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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended March 31, 1995
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Commission File Number 1-1511
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FEDERAL-MOGUL CORPORATION
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(Exact name of Registrant as specified in its charter)
Michigan 38-0533580
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
26555 Northwestern Highway, Southfield, Michigan 48034
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(Address of principal executive offices) (Zip Code)
(810) 354-7700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock - 34,988,359 shares as of May 2, 1995
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<TABLE>
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
Three Months Ended
March 31,
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1995 1994
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(Millions of Dollars,
Except Per Share Amounts)
<S> <C> <C>
Net sales $ 524.3 $ 460.3
Cost of products sold 410.6 363.6
Selling, distribution and administrative expenses 78.7 64.7
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Operating earnings 35.0 32.0
Other income (expense):
Amortization of intangible assets (2.9) (2.2)
Interest expense (8.4) (5.2)
Interest income .8 1.7
International currency exchange losses (1.7) (2.7)
Other, net - .6
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Earnings Before Income Taxes 22.8 24.2
Income taxes 8.6 9.2
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Net Earnings 14.2 15.0
Preferred stock dividends, net of tax benefits 2.2 2.3
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Net Earnings Available for Common Shares $ 12.0 $ 12.7
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Earnings Per Common Share
Primary $ .34 $ .39
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Fully Diluted $ .33 $ .36
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See accompanying notes.
/TABLE
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<TABLE>
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
March 31, December 31,
1995 1994
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(Millions of Dollars)
<S>
Assets
<C> <C>
Current Assets:
Cash and equivalents $ 24.5 $ 25.0
Accounts receivable 342.5 269.5
Inventories 399.1 372.1
Prepaid expenses and income tax benefits 47.1 37.6
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Total Current Assets 813.2 704.2
Property, Plant and Equipment 462.7 437.3
Goodwill 173.5 172.9
Other Intangible Assets 71.1 71.2
Business Investments and Other Assets 111.2 110.5
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Total Assets $1,631.7 $1,496.1
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Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 96.8 $ 74.0
Accounts payable 155.5 136.6
Accrued compensation 38.5 33.3
Other accrued liabilities 101.3 92.0
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Total Current Liabilities 392.1 335.9
Long-Term Debt 377.5 319.4
Postemployment Benefits 205.2 199.8
Other Accrued Liabilities 44.5 43.8
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Total Liabilities 1,019.3 898.9
Shareholders' Equity:
Series D preferred stock 76.6 76.6
Series C ESOP preferred stock 59.0 59.1
Unearned ESOP compensