, such
designation will avoid the need for, or reduce the amount of, such compensation
and will not be otherwise disadvantageous to such Lender.
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ARTICLE 3
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur when all the
following conditions have been satisfied:
(a) the Administrative Agent shall have received a duly
executed Note of the Company for the account of each Lender dated on or
before the Effective Date and complying with the provisions of Section
2.13;
(b) the Administrative Agent shall have received opinions of
Jones Day Reavis & Pogue, special counsel for the Company, and of the
General Counsel of the Company, collectively substantially to the
effect of Exhibit B hereto;
(c) the Administrative Agent shall have received an opinion of
Davis Polk & Wardwell, special counsel for the Agents, substantially to
the effect of Exhibit C hereto;
(d) the Company shall have paid to the Administrative Agent
all fees and expenses payable on or prior to the Closing Date for its
own account and the account of the Lenders; and
(e) the Administrative Agent shall have received (i) certified
copies of the Amended Articles of Incorporation and Regulations of the
Company, (ii) certified copies of resolutions of the Board of Directors
of the Company authorizing the Company to execute, deliver and perform
this Agreement and its Notes and (iii) a certificate of the Secretary
or an Assistant Secretary of the Company certifying the names of the
officer or officers of the Company who have signed or will sign this
Agreement, the Notes, and other documents provided for in this
Agreement to be executed by the Company, together with a sample of the
true signature of each such officer, and a certificate of authorization
setting forth each Person who is authorized to effect Loans and other
transactions hereunder, together with a sample of the true signature of
each such Person. Each Lender may conclusively rely on such
certificates until it shall have received notice to the contrary.
Promptly after the Closing Date occurs, the Administrative Agent shall notify
the Company and the Lenders thereof, and such notice shall be conclusive and
binding on all parties hereto.
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SECTION 3.02. Borrowings to Finance Acquisition of Target Shares. The
obligation of any Lender to make a Loan on the occasion of any Borrowing for the
purposes (and only for the purposes) of (i) financing the acquisition of Target
Shares pursuant to the Offer and the Completion Procedures and (ii) financing
open market purchases of Target Shares while the Offer is continuing is subject
to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred and the
Offer shall have been announced on or before February 15, 1999;
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02;
(c) immediately before and after such Borrowing, no Event of
Default described in clause (c) of Section 6.01 shall have occurred and
be continuing with respect to the Borrower or the Company (if not the
Borrower);
(d) the representations and warranties of the Company set
forth in Sections 4.01, 4.02 and 4.03 (or, if the Company is not the
Borrower, the representations and warranties of the Borrower set forth
in Sections 4.11(a), (b) and (c)) shall be true on and as of the date
of such Borrowing;
(e) Acquisition Subsidiary shall not have waived, amended or
modified in any material respect any material term or condition of the
Offer, including without limitation the offered price per Target Share,
other than an extension of time for acceptance of the Offer;
(f) Acquisition Subsidiary shall not have decided, declared or
accepted that valid acceptances in respect of less than a majority in
nominal value of the ordinary shares to which the Offer relates shall
be required for the satisfaction of the condition set forth in
paragraph 1(a) of Appendix 1 to the press release by which the Offer is
announced; and
(g) if the Offer Funding Date is on or prior to the date of
such Borrowing, the fact that the Offer shall have been declared
unconditional in all respects and the Administrative Agent shall have
received a certified copy of the announcement to such effect.
Each Borrowing described in this Section shall be deemed to be a representation
and warranty by the Borrower that the conditions specified in this Section are
satisfied on the date of such Borrowing.
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SECTION 3.03. Borrowings for Other Corporate Purposes. The obligation
of any Lender to make a Loan on the occasion of any Borrowing prior to the Reset
Date for a purpose other than those specified in Section 3.02 is subject to the
satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred and the
Offer shall have been announced on or before February 15, 1999;
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02;
(c) the fact that, immediately before and after such
Borrowing, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing;
(d) the fact that the representations and warranties of the
Company and, if the Company is not the Borrower, of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing; and
(e) the fact that the Offer Funding Date shall have occurred
on or prior to the date of such Borrowing.
Each Borrowing described in this Section shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in the foregoing clauses 3.03(c), 3.03(d) and 3.03(e).
SECTION 3.04. Borrowings. The obligation of any Lender to make a
Loan on the occasion of any Borrowing on or after the Reset Date is subject to
the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred and the Offer
shall have been announced on or before February 15, 1999;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02;
(c) the fact that, immediately before and after such Borrowing, no
Event of Default or Unmatured Event of Default shall have occurred and be
continuing;
(d) the fact that the representations and warranties of the Company
contained in Sections 4.01, 4.02, 4.03 and 4.10 and, if the Company is not the
Borrower, the representations and warranties of the Borrower contained in
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Sections 4.11(a), (b) and (c) shall be true on and as of the date of such
Borrowing; and
(e) in the case of any such Borrowing prior to the Acquisition Closing
Date, the fact that after giving effect thereto, the unused amount of the
Commitments will be not less than the maximum aggregate amount at that time
remaining to be paid (on the assumption that all outstanding Target Shares will
be acquired at the price stated in the Offer) to accepting shareholders pursuant
to the Offer and the Completion Procedures.
Each Borrowing described in this Section shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in the foregoing clauses 3.04(c), 3.04(d) and 3.04(e).
SECTION 3.05. First Borrowing by Each Eligible Subsidiary. The
obligation of each Lender to make a Loan on the occasion of the first Borrowing
by each Eligible Subsidiary is subject to the satisfaction of the following
further conditions:
(a) receipt by the Administrative Agent for the account of
each Lender of a duly executed Note of such Eligible Subsidiary, dated
on or before the date of such Borrowing, complying with the provisions
of Section 2.13;
(b) receipt by the Administrative Agent of an opinion of
counsel for such Eligible Subsidiary acceptable to the Administrative
Agent, substantially to the effect of Exhibit F hereto and covering
such additional matters relating to the transactions contemplated
hereby as the Majority Lenders may reasonably request; and
(c) receipt by the Administrative Agent of all documents which
it may reasonably request relating to the existence of such Eligible
Subsidiary, its authority for and the validity of its Election to
Participate, this Agreement and its Notes, and any other matters
relevant thereto, all in form and substance satisfactory to the
Administrative Agent.
The opinion referred to in clause 3.05(b) shall be dated on or before the date
of the first Borrowing by such Eligible Subsidiary.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Organization. The Company is a corporation duly
incorporated and in good standing under the laws of the State of Ohio and the
Company is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction of the United States where,
because of the nature of its activities or properties, such qualification is
required and where the failure to be so qualified would have a Material Adverse
Effect.
SECTION 4.02. Authorization; No Conflict. The execution, delivery and
performance by the Company of this Agreement and the Notes are within the
Company's corporate powers, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with, any governmental
body, agency or official (other than (i) Exchange Act reporting requirements and
(ii) actions which have been taken, and filings which have been made, and are in
full force and effect) and do not and will not contravene, or constitute a
default under, any provision of applicable law or regulation or of the Amended
Articles of Incorporation or Regulations of the Company or of any agreement for
borrowed money or other material agreement binding upon the Company. The Company
has duly executed and delivered this Agreement.
SECTION 4.03. Validity and Binding Nature. This Agreement is a legal,
valid and binding obligation of the Company, and the Notes, when duly executed
and delivered will be, legal, valid and binding obligations of the Company, in
each case enforceable against the Company in accordance with their respective
terms.
SECTION 4.04. Financial Statements. (a) The Company's audited
consolidated financial statements as at December 31, 1997 and its unaudited
consolidated financial statements as at September 30, 1998, copies of which have
been furnished to each Lender, have been prepared in accordance with GAAP,
applied on a basis consistent with that of the preceding fiscal year (except as
described in the notes thereto), and fairly present in all material respects the
consolidated financial condition and results of operations of the Company and
its Consolidated Subsidiaries as of the dates and for the periods indicated, as
applicable.
(b) Since September 30, 1998 there has been no material adverse change
in the business, financial position or results of operations of the Company and
its Consolidated Subsidiaries, taken as a whole.
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SECTION 4.05. Litigation. There are no material legal proceedings,
other than ordinary routine litigation incidental to the business, to which the
Company or any of its Consolidated Subsidiaries is a party or to which
any of their respective properties is subject that are required to be
disclosed in the Company's periodic reports under the Exchange Act and
that have not been so disclosed.
SECTION 4.06. Compliance with ERISA. Each member of the controlled
group of corporations (as defined in Section 414(b) of the Internal Revenue
Code of 1986), which includes the Company (the "TRW GROUP"), has (i)
fulfilled its obligations under the minimum funding standards of Part 3
of Title I of the Employee Retirement Income Security Act of 1974 (as
amended and, together with any successor statute, "ERISA") and Section
412 of the Internal Revenue Code of 1986 (as amended and, together with
any successor statute, the "CODE") with respect to each defined benefit
plan (as defined in Section 3 (35) of ERISA) maintained by a member of
the TRW Group (each, a "PLAN") and (ii) is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code
with respect to each such Plan. No member of the TRW Group has (x) sought
a waiver of the minimum funding standard under Section 412 of the Code in
respect of any Plan, (y) failed to make any contribution or payment
required to be made to a Plan or to any multi-employer plan (as defined
in Section 3 (37)(A) of ERISA) or made any amendment to any Plan which
has resulted or could result in the imposition of a lien or the posting
of a bond or other security under ERISA or the Code or (z) incurred any
liability under Title IV of ERISA other than the liability to the Pension
Benefit Guaranty Corporation for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. The Company has established
accruals for matters that are probable and reasonably estimable as required by
FASB Statement No. 5, "Accounting for Contingencies." To the Company's
knowledge, any liability that may result from the resolution of known
environmental matters in excess of amounts accrued therefor will not have a
Material Adverse Effect.
SECTION 4.08. Taxes. The Company and its Consolidated Subsidiaries have
filed all United Stated federal income tax returns and all other material tax
returns which are required to have been filed by them (subject to any available
extensions) and have paid all taxes indicated as due on such returns. The
Company has made adequate and reasonable provision for all material taxes not
yet due and payable, if any, and all material assessments, if any.
SECTION 4.09. Government Regulation. Neither the Company nor any of its
Consolidated Subsidiaries is registered as a public utility under the Public
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Utility Holding Company Act of 1935, as amended, or as an investment company
under the Investment Company Act of 1940, as amended.
SECTION 4.10. Year 2000 Compliance. The Company has (i) initiated a
review and assessment of all areas within the business and operations of the
Company and each of its Consolidated Subsidiaries that could reasonably be
expected to be materially adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by it or any of its Subsidiaries
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a timely
basis and (iii) to date, implemented such plan substantially in accordance with
such timetable. The Company reasonably believes that all computer applications
that are material to the business or operations of the Company or any of its
Consolidated Subsidiaries will on a timely basis be able to perform properly
date-sensitive functions for all dates before and from and after January 1,
2000, except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.11. Eligible Subsidiaries. (a) Each Eligible Subsidiary
is duly organized and existing under the laws of its jurisdiction of
organization.
(b) The execution and delivery by each Eligible Subsidiary of its
Election to Participate and its Notes, and the performance by it of this
Agreement and its Notes, are within its legal powers, have been duly authorized
by all necessary legal action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not and will not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the organizational documents of such Eligible Subsidiary or of
any agreement for borrowed money or other material agreement binding upon the
Company or any of its Subsidiaries. Such Eligible Subsidiary has duly executed
and delivered its Election to Participate.
(c) This Agreement is a legal, valid and binding obligation of each
Eligible Subsidiary, and its Notes, when duly executed and delivered will be,
legal, valid and binding obligations of such Eligible Subsidiary, in each case
enforceable against such Eligible Subsidiary in accordance with their respective
terms.
(d) Except as disclosed in its Election to Participate, there is no
income, stamp or other tax of any country, or any taxing authority thereof or
therein, in the nature of a withholding tax or otherwise, which is imposed on
any payment to be made by each Eligible Subsidiary pursuant to this Agreement or
its Notes, or is
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imposed in respect of the execution, delivery or enforcement of its Election to
Participate, this Agreement or its Notes.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Lender has any Credit Exposure
hereunder or any interest or fees accrued hereunder remain unpaid:
SECTION 5.01. Reports, Certificates and Other Information. The
Company will deliver to each of the Lenders:
(a) within 120 days after each Fiscal Year, a copy of the
Company's Annual Report to Shareholders and its Annual Report on Form
10-K for the Fiscal Year then ended, as filed with the SEC and which
will include an annual audit report of the Company, prepared on a
consolidated basis and in accordance with the Company's then current
method of accounting, which method must be in accordance with GAAP,
duly certified by independent certified public accountants of
nationally recognized standing selected by the Company;
(b) within 60 days after each Fiscal Quarter (except the last
Fiscal Quarter) of each Fiscal Year, a copy of the Company's Quarterly
Report on Form 10-Q for the Fiscal Quarter then ended, as filed with
the SEC;
(c) contemporaneously with the furnishing of a copy of each
Annual Report on Form 10-K provided for in subsection (a) and of each
Quarterly Report on Form 10-Q provided for in subsection (b), a duly
completed certificate in the form of Exhibit I with appropriate
insertions (each such certificate called a "COMPLIANCE CERTIFICATE"),
dated not more than 10 days prior to the date furnished, signed by an
officer of the Company, showing compliance with the Consolidated Net
Worth covenant set forth in Section 5.07 and, if applicable, the Debt
of Subsidiaries covenant set forth in Section 5.05 and the Leverage
Ratio covenant set forth in Section 5.06, and to the effect that no
Unmatured Event of Default or Event of Default has occurred and is
continuing or, if there is any such an event, describing it and the
steps, if any, being taken to cure it;
(d) on any date prior to the Reset Date, within five Domestic
Business Days after any Responsible Officer obtains knowledge of any
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Event of Default or Unmatured Event of Default, if such Event of
Default or Unmatured Event of Default is then continuing, a certificate
of the Company's chief financial officer or chief accounting officer
setting forth the details thereof and the action which the Company is
taking or proposes to take with respect thereto;
(e) promptly upon the filing thereof, copies of each Current
Report on Form 8-K filed by the Company with the SEC; and
(f) from time to time such additional information concerning
the Company as the Administrative Agent, at the request of any Lender,
may reasonably request.
Information required to be delivered pursuant to subsections 5.01(a), 5.01(b),
or 5.01(e) above shall be deemed to have been delivered on the date on which the
Company provides notice to the Lenders that such information has been posted on
the Company's website on the Internet at the website address listed on the
signature pages hereof, at sec.gov/edaux/searches.htm or at another website
identified in such notice and accessible by the Lenders without charge; provided
that (i) such notice may be included in a Compliance Certificate delivered
pursuant to subsection 5.01(c) and (ii) the Company shall deliver paper copies
of the information referred to in subsections 5.01(a), 5.01(b), or 5.01(e) to
any Lender which requests such delivery.
SECTION 5.02. Mergers; Consolidations; Sales. The Company shall not
consolidate with, or sell or convey all or substantially all its assets to, or
merge into, any other Person, unless (i) the Company is the surviving
corporation of such transaction, or (ii) the Company is the nonsurviving party
to a merger or consolidation, the primary purpose of which is to effect a
reincorporation of the Company under the laws of another state. Prior to the
Reset Date, the Company will not, directly or indirectly, make Restricted
Dispositions of assets with an aggregate fair market value in excess of
$500,000,000. For this purpose, "RESTRICTED DISPOSITION" means a sale, lease,
conveyance or other disposition outside the ordinary course of business
(including by merger, consolidation, spin-off or split-off), but excluding any
sale to the extent the consideration therefor consists of cash, cash equivalents
and notes and other installment payment obligations and the Company complies
with the provisions of Section 2.03(b) with respect to any such disposition (to
the extent applicable).
SECTION 5.03. Use of Proceeds. The proceeds of Loans made prior to the
Offer Funding Date will be applied by the Borrowers to finance directly or
indirectly the Acquisition Transactions (including by refinancing commercial
paper the proceeds of which were applied to finance the Acquisition
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Transactions). The proceeds of Loans made on or after the Offer Funding Date
will be applied by the Borrowers for general corporate purposes, including
without limitation to finance directly or indirectly the Acquisition
Transactions. None of such proceeds will be used in violation of the Margin
Regulations.
SECTION 5.04. Liens. At any date prior to the Reset Date, the Company
will not, and will not permit (x) prior to the Reset Date, any Subsidiary and
(y) on and after the Reset Date, any Domestic Subsidiary to, directly or
indirectly, create or assume any mortgage, encumbrance, lien, pledge, charge, or
security interest of any kind (collectively and individually, a "mortgage") upon
or in (m) prior to the Reset Date, any of its assets (including shares of
capital stock or indebtedness), whether now owned or hereafter acquired by it,
and (n) on and after the Reset Date, any of its interests in any Principal
Property or upon or in any shares of capital stock or indebtedness of any
Domestic Subsidiary, whether such interest, capital stock or indebtedness is now
owned or hereafter acquired, if such mortgage secures or is intended to secure,
directly or indirectly, the payment of any Debt; excluding, however, from the
operation of this Section 5.04:
(i) mortgages on property acquired, constructed, or improved by the
Company or any Subsidiary after July 1, 1992 which are created or
assumed contemporaneously with, or within 120 days after, such
acquisition or completion of such construction or improvement to
secure or provide for the payment of any part of the purchase price of
such property or the cost of such construction or improvement incurred
after July 1, 1992, or, in addition to mortgages contemplated by
clauses (ii) and (iii) below, mortgages on any such property existing
at the time or placed thereon at the time of acquisition or leasing
thereof by the Company or any Subsidiary, or conditional sales
agreements or other title retention agreements with respect to any
property now owned or leased or hereafter acquired or leased by the
Company or a Subsidiary;
(ii) mortgages on property (including shares of capital stock or
indebtedness of a corporation) of a corporation existing at the time
such corporation becomes a Subsidiary or is merged or consolidated
with the Company or a Subsidiary or existing at the time of a sale,
lease, or other disposition of the properties of such corporation (or
a division thereof) or other Person as an entirety or substantially as
an entirety (which includes the sale, lease, or other disposition of
all or substantially all the assets thereof) to the Company or a
Subsidiary, provided that no such mortgage shall extend to any other
Principal Property of the Company or any
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Subsidiary or to any shares of capital stock or any
indebtedness of any Subsidiary;
(iii) mortgages created by the Company or a Subsidiary to secure
Debt of the Company or a Subsidiary to the Company or to a
wholly-owned Subsidiary;
(iv) mortgages in favor of the United States of America or any
State, territory or possession thereof, or any foreign country
or any department, agency, instrumentality, or political
subdivision of any of such domestic or foreign jurisdictions
to secure partial, progress, advance, or other payments
pursuant to any contract or statute or to secure any Debt
incurred for the purpose of financing all or any part of the
purchase price of, or the cost of constructing, the property
subject to such mortgages;
(v) mortgages for the sole purpose of extending, renewing, or
replacing (or successively extending, renewing, or replacing)
in whole or in part any mortgage existing on July 1, 1992 or
referred to in the foregoing clauses (i) to (iv) inclusive or
of any Debt secured thereby; provided, however, that the
principal amount of Debt secured thereby shall not exceed the
principal amount of Debt so secured at the time of such
extension, renewal, or replacement, and that such extension,
renewal, or replacement mortgage shall be limited to all or a
part of the property which secured the mortgage so extended,
renewed, or replaced (plus improvements on such property);
(vi) mortgages on Margin Stock, if and to the extent that the value
of such Margin Stock exceeds 25% of the total assets of the
Company and its Subsidiaries subject to this Section;
(vii) on or after the Reset Date, mortgages under which effective
provision is made for all Loans to be secured equally and
ratably with any other Debt secured, directly or indirectly,
thereby; and
(viii) mortgages (other than mortgages permitted by any of the
foregoing clauses) if, at the time of creation or assumption
thereof and after giving effect thereto, the aggregate
principal amount of Exempted Indebtedness does not exceed
(a)(i) prior to the Reset Date, 10% and (ii) on and after the
Reset Date, 15% of Consolidated Net Tangible Assets,
determined as of a date not more than 95 days prior to such
creation or assumption less (b) for purposes of any
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determination prior to the Reset Date, the aggregate principal
amount of Debt of Consolidated Subsidiaries (other than
Excluded Subsidiary Debt).
SECTION 5.05. Debt of Subsidiaries. The aggregate principal amount of
Debt of all Consolidated Subsidiaries (excluding (i) the Loans, (ii) Debt of a
Subsidiary to the Company or to a wholly owned Subsidiary, (iii) Debt of Foreign
Subsidiaries to the extent not in excess of $1,000,000,000, (iv) secured Debt
and (v) Debt of a Subsidiary which has guaranteed the Loans on terms reasonably
satisfactory to the Administrative Agent (items (i)-(v), collectively, "EXCLUDED
SUBSIDIARY DEBT")) will at no time prior to the Reset Date exceed (x) 10% of
Consolidated Net Tangible Assets less (y) Exempted Indebtedness.
SECTION 5.06. Leverage Ratio. The Leverage Ratio will not exceed (a)
4.25, prior to March 31, 2000, and (b) 4.00, on or after March 31, 2000, at any
date during the Compliance Period. The "COMPLIANCE PERIOD" for this purpose is
the period from and including the last day of the first Fiscal Quarter ending at
least 30 days after the Offer Funding Date to but not including the Leverage
Reset Date. "LEVERAGE RESET DATE" means the first date following the Offer
Termination Date on which the Company's long-term unsecured debt is rated at
least A- by S&P and A3 by Moody's.
SECTION 5.07. Net Worth. (a) At the last day of any Fiscal Quarter
ended prior to the Reset Date, the Company will not permit Consolidated Net
Worth to be less than an amount (the "MINIMUM NET WORTH AMOUNT") equal to the
sum of (i) $1,250,000,000 and (ii) an amount equal to 50% of the consolidated
net income of the Company and its Consolidated Subsidiaries for each Fiscal
Quarter ending after March 31, 1999 but before the date of determination, in
each case, for which such consolidated net income is positive (but with no
deduction on account of negative consolidated net income for any Fiscal Quarter)
and (iii) 50% of the amount by which Consolidated Net Worth is increased after
March 31, 1999 as a result of the issuance and sale of capital stock of the
Company or the conversion or exchange of Debt of the Company into capital stock
of the Company; provided that the Minimum Net Worth Amount determined at the end
of any Fiscal Quarter prior to the first anniversary of the Offer Funding Date
shall be reduced by an amount equal to the amount by which Consolidated Net
Worth at the end of such Fiscal Quarter is reduced on account of Transaction
Costs incurred or accrued during such Fiscal Quarter, if and to the extent that
the aggregate amount of such Transaction Costs does not exceed $500,000,000.
(b) At any date on or after the Reset Date, the Company will not permit
Consolidated Net Worth to be less than the Minimum Net Worth Amount set forth in
the Compliance Certificate delivered by the Company pursuant to Section
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5.01(c) with respect to the fiscal period most recently ended on or prior to
the Reset Date.
SECTION 5.08. Sale and Leaseback. (a) The Company will not, and will
not permit any Domestic Subsidiary to, sell, lease or transfer any Principal
Property owned by the Company or a Domestic Subsidiary as an entirety, or any
substantial portion thereof, to anyone other than a Wholly Owned Domestic
Subsidiary (or the Company or a Wholly Owned Domestic Subsidiary in the case of
a Domestic Subsidiary) with the intention of taking back a lease of such
property (herein referred to as a "SALE AND LEASEBACK TRANSACTION") except a
lease for a period of not more than 36 months by the end of which it is intended
that the use of such property by the lessee will be discontinued; provided, that
notwithstanding the foregoing, the Company or any Domestic Subsidiary may sell
any such property and lease it back if the net proceeds of such sale are at
least equal to the fair value (as determined by resolution adopted by the Board
of Directors of the Company) of such property, and (i) the Company or such
Domestic Subsidiary would be entitled pursuant to paragraphs (i)-(vii) of
Section 5.04 to create Debt secured by a mortgage on the property to be leased
in an amount equal to the Attributable Debt with respect to such Sale and
Leaseback Transaction without equally and ratably securing all the Loans, or
(ii) if such sale or transfer does not come within the exception provided by the
preceding clause (i), the net proceeds of such sale shall, and in any such case
the Company covenants that they will, within 120 days after such sale, be
applied (to the greatest extent possible) either to the repayment of the Loans
then outstanding when due (whereupon the Commitments hereunder shall be reduced,
on a pro rata basis, to the extent that such net proceeds are so applied) or to
the retirement of other Consolidated Funded Debt of the Company ranking at least
on a parity with the Loans, or in part to one or more of such alternatives and
in part to another.
(b) Notwithstanding the provisions of Section 5.08(a), the Company and
or any Domestic Subsidiary may enter into Sale and Leaseback Transactions if, at
the time of such entering into, and after giving effect thereto, Exempted
Indebtedness does not exceed (a)(i) prior to the Reset Date, 10% and (ii) on and
after the Reset Date, 15% of Consolidated Net Tangible Assets, determined as of
a date not more than 95 days prior to such creation or assumption less (b) for
purposes of any determination prior to the Reset Date, the aggregate principal
amount of Debt of Consolidated Subsidiaries (other than Excluded Subsidiary
Debt).
SECTION 5.09. Most Favored Lender. The Company will not (a) enter into
any indenture, agreement or other instrument under which any Debt for borrowed
money in excess of $50,000,000 for any such indenture, agreement or instrument
(or series of related agreements or instruments) of the Company or of
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any Subsidiary may be issued (a "RESTRICTED AGREEMENT"), or (b) agree to any
amendment, waiver, consent, modification, refunding, refinancing or replacement
of any Restricted Agreement, in either case, with terms the effect of which is
to (i) include a Covenant which imposes a restriction, limitation or obligation
in favor of another lender not imposed in favor of the Lenders by this Agreement
or (ii) revise or alter any Covenant contained therein the effect of which is to
impose a restriction, limitation or obligation in favor of another lender not
imposed in favor of the Lenders by this Agreement, unless the Company
concurrently (x) notifies the Lenders and the Administrative Agent thereof and
(y) incorporates herein such additional, altered or revised Covenant. If the
Administrative Agent at the time so elects by notice to the Company and the
Lenders, the incorporation of each such additional Covenant shall be deemed to
occur automatically without any further action or the execution of any
additional document by any of the parties to this Agreement. If the
Administrative Agent does not elect to effect such an automatic incorporation,
the Administrative Agent shall promptly tender to the Company for execution by
it an amendment (executed by the Administrative Agent) incorporating such
additional Covenant and shall promptly deliver a copy of such amendment to the
Lenders.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) default in the payment when due of any principal of any
Note or default in the payment when due of interest on any Note or fees
payable by any Borrower hereunder and continuance of such failure to
pay interest or fees for five Domestic Business Days after written
notice thereof to the Company from the Administrative Agent at the
request of the Lender to which such amounts are owed;
(b) (i) on any date prior to the Reset Date, a default in the
payment when due at maturity (subject to any applicable grace period)
or by acceleration of any Other Debt or the occurrence of any event or
condition which results in the acceleration of the maturity of any
Other Debt or enables the holder of such Other Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
provided that, if any such default, event or condition shall
subsequently be remedied, cured, or waived prior to either the
termination of the Commitments or the declaration that all Loans are
immediately due and payable, in each case pursuant to this Section
6.01, and as a result the payment of such Other Debt is no longer due
and the holder thereof, or any Person acting on such
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holder's behalf, may no longer accelerate the maturity thereof, the
Event of Default existing hereunder by reason thereof shall likewise be
deemed thereupon to be remedied, cured, or waived and no longer in
existence, all without any further action by the parties hereto or
(ii) on any date on or after the Reset Date, a default in the payment
when due at maturity (subject to any applicable grace period) or by
acceleration of any Other Debt, or a default in the performance or
observance of any obligation or condition with respect to any Other
Debt if such default results in the acceleration of the maturity of
such Other Debt; provided that, if any such default shall subsequently
be remedied, cured, or waived prior to either the termination of the
Commitments or the declaration that all Loans are immediately due and
payable, in each case pursuant to this Section 6.01, and as a result
the payment of such Other Debt is no longer due, the Event of Default
existing hereunder by reason thereof shall likewise be deemed
thereupon to be remedied, cured, or waived and no longer in existence,
all without any further action by the parties hereto;
(c) the Company generally fails to pay, or admits in writing
its inability to pay, debts as they become due; or the Company applies
for, consents to, or acquiesces in the appointment of, a trustee,
receiver, or other custodian for the Company or for a substantial part
of the property thereof, or makes a general assignment for the benefit
of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, or receiver, or other custodian is appointed
for the Company or for a substantial part of the property of the
Company; or any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding is commenced in respect of the
Company and if such case or proceeding is not commenced by the
Company, it is consented to or acquiesced in by the Company or remains
for 90 consecutive days undismissed or unstayed; or the Company takes
any corporate action to authorize any of the foregoing. For purposes
of this subsection and subsection (f), on any date prior to the Reset
Date, (x) "COMPANY" means the Company and any Material Subsidiary, and
(y) "MATERIAL SUBSIDIARY" means any Subsidiary of the Company whose
assets (or, if such Subsidiary has subsidiaries, whose consolidated
assets) are at least equal to $100,000,000;
(d) failure by the Company to comply with or to perform in any
material respect any provision of this Agreement (and not constituting
an Event of Default under any of the preceding subsections of this
Section 6.01) and continuance of such failure for 30 days after written
notice thereof to the Company from the Administrative Agent at the
request of Majority Lenders;
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(e) any warranty made by the Company or any other Borrower in
Article 4 of this Agreement is breached or is incorrect when made (or
deemed made) in any material respect and the Company shall fail to take
corrective actions reasonably satisfactory to the Majority Lenders
within 30 days after written notice thereof to the Company from the
Administrative Agent at the request of the Majority Lenders, except
only in the case of a breach of the warranties contained in Article 4
made (or deemed made) on any date prior to the Reset Date, in which
case there shall be no opportunity to take corrective actions;
(f) any final and unappealable judgment or order from a
judicial or administrative body (which order or judgment is fully
enforceable against the Company in courts of the United States of
America or any state thereof) for the payment of money in excess of
$100,000,000 (after adjustments to reflect reductions for credits and
set-offs asserted in good faith by the Company shall be rendered
against the Company, shall not have been discharged or vacated and
shall have been in effect, in its final and unappealable form, for a
period of 30 consecutive days;
(g) prior to the Reset Date, any member of the TRW Group shall
fail to pay when due an amount or amounts aggregating in excess of
$100,000,000 which it shall have become liable to pay under Title IV of
ERISA; or notice of intent to terminate a Material Plan shall be filed
under Title IV of ERISA by any member of the TRW Group, any plan
administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer, any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could cause one or
more members of the TRW Group to incur a current payment obligation in
excess of $100,000,000;
(h) any person or group of persons (within the meaning of
Section 13 or 14 of the Exchange Act) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the SEC
under said Act) of 30% or more of the outstanding shares of common
stock of the Company;
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(i) at any time Continuing Directors shall not constitute a
majority of the board of directors of the Company ("CONTINUING
DIRECTOR" means each (i) individual who was a director of the Company
at the Effective Date or (ii) individuals who were nominated or elected
to be a director of the Company by at least two-thirds of the
Continuing Directors at the time of such nomination or election); or
(j) the Guarantee of the Company set forth in Article 9 shall
cease at any time to be in full force and effect, or any party hereto
(other than a Lender Party) shall so assert in writing;
then, and in every such event, the Administrative Agent shall:
(i) if requested by Lenders having more than 50% in aggregate
amount of the Commitments, by notice to the Company terminate the
Commitments or reduce the Commitments ratably to an aggregate amount
specified in such notice, whereupon the Commitments shall be so
terminated or reduced forthwith; provided that, until either all Target
Shares have been acquired pursuant to the Offer and the Completion
Procedures or the Offer Termination Date has occurred, the Commitments
shall not be terminated pursuant to this clause (i) or reduced pursuant
to this clause (i) to an aggregate amount less than the maximum
aggregate amount from time to time remaining to be paid (on the
assumption that all outstanding Target Shares will be acquired at the
price stated in the Offer) to accepting shareholders pursuant to the
Offer and the Completion Procedures; and
(ii) if requested by Lenders holding more than 50% in
aggregate unpaid principal amount of the Loans, by notice to the
Company declare the Loans (together with accrued interest thereon) to
be, and they shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by each Borrower;
provided that, if any Event of Default specified in subsection 6.01(c) occurs
with respect to the Company or, prior to the Reset Date, any other Borrower,
then without any notice to any Borrower or any other act by the Administrative
Agent or the Lenders, the Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by each Borrower. Except as provided in the foregoing
proviso, neither any Agent nor any Lender shall, at any time before the Offer
Termination Date, be entitled to (i) enjoin the funding of the Offer, (ii)
exercise
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any right of rescission or set-off or similar right or (iii) attempt in
any other manner to obtain payment from funds drawn hereunder to fund the Offer
and the Completion Procedures, in each case if and to the extent that to do so
would prevent the funding of the Offer and the Completion Procedures as
contemplated hereby upon satisfaction of the conditions set forth in Section
3.02.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Company (i) under Section 6.01(a) promptly upon being requested to
do so by the relevant Lender and (ii) under Section 6.01(d) and 6.01(e) promptly
upon being requested to do so by the Majority Lenders and, in each case, after
having done so, shall notify all the Lenders thereof.
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Each Agent shall have the same
rights and powers under this Agreement as any other Lender and may exercise or
refrain from exercising the same as though it were not one of the Agents. Each
Agent and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Company or any Subsidiary or affiliate
of the Company as if it were not one of the Agents.
SECTION 7.03. Action by Administrative Agent. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Event of Default or
Unmatured Event of Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Administrative Agent may
consult with legal counsel (who may be counsel for any Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
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SECTION 7.05. Liability of Agents. None of the Administrative Agent,
its affiliates and their respective directors, officers, agents and employees
shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Majority Lenders
(or such different number of Lenders as any provision hereof expressly
requires for such consent or request) or (ii) in the absence of its own
gross negligence or willful misconduct. None of the Administrative Agent,
its affiliates and their respective directors, officers, agents and
employees shall be responsible for or have any duty to ascertain, inquire
into or verify (i) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of any
Borrower; (iii) the satisfaction of any condition specified in Article 3
except, in the case of the Administrative Agent, receipt of items
required to be delivered to it; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or
writing furnished in connection herewith. The Administrative Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement or other writing (which may be a bank wire, telex,
facsimile or similar writing) believed by it to be genuine or to be
signed by the proper party or parties. Without limiting the generality of
the foregoing, the use of the term "agent" in this Agreement with
reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 7.06. Indemnification. The Lenders shall, ratably in proportion
to their Credit Exposures, indemnify the Administrative Agent, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrowers) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except such
as result from such indemnitees' gross negligence or willful misconduct) that
such indemnitees may suffer or incur in connection with this Agreement or any
action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance on any other Lender Party, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance on any other
Lender Party, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
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SECTION 7.08. Successor Administrative Agent. The Administrative Agent
may resign at any time by giving notice thereof to the Lenders and the Company.
Upon any such resignation, the Majority Lenders shall have the right to appoint
a successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent gives notice
of resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $100,000,000. Upon
the acceptance of its appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent resigns as Administrative Agent hereunder, the provisions
of this Article shall inure to its benefit as to actions taken or omitted to be
taken by it while it was Administrative Agent.
SECTION 7.09. Agents' Fee. The Company shall pay to each Agent for its
own account fees in the amounts and at the times previously agreed upon by the
Company and such Agent.
SECTION 7.10. Other Agents. None of the Co-Syndication Agents, in
their capacities as such, shall have any duties or obligations of any kind
under this Agreement.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or before the first day of any Interest Period for any
Euro-Dollar Loans:
(a) the Administrative Agent is advised by the Reference
Lenders that deposits in dollars in the applicable amounts are not
being offered to the Reference Lenders in the London interbank market
for such Interest Period, or
(b) Lenders having at least 50% in aggregate amount of the
Commitments advise the Administrative Agent that the Adjusted London
Interbank Offered Rate as determined by the Administrative Agent will
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not adequately and fairly reflect the cost to such Lenders of funding
their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Company and
the Lenders, whereupon until the Administrative Agent notifies the Company and
the Lenders that the circumstances giving rise to such suspension no longer
exist, (i) the obligations of the Lenders to make Euro-Dollar Loans or to
continue or convert outstanding Loans as or into Euro-Dollar Loans shall be
suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a
Base Rate Loan on the last day of the then current Interest Period applicable
thereto. Unless the Borrower notifies the Administrative Agent at least two
Domestic Business Days before the date of any affected Borrowing for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.02. Illegality. (a) If, on or after the date hereof, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible for any Lender (or its
Applicable Lending Office) to make, maintain or fund its Euro-Dollar Loans to
any Borrower and such Lender shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Lenders
and the Company, whereupon until such Lender notifies the Company and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Lender to make Euro-Dollar Loans to such
Borrower or to continue outstanding Loans to such Borrower as Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Administrative Agent
pursuant to this Section, such Lender shall designate a different Applicable
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Lender, be otherwise disadvantageous to
such Lender.
(b) If such notice is given, each Euro-Dollar Loan of such Lender then
outstanding to such Borrower shall be converted to a Base Rate Loan either (i)
on the last day of the then current Interest Period applicable to such
Euro-Dollar Loan if such Lender may lawfully continue to maintain and fund such
Loan as a Euro-Dollar Loan to such day or (ii) immediately if such Lender shall
determine that it may not lawfully continue to maintain and fund such Loan as a
Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan
shall be
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payable on the same dates as, and on a pro rata basis with, the
interest and principal payable on the related Euro-Dollar Loans of the other
Lenders.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any such requirement included in an applicable Reserve Percentage), special
deposit, insurance assessment or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (or its Applicable
Lending Office) or shall impose on any Lender (or its Applicable Lending Office)
or the London interbank market any other condition affecting its Euro-Dollar
Loans, its Notes or its obligation to make Euro-Dollar Loans and the result of
any of the foregoing is to increase the cost to such Lender (or its Applicable
Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the
amount of any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or under its Note with respect thereto, by
an amount deemed in good faith by such Lender to be material, then, within 15
days after demand by such Lender (with a copy to the Administrative Agent), the
relevant Borrower shall pay to such Lender such additional amount or amounts as
will compensate such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Lender (or its Parent) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand by such Lender (with a copy to the Administrative Agent), the
Company shall pay (or cause the relevant
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Borrowers to pay) to such Lender such additional amount or amounts as will
compensate such Lender (or its Parent) for such reduction.
(c) Each Lender will promptly notify the Company and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
Section, but in any event within 45 days after such Lender obtains actual
knowledge thereof; provided that (i) if any Lender fails to give such notice
within 45 days after it obtains actual knowledge of such an event, such Lender
shall, with respect to compensation payable pursuant to this Section 8.03 in
respect of any costs resulting from such event, only be entitled to payment
under this Section 8.03 for costs incurred from and after the date 45 days prior
to the date that such Lender does give such notice and (ii) each Lender will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to it. A certificate of
any Lender claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder (and the basis for the
calculations of such amount or amounts) shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes or other charges of
any nature deducted, withheld or otherwise imposed with respect to any payment
by any Borrower pursuant to this Agreement or any Note, and all liabilities with
respect thereto, excluding:
(i) with respect to each Lender Party, taxes imposed on its
net income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which it is organized or in which its
principal executive office or Applicable Lending Office is located, and
(ii) any United States withholding tax imposed on such
payment, but not excluding any portion of such tax that exceeds the
United States withholding tax which would have been imposed on such a
payment to such Lender Party under the laws and treaties in effect when
such Lender Party first becomes a party to this Agreement (all taxes
described in (i) and (ii), collectively, "EXCLUDED TAXES").
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"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or any Note or from the
execution, delivery, registration or enforcement of, or otherwise with respect
to, this Agreement or any Note; provided that Other Taxes shall not include
Excluded Taxes.
(b) Each payment by a Borrower to or for the account of a Lender Party
hereunder or under any Note shall be made without deduction for any Taxes or
Other Taxes; provided that, if a Borrower shall be required by law to deduct any
Taxes or Other Taxes from such payment, (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) such Lender Party
receives an amount equal to the sum it would have received had no such deduction
been made, (ii) such Borrower shall make such deduction, (iii) such Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and (iv) such Borrower shall
promptly furnish to the Administrative Agent, at its address specified in or
pursuant to Section 10.01, the original or a certified copy of a receipt
evidencing payment thereof or other reasonably satisfactory evidence thereof.
(c) The relevant Borrower shall indemnify each Lender Party for the
full amount of any Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted (whether or not correctly) by any
jurisdiction on amounts payable under this Section) paid by such Lender Party
with respect to amounts paid by such Borrower pursuant to this Agreement or any
Note, and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be paid within 15
days after the later of the date such Lender Party makes demand therefor and the
date such payment is made.
(d) Each Lender Party organized under the laws of a jurisdiction
outside the United States, before it signs and delivers this Agreement in the
case of each Lender Party listed on the signature pages hereof and before it
becomes a Lender Party in the case of each other Lender Party, and from time to
time thereafter if requested in writing by the Company (but only so long as such
Lender Party remains lawfully able to do so), shall provide the Company and the
Administrative Agent with Internal Revenue Service form 1001 or 4224 in
duplicate, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender Party is entitled to benefits under
an income tax treaty to which the United States is a party which exempts such
Lender Party from United States withholding tax or reduces the rate of
withholding tax on payments of interest for the account of such Lender Party or
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certifying that the income receivable by it pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Lender Party has failed to
provide the Company or the Administrative Agent with the appropriate form as
required by Section 8.04(d) (unless such failure is due to a change in treaty,
law or regulation occurring after the date on which such form originally was
required to be provided or results from the Company's failure to make a timely
written request pursuant to Section 8.04(d)), such Lender Party shall not be
entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to
Taxes imposed by the United States; provided that if a Lender Party, which is
otherwise exempt from or subject to a reduced rate of withholding tax, becomes
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrowers shall take such steps as such Lender Party shall reasonably
request to assist such Lender Party to recover such Taxes.
(f) If any Borrower is required to pay additional amounts to or for
the account of a Lender Party pursuant to this Section as a result of a change
of law, treaty or regulation occurring after such Lender Party first became a
party to this Agreement, such Lender Party will, at the Company's request,
change the jurisdiction of its Applicable Lending Office if, in the sole
judgment of such Lender Party, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Lender Party.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Lender to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans to any Borrower has been suspended
pursuant to Section 8.02 or (ii) any Lender has demanded compensation under
Section 8.03 or 8.04 with respect to its Euro-Dollar Loans, and in any such case
the Company shall, by at least five Euro-Dollar Business Days' prior notice to
such Lender through the Administrative Agent, have elected that the provisions
of this Section shall apply to such Lender, then, unless and until such Lender
notifies the Company that the circumstances giving rise to such suspension or
demand for compensation no longer exist, all Loans to such Borrower which would
otherwise be made by such Lender as (or continued as or converted to)
Euro-Dollar Loans shall instead be Base Rate Loans on which interest and
principal shall be payable contemporaneously with the related Euro-Dollar Loans
of the other Lenders. If such Lender notifies the Company that the circumstances
giving rise to such suspension or demand for compensation no longer exist, the
principal amount of each such Base Rate Loan shall be converted into a
Euro-Dollar Loan on the first day of the next succeeding Interest Period
applicable to the related Euro-Dollar Loans of the other Lenders.
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SECTION 8.06. Substitution of Lender. (a) If (i) the obligation of any
Lender to make or maintain Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or
8.04, the Company shall have the right to seek one or more banks or other
institutions (each a "SUBSTITUTE LENDER"), which may be one or more of the
Lenders or one or more other banks or institutions satisfactory to the
Administrative Agent, to purchase the Notes and assume the Commitment(s) and the
Loans of such Lender (the "AFFECTED LENDER") and, if the Company locates one or
more Substitute Lenders, the Affected Lender shall, upon payment to it of the
purchase price agreed between it and the Substitute Lender or Lenders (or,
failing such agreement, a purchase price in the amount of the outstanding
principal amount of its Loans and accrued interest thereon to the date of
payment) plus any amount (other than principal and interest) then due to it or
accrued for its account hereunder, assign all its rights and obligations under
this Agreement and the Notes (including its Commitment(s) and its Loans of each
Class) to the Substitute Lender or Lenders, and the Substitute Lender or Lenders
shall assume such rights and obligations, whereupon (i) the Commitment of the
relevant Class (and/or the Loans of the relevant Class) of each Substitute
Lender that is already a Lender shall be increased by the portion of the
Affected Lender's Commitment of such Class (and/or Loans of such Class) so
assigned to and assumed by it and (ii) each Substitute Lender that is not
already a Lender shall become a Lender party to this Agreement and shall acquire
all the rights and obligations of a Lender with a Commitment of the relevant
Class (and/or the Loans of the relevant Class) equal to the portion of the
Affected Lender's Commitment of such Class (and/or Loans of such Class) so
assigned to and assumed by it.
ARTICLE 9
GUARANTY
SECTION 9.01. The Guaranty. The Company hereby unconditionally,
absolutely and irrevocably guarantees, as primary obligor and not merely as
surety, the repayment to each Lender, when due pursuant to the terms and
conditions of this Agreement, of the amount of any Loan made pursuant to this
Agreement to an Eligible Subsidiary, together with accrued interest on such
Loan; provided, however, that before any amount shall be deemed due and payable
pursuant to this Guarantee, the Administrative Agent must first give notice to
the Company of the nonpayment thereof by the Eligible Subsidiary at the request
of the relevant Lender, and the Company shall have five Domestic Business Days
from the receipt of such notice to cure or cause to be cured any and all such
nonpayments. The Company's obligations hereunder constitute a guaranty of
payment and not of collection merely. The Company hereby waives notice of, and
consents to, any extensions of time of payment, renewals, compromises,
settlements, releases or other indulgences from time to time granted by the
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Lenders in respect of Loans made to Eligible Subsidiaries. Except as otherwise
provided in this Article 9, the Company hereby waives presentment, protest,
demand of payment, notice of dishonor and all notices and demands whatsoever.
The obligations of the Company hereunder shall not be released, discharged or
otherwise affected by (i) any change in the corporate existence or constitution,
structure or ownership of any Eligible Subsidiary or the Company, (ii) any
insolvency, bankruptcy, reorganization or similar proceeding affecting the
Eligible Subsidiary or its assets or the Company or (iii) the existence of any
claim, set-off or other rights which the Company may have at any time against
any Lender Party or any other Person. If at any time any payment of any
obligation guaranteed hereunder is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy or reorganization of an Eligible
Subsidiary or otherwise, the Company's obligations under this Article 9 with
respect to such payment shall be reinstated at such time as though such payment
had not been made. If acceleration of the time for payment of any amount payable
by any Eligible Subsidiary under this Agreement or its Notes is stayed upon any
bankruptcy, insolvency or reorganization of such Eligible Subsidiary or
otherwise, all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by the Company pursuant to this
Article 9 in accordance with the terms hereof. The Company shall not exercise
any of its subrogation rights with respect to amounts paid to a Lender pursuant
to this Article 9 until all amounts guaranteed hereunder payable to any Lender
have been paid in full and the Commitments have terminated. Following such
payment in full and termination of the Commitments, the Company shall be
entitled to subrogation in the Lenders' rights and, upon the reasonable request
of the Company, each Lender agrees to cooperate with the Company in enforcement
of the Company's subrogation rights, including the transfer and delivery by such
Lender to the Company of any and all related evidence of indebtedness within the
possession or control of such Lender.
SECTION 9.02. Notice of Non-Payment. The Administrative Agent shall
give notice to the Company pursuant to the proviso set forth in the first
sentence of Section 9.01 promptly upon being requested to do so by the relevant
Lender.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile or similar writing) and shall be given to such party: (a) in the case
of the Company or the Administrative Agent, at its address, facsimile number or
telex number set
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forth on the signature pages hereof, (b) in the case of an Eligible
Subsidiary, at its address, facsimile number or telex number set forth in its
Election to Participate, (c) in the case of any Lender, at its address,
facsimile number or telex number set forth in its Administrative Questionnaire
or (d) in the case of any party, at such other address, facsimile number or
telex number as such party may hereafter specify for the purpose by notice to
the Administrative Agent and the Company. Each such notice, request or other
communication shall be effective (i) if given by telex, when transmitted to the
telex number referred to in this Section and the appropriate answerback is
received, (ii) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, (iii) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iv) if given by any
other means, when delivered at the address referred to in this Section; provided
that notices to the Administrative Agent under Article 2 or Article 8 shall not
be effective until received.
SECTION 10.02. No Waivers. No failure or delay by any Lender Party in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.03. Expenses; Indemnification. (a) The Company shall pay (i)
all out-of-pocket expenses of the Administrative Agent, including reasonable
fees and disbursements of special counsel for the Agents, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Event of Default or Unmatured Event of
Default or alleged Event of Default or Unmatured Event of Default hereunder and
(ii) if an Event of Default occurs, all out-of-pocket expenses incurred by each
Lender Party, including (without duplication) the reasonable fees and
disbursements of outside counsel and the reasonable allocated cost of inside
counsel, in connection with such Event of Default and collection, or any
bankruptcy, insolvency, reorganization or other enforcement proceedings
resulting therefrom.
(b) The Company agrees to indemnify each Lender Party, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be
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designated a party thereto) brought or threatened relating to or
arising out of this Agreement or any actual or proposed use of proceeds of Loans
hereunder; provided that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or willful misconduct.
SECTION 10.04. Set-Offs. (a) If (i) an Event of Default has occurred
and is continuing and (ii) the requisite Lenders have requested the
Administrative Agent to declare the Loans to be immediately due and payable
pursuant to Section 6.01, or the Loans have become immediately due and payable
without notice as provided in Section 6.01, then each Lender Party is hereby
authorized by each Borrower at any time and from time to time, to the extent
permitted by applicable law, without notice to such Borrower (any such notice
being expressly waived by such Borrower), to set off and apply all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender Party to or for the account
of such Borrower against any obligations of such Borrower to such Lender Party
now or hereafter existing under this Agreement, regardless of whether any such
deposit or other obligation is then due and payable or is in the same currency
or is booked or otherwise payable at the same office as the obligation against
which it is set off and regardless of whether such Lender Party shall have made
any demand for payment under this Agreement. Each Lender Party agrees promptly
to notify the relevant Borrower after any such set-off and application made by
such Lender Party; provided that any failure to give such notice shall not
affect the validity of such setoff and application. The rights of the Lender
Parties under this subsection are in addition to any other rights and remedies
which they may have.
(b) Each Lender agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest then due with respect to the Loans to
any Borrower held by it which is greater than the proportion received by any
other Lender in respect of the aggregate amount of principal and interest then
due with respect to the Loans to the same Borrower held by such other Lender,
the Lender receiving such proportionately greater payment shall purchase such
participations in the Loans to such Borrower held by the other Lenders, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Loans to such Borrower held by the
Lenders shall be shared by the Lenders pro rata; provided that nothing in this
Section shall impair the right of any Lender to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of the relevant Borrower other than its indebtedness in
respect of the Loans. Each Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Loan to such Borrower, whether or not acquired pursuant to the foregoing
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arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of such Borrower in the amount of such participation.
SECTION 10.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Company and the Majority Lenders (and, if the
rights or duties of any Agent are affected thereby, by such Agent); provided
that no such amendment or waiver shall:
(a) unless signed by all the Lenders, (i) increase or decrease
the Commitment of any Lender (except for a ratable decrease in the
Commitments of all the Lenders) or subject any Lender to any additional
obligation, (ii) reduce the principal of or rate of interest on any
Loan or any fees hereunder, (iii) postpone the date of any scheduled
payment of principal of or interest on any Loan or any fees hereunder
or of any scheduled termination of any Commitment, (iv) release the
Company from its obligations under Article 9, (v) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the
Loans, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action under this Section or any
other provision of this Agreement or (vi) change this clause 10.05(a);
(b) unless signed by a Designated Lender or its Designating
Lender, (i) subject such Designated Lender to any additional
obligation, (ii) affect its rights hereunder (unless the rights of all
the Lenders hereunder are similarly affected) or (iii) change this
clause 10.05(b); or
(c) unless signed by an Eligible Subsidiary, (i) subject such
Eligible Subsidiary to any additional obligation, (ii) increase the
principal of or rate of interest on any outstanding Loan to such
Eligible Subsidiary, (iii) accelerate the stated maturity of any
outstanding Loan to such Eligible Subsidiary or (iv) change this clause
10.05(c).
SECTION 10.06. Successors; Participations and Assignments. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that no
Borrower may assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all the Lenders.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in any of its
Commitments or any or all of its Loans. If a Lender grants any such
participating
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interest to a Participant, whether or not upon notice to any of the
Borrowers or the Administrative Agent, such Lender shall remain responsible for
the performance of its obligations hereunder, and the Borrowers and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement.
Any agreement pursuant to which any Lender may grant such a participating
interest shall provide that such Lender shall retain the sole right and
responsibility to enforce the obligations of the Borrowers hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation agreement
may provide that such Lender will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section
10.05(a) without the consent of the Participant. Each Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article 8 with respect to its participating
interest. An assignment or other transfer which is not permitted by Section
10.06(c) or 10.06(d) shall be given effect for purposes of this Agreement only
to the extent of a participating interest granted in accordance with this
subsection.
(c) Any Lender may at any time assign to one or more banks or other
institution (each, an "ASSIGNEE") all, or a proportionate part of all, of its
Commitment of any Class (together with a corresponding portion of its Loans of
such Class) or its Tranche Two Term Loans (and, in each case, a corresponding
portion of its Notes) and such Assignee shall assume such rights and
obligations, pursuant to an Assignment and Assumption Agreement substantially in
the form of Exhibit G hereto signed by such Assignee and such transferor Lender,
with (and subject to) the subscribed consent of the Company (which shall not be
unreasonably withheld) and the Administrative Agent; provided that (i) after
giving effect to any proposed assignment (A) the Credit Exposure of the
transferor Lender (together with its affiliates) shall be equal to $0 or at
least $5,000,000, and (B) the Credit Exposure of the proposed Assignee (together
with its affiliates) shall be at least equal to $5,000,000 and (ii) if a
proposed Assignee is an affiliate of a transferor Lender or was a Lender
immediately before such assignment, no such consent of the Company or the
Administrative Agent shall be required; and provided further that no such
consent of the Company shall be required if at the time an Event of Default is
continuing. When such Assignment and Assumption Agreement has been signed and
delivered by the parties thereto and such Assignee has paid to such transferor
Lender the purchase price agreed between them, such Assignee shall be a Lender
party to this Agreement and shall have all the rights and obligations of a
Lender with a Commitment(s) and, if applicable, Loans as set forth in such
instrument of assumption, and the transferor Lender shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
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pursuant to this subsection, the transferor Lender, the Administrative Agent and
the Borrowers shall make appropriate arrangements so that, if required, new
Notes are issued to the Assignee. In connection with any such assignment, the
transferor Lender shall pay to the Administrative Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States or a State thereof, it shall
deliver to the Company and the Administrative Agent certification as to
exemption from deduction or withholding of United States federal income taxes in
accordance with Section 8.04.
(d) Any Lender may at any time assign all or any portion of its rights
under this Agreement and its Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Lender's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Lender would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Company's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Lender to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 10.07. Designated Lenders. (a) Subject to the provisions of
this subsection (a), any Lender may at any time designate an Eligible Designee
to provide all or a portion of the Loans to be made by such Lender pursuant to
this Agreement; provided that such designation shall not be effective unless the
Company and the Administrative Agent consent thereto (which consents shall not
be unreasonably withheld). When a Lender and its Eligible Designee shall have
signed an agreement substantially in the form of Exhibit H hereto (a
"DESIGNATION AGREEMENT") and the Company and the Administrative Agent shall have
signed their respective consents thereto, such Eligible Designee shall become a
Designated Lender for purposes of this Agreement. The Designating Lender shall
thereafter have the right to permit such Designated Lender to provide all or a
portion of the Loans to be made by such Designating Lender pursuant to Section
2.01, and the making of such Loans or portion thereof shall satisfy the
obligation of the Designating Lender to the same extent, and as if, such Loans
or portion thereof were made by the Designating Lender. As to any Loans or
portion thereof made by it, each Designated Lender shall have all the rights
that a Lender making such Loans or portion thereof would have had under this
Agreement and otherwise; provided that (x) its voting rights under this
Agreement shall be exercised solely by its Designating Lender and (y) its
Designating Lender shall remain solely responsible to the other parties hereto
for the performance of such Designated Lender's obligations under this
Agreement, including its obligations
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in respect of the Loans or portion thereof made by it. No additional
Note shall be required to evidence the Loans or portion thereof made by a
Designated Lender; and the Designating Lender shall be deemed to hold its Note
as agent for its Designated Lender to the extent of the Loans or portion thereof
funded by such Designated Lender. Each Designating Lender shall act as
administrative agent for its Designated Lender and give and receive notices and
other communications on its behalf. Any payments for the account of any
Designated Lender shall be paid to its Designating Lender as administrative
agent for such Designated Lender and neither the Borrowers nor the
Administrative Agent shall be responsible for any Designating Lender's
application of such payments. In addition, any Designated Lender may, with
notice to (but without the prior written consent of) the Company and the
Administrative Agent, (i) assign all or portions of its interest in any Loans to
its Designating Lender or to any financial institutions consented to by the
Company and the Administrative Agent that provide liquidity and/or credit
facilities to or for the account of such Designated Lender to support the
funding of Loans or portions thereof made by it and (ii) disclose on a
confidential basis any non-public information relating to its Loans or portions
thereof to any rating agency, commercial paper dealer or provider of any
guarantee, surety, credit or liquidity enhancement to such Designated Lender.
(b) Each party to this Agreement agrees that it will not institute
against, or join any other person in instituting against, any Designated Lender
any bankruptcy, insolvency, reorganization or other similar proceeding under any
federal or state bankruptcy or similar law, for one year and a day after all
outstanding senior indebtedness of such Designated Lender is paid in full. The
Designating Lender for each Designated Lender agrees to indemnify, save, and
hold harmless each other party hereto for any loss, cost, damage and expense
arising out of its inability to institute any such proceeding against such
Designated Lender. This subsection (b) shall survive the termination of this
Agreement.
SECTION 10.08. No Reliance on Margin Stock. Each Lender represents to
the Administrative Agent and each of the other Lenders that it in good faith is
not relying upon any "margin stock" (as defined in Regulation U) as collateral
in the extension or maintenance of the credit provided for in this Agreement.
SECTION 10.09. Governing Law; Judicial Proceedings. (a) This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York.
(b) Each Borrower hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
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contemplated hereby. Each Borrower irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
(c) Each Borrower irrevocably designates and appoints CT Corporation
System, having an office on the date hereof at 1633 Broadway, New York, New York
10102 as such Borrower's authorized agent, to accept and acknowledge on its
behalf service of any and all process which may be served in any suit, action or
proceeding referred to in Section 10.09(b) in any federal or New York State
court sitting in New York City. Each Borrower represents and warrants that such
agent has agreed to accept such appointment. Said designation and appointment
shall not be revocable by any Borrower until the Commitments have terminated
(or, in the case of an Eligible Subsidiary, its status as a Borrower hereunder
is terminated) and all principal, interest and other amounts payable by it
hereunder shall have been paid in full; provided, however, that such Borrower
may replace such agent with another agent with the consent of the Administrative
Agent (such consent not to be unreasonably withheld or delayed). If such agent
shall cease to act as agent for any Borrower, such Borrower agrees to designate
irrevocably and appoint without delay another such agent satisfactory to the
Administrative Agent.
(d) Each Borrower consents to process being served in any suit, action
or proceeding referred to in Section 10.09(b) in any federal or New York State
court sitting in New York City by service of process upon its agent appointed as
provided in Section 10.09(c); provided that, to the extent lawful and possible,
notice of said service upon such agent shall be mailed by registered or
certified air mail, postage prepaid, return receipt requested, to such Borrower
at its address specified in or pursuant to Section 10.01. Each Borrower
irrevocably waives, to the fullest extent permitted by law, all claim or error
by reason of service in such manner and agrees that such service shall be deemed
in every respect effective service of process upon such Borrower in any such
suit, action or proceeding and shall, to the fullest extent permitted by law,
constitute valid and personal service upon and personal delivery to such
Borrower.
(e) Nothing in this Section shall affect the right of the
Administrative Agent or any Lender to serve process in any other manner
permitted by law or limit the right of the Administrative Agent or any Lender to
bring proceedings against any Borrower in the courts of any jurisdiction or
jurisdictions.
SECTION 10.10. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
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This Agreement shall become effective when the Administrative Agent
shall have received, from each party listed on the signature pages hereof,
either a counterpart hereof signed by such party or facsimile or other written
confirmation satisfactory to the Administrative Agent confirming that such party
has signed a counterpart hereof.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TRW INC.
By: /s/ Ronald P. Vargo
________________________________________
Title: Vice President and Treasurer
Address: 1900 Richmond Road
Cleveland, Ohio 44124
Attn: Vice President and Treasurer
with a copy to: Secretary
Facsimile: (216) 291-7831
Web Site: www.trw.com
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Lender and as Administrative Agent
By: /s/ Christopher C. Kunhard
________________________________________
Title:
Address: 60 Wall Street
New York, New York 10260
Attn:
Facsimile: (212) 448-5939
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BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Lender and as
Co-Syndication Agent
By: /s/ Raju N. Patel
________________________________________
Title: Vice President
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile: (312) 987-0303
CITIBANK, N.A., as Lender and as
Co-Syndication Agent
By: /s/ Jordan Schweon
________________________________________
Title: Managing Director
Address: 399 Park Avenue
11th Floor -- Zone 20
New York, New York 10043
Facsimile: (212) 793-3963
67
<PAGE> 1
Exhibit (c)(1)
This document and the attached draft press announcement have been approved for
the purposes of section 57 of the Financial Services Act 1986 by J P Morgan, a
member of The Securities and Futures Authority Limited.
IRREVOCABLE UNDERTAKING
To: TRW Automotive UK (the "OFFEROR") and
J P Morgan (the "BANK")
28th January, 1999
PROPOSED OFFER FOR LUCASVARITY PLC
I understand that:
(a) the Offeror intends to make an offer (the "OFFER") to acquire all the
ordinary shares of 25p each ("ORDINARY SHARES") and American Depositary
Shares ("ADSs") each representing ten Ordinary Shares and evidenced by
American Depositary Receipts (together "SECURITIES") in the capital of
LucasVarity plc (the "TARGET");
(b) the Offer will be substantially on the terms and conditions to be set
out in a press announcement of the Offer (the "PRESS ANNOUNCEMENT")
which is substantially in the form of the attached draft Press
Announcement, together with such additional terms and conditions as may
be required to comply with the rules of The London Stock Exchange
Limited (the "LONDON STOCK EXCHANGE") and The City Code on Takeovers
and Mergers (the "CITY CODE") and any other amendments or terms and
conditions agreed between the Offeror and the Target;
(c) the Offer will extend to any Ordinary Shares issued while the Offer
remains open for acceptance, including any shares issued as a result of
the exercise of options under the LucasVarity 1996 Executive Share
Option Scheme, the Lucas Industries 1994 Executive Share Option Scheme,
the Lucas Industries Executive Share Option Scheme (1986), the
LucasVarity 1996 Savings-Related Share Option Scheme, the Lucas
Industries Employers' 1991 Savings-Related Share Option Scheme, the
Varity Corporation Executive Stock Option Plan and the Varity
Shareholder Value Incentive Plan ("Options"); and
(d) the making of the Offer is conditional on:
(i) the receipt by the Offeror of completed irrevocable
undertakings to accept the Offer (in a form acceptable to the
Offeror) from each of the directors of the Target); and
(ii) the release of the Press Announcement,
but the Offeror may waive conditions (i) or (ii) above in whole or in part (and
either conditionally or otherwise) if it so chooses and all my obligations under
this undertaking will lapse if the above
<PAGE> 2
2
conditions are not fulfilled (or, where permitted, waived by the Offeror) by
5.00pm on 28th January, 1999 (or such later time or day as the Offeror
may notify to the Board of the Target).
In consideration of the Offeror agreeing (subject to the above conditions) to
make the Offer, I undertake, agree and represent to and with the Offeror and the
Bank in the following terms:
1. I am the registered holder and beneficial owner of, and have all
relevant authority to accept (or procure the acceptance of) the Offer
in respect of, the number of Securities specified in Part 1 of the
Schedule and to transfer them free from all liens, charges and
encumbrances and together with all rights attaching to them as
envisaged by the terms of the Offer, including the right to all
dividends and other distributions (if any) declared, made or paid after
the date of this undertaking.
2. I will accept the Offer in respect of all the Securities referred to in
paragraph 1 above in accordance with the procedures for acceptance set
out in the Offer Document, not later than 3.30 p.m. on the fifth
business day after the despatch of the document containing the Offer
(the "Offer Document").
3. I am also beneficially entitled to the option(s) granted under the
Target share option schemes (the "SCHEMES") to subscribe for the number
of Ordinary Shares specified in Part 2 of the Schedule. In relation to
the options granted under the Schemes (other than the Schemes or any
part of the Schemes which are approved by the Inland Revenue) (the
"OPTION(S)"), I shall accept any proposal made by the Offeror to
holders of Options in compliance with Rule 15 of the City Code in
respect of the Options not later than ten days after such proposal is
made to optionholders in each case to the extent such Options have not
lapsed or been exercised.
4. Unless and until the Offer closes, lapses or is withdrawn, I will not:
(a) sell, transfer, charge, pledge or grant any option over or
otherwise dispose of any of the Securities or any interest in any
of the Securities except to the Offeror under the Offer; or
(b) accept any other offer in respect of any of the Securities
(whether it is conditional or unconditional and irrespective of
the means by which it is to be implemented); or
(c) withdraw the acceptances referred to in paragraphs 2 and 3 above
in respect of any of the Securities even though I may become
entitled to withdraw them under the rules of the City Code or any
provision in the Offer Document; or
(d) acquire any further interest in any shares in the Target other
than pursuant to the Option(s).
5. The Press Announcement may incorporate a reference to me substantially
in the terms set out in the attached draft Press Announcement and, in
accordance with the Rules of the City Code, this undertaking will be
referred to in the Offer Document and will be available for inspection
while the Offer is open for acceptance.
6. By 11.59pm in London on 3rd February, 1999, I will supply to the Bank
for inclusion in the Offer Document details (as required by Rules 24.3
and 25.3 of the City Code) of:
(a) my interests in securities of the Offeror and the Target; and
<PAGE> 3
(b) all my dealings in securities of the Offeror and the Target
during the period of 12 months prior to the date of this
undertaking.
I will notify the Bank immediately of any dealings by me in the
Offeror's securities after the date of this undertaking and before the
Offer lapses or is withdrawn.
7. I further undertake as follows:
(a) as a director of the Target, I agree to the issue of the Press
Announcement containing the reference to the recommendation of
all the directors of the Target (other than Mr Gates who is
abstaining) and confirm the accuracy of the information in it
in relation to the Target and its subsidiaries and associated
companies (the "TARGET GROUP");
(b) I will provide to you promptly on request all information in
relation to myself that may be reasonably necessary to
complete the preparation and despatch of the Offer Document in
order to comply with the requirements of the City Code and/or
all applicable United States securities laws and regulations;
(c) as a director of the Target, I will comply with the
requirements of the City Code and of the London Stock Exchange
in connection with the Offer including, in particular, the
requirement to join with the other directors of the Target
(other than Mr Gates who is abstaining) in making in the Offer
Document a statement of responsibility in relation to
information concerning the Target Group and directors of the
Target in the terms or to the effect required under Rule 19.2
of the City Code;
(d) I consent to particulars of this undertaking and my holdings
of, and dealings in, relevant securities of the Target and the
Offeror being included in the Offer Document and any other
related or ancillary document as required by the Code and/or
all applicable United States securities laws and regulations.
(e) subject to any overriding fiduciary duty, I will confirm in the
Offer that I consider the terms of the Offer to be fair and
reasonable and I will recommend shareholders of the Target to
accept the Offer and I will not recommend any other offer.
(f) subject to any overriding fiduciary duty or to my duties under
the City Code, I will at all times while the Offer is open for
acceptance:
(i) co-operate with the Offeror and endeavour to ensure
that the Offer becomes unconditional in all
respects; and
(ii) join with the Offeror in endeavouring to obtain such
regulatory consents and consents of clients or
customers or other third parties as are necessary to
avoid termination or variation of contracts which are
material to the business of any member of the Target
Group; and
(iii) join in making and agreeing to extensions of relevant
times and/or dates under the City Code to the extent
necessary to enable documents to be posted later than
may otherwise be required or to enable the Offer to
remain open without becoming unconditional as to
acceptances or in all respects or lapsing, as the
case may be;
<PAGE> 4
4
(g) subject to any overriding fiduciary duty or to my duties under
the City Code I will not directly or indirectly solicit or
encourage any general offer for all or any part of the issued
share capital of the Target from any third party;
(h) subject to any overriding fiduciary duty or my obligations
under the City Code, I will not take any action which is
inconsistent with my obligations contained in this undertaking
or the successful implementation of the Offer;
8. By way of security for my obligations under this letter I appoint any
director of the Offeror to be my attorney to execute in my name and on
my behalf a form of acceptance of the Offer in respect of all or any of
the Securities if and to the extent that after five business days from
the date of despatch of the Offer Document I have failed to comply with
my obligations in paragraph 2 of this letter, and to sign, execute and
deliver any documents and do all acts and things as may be necessary
for or incidental to the acceptance of the Offer in relation to the
Securities described in the Schedule. I agree that this power of
attorney is irrevocable until the Offer closes, lapses or is withdrawn.
9.
(a) Subject to paragraph (b) below, the Offeror agrees to make the Offer by
no later than 25th February, 1999 (or such later date as the Offeror
with the consent of the Panel may agree) provided that the Press
Announcement is released in substantially the form attached (or in such
other form as may be agreed between the Offeror and the Offeree or as
may be required to comply with the requirements of the Panel or US
securities laws or such other laws as may be relevant).
(b) If after the Offeror releases the Press Announcement either:
(i) the Panel consents to the Offeror not making the Offer;
(ii) an event occurs which means that the Offeror is no longer
required by the City Code to proceed with the Offer; or
(iii) the Offeror becomes aware that any condition of the Offer as set
out in the Press Announcement has or may become incapable of
being fulfilled,
the Offeror shall not be obliged to make the Offer.
(c) This undertaking shall lapse if:
(i) the Press Announcement is not released by close of business on
29th January, 1999 (or such later date as the Offeror and the
Offeree may agree);
(ii) the Offer is not made in the circumstances referred to in
paragraph (b) above; or
(iii) the Offer lapses or is withdrawn.
If the undertaking lapses, I shall have no claim against the Offeror.
10. The following additional provisions apply to this undertaking:
<PAGE> 5
5
(A) I acknowledge that in connection with the Offer and the matters
described above the Bank is not acting for me and that the Bank will
not be responsible to me for providing the protections afforded to
customers of the Bank or advising me in relation to the Offer or the
matters described above.
(B) I confirm that I have been given an adequate opportunity to consider
whether or not to give this undertaking and to obtain independent
advice.
(C) I agree that, if I fail to accept the Offer in accordance with this
undertaking or breach any of my obligations, damages would not be an
adequate remedy and accordingly the Offeror shall be entitled to the
remedy of injunction or specific performance or any other such
equitable relief.
(D) Any time, date or period mentioned in this undertaking may be extended
by mutual agreement between the parties but as regards any time, date
or period originally fixed or so extended time shall be of the essence.
All times referred to herein are London time.
(E) I have full power and authority to enter into and perform any
obligation under this undertaking and to accept the Offer in respect of
the Securities specified in Part I of the Schedule.
(F) The Schedule contains full and accurate details of all the shares or
other securities convertible into shares in the Target:
(i) of which I am the registered and beneficial owner;
(ii) to which I am entitled upon the exercise of any
option, warrant or other right to acquire or to
subscribe for such shares or other securities in the
Target whether or not such rights are currently
exercisable or subject to any condition.
(G) References in this undertaking to a person having an "interest in
shares" include all interests which that person would be required to
notify to the Target if he were a director of the Target.
(H) In this undertaking, the expression the "Offer" extends to any improved
or revised offer on behalf of the Offeror, whether voluntary or
mandatory provided that the terms of such offer are, in the opinion of
the Target's financial adviser, on the date of the relevant
announcement, an improvement or no diminution in the value of the
consideration under the Offer..
(I) This undertaking shall bind my estate and personal representatives
except in relation to those obligations which relate to my position as
a director of the Target.
(J) This undertaking shall be governed by and construed in accordance with
English law and I submit to the jurisdiction of the English courts.
<PAGE> 6
6
THE SCHEDULE
PART 1
THE SECURITIES
Name(s) and registered No. of Ordinary Shares/
address of registered ADSs
holder(s)
PART 2
THE OPTION(S)
A. EXECUTIVE SHARE OPTION SCHEME
No. of Ordinary Shares Date of grant Exercise price
B. OTHER SHARE OPTION SCHEME(S)
No. of Ordinary Shares Date of grant Exercise price
<PAGE> 7
7
Dated: ..........................
Name: ...........................
Address:.........................
.................................
.................................
SIGNED and delivered as a )
deed by the person named )
above in the presence of: ) ..................
(Signature)
Witness's signature:
....................
Name: ..................................
Address: ...............................
........................................
<PAGE> 1
Exhibit (c)(2)
LucasVarity plc
46 Park Street
London
W1Y 4AD
Attention
28th January, 1999
Gentlemen,
This agreement is entered into in consideration of inter alia TRW Inc. or any of
its subsidiaries ("TRW") committing its own resources and its advisers to
investigations by way of due diligence into the affairs of the LucasVarity Group
and to the preparations necessary, including arranging financing, for the
purposes of the] proposed offer ("OFFER") by TRW or any of its subsidiaries
("OFFEROR") for all of the outstanding share capital, including that represented
by ADRs of LucasVarity plc ("LUCASVARITY") and, as an inducement and
pre-condition to the Offeror agreeing to announce the Offer, LucasVarity agrees
to pay a fee (the "FEE") in the sum of $ 49,800,000 being the equivalent of
sterling (pound)30 million at an exchange rate of $1.66 in the event that any
one of the Relevant Circumstances described below occurs. Any amount due
hereunder shall be payable by wire transfer of same day funds to an account
designated by TRW no later than two business days after any of the Relevant
Circumstances occur.
The Relevant Circumstances are:-
1. The Offer lapses or is withdrawn in accordance with its terms and prior
thereto (i) TRW has not purchased at least a majority of LucasVarity's
outstanding share capital and (ii) prior to such lapse or withdrawal,
any person or entity (including, without limitation, LucasVarity)
publicly announces or publicly proposes an Independent Competing Offer
which has not been withdrawn prior to such lapse or withdrawal;
2. The Offer lapses or is withdrawn in accordance with its terms and prior
thereto the Directors of LucasVarity have agreed to the announcement of
an Independent Competing Offer and agreed to recommend such offer;
3. The Offer lapses or is withdrawn in accordance with its terms and prior
thereto the Directors of LucasVarity, or any committee thereof, shall
have (a) withdrawn or modified, in a manner adverse to TRW, its
approval or recommendation of the Offer, or approved or recommended any
Independent Competing Offer, or (b) resolved to take any of the
foregoing actions;
4. The Offer lapses or is withdrawn in accordance with its terms and prior
thereto LucasVarity has violated any of the terms of paragraph 6, 7 or
8 of the Confidentiality Agreement dated 21st January, 1999 between
LucasVarity and TRW; or
5. if within 18 months after LucasVarity and TRW mutually agree to
terminate good faith efforts to consummate the proposed Offer, an offer
(other than by TRW or one of its affiliates) is posted for the
acquisition of the share capital of LucasVarity which is recommended by
the Directors of LucasVarity.
An "INDEPENDENT COMPETING OFFER" means an offer, scheme of arrangement,
recapitalisation or other transaction which (a) is made or entered into by a
party which is not an affiliate of TRW and (b)
<PAGE> 2
is in a cash amount in excess of the Offer, or which comprises all non-cash
consideration or a mix of cash and non-cash consideration, in either case in an
amount which TRW and LucasVarity agree, or failing such agreement an independent
financial adviser determines, exceeds the value of the Offer.
This agreement and any claim related directly or indirectly to this agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York without regard to the principles of conflict of laws thereof. No such
claim shall be commenced, prosecuted or continued in any forum other than the
courts of the State of New York or in any United States District Court located
in the State of New York, and the parties agree to submit to personal
jurisdiction and service and venue in any such court having subject matter
jurisdiction over any such claim.
Please confirm LucasVarity's agreement with the foregoing by signing and
returning to the undersigned the duplicate copy of this agreement enclosed
herewith.
Very truly yours,
TRW INC.
By /s/ Kathleen A. Weigand
------------------------------
Assistant Secretary
Confirmed and Agreed to by
LUCASVARITY PLC
By /s/ John A. Gilroy
------------------------------
Executive Vice President and
Chief Operating Officer
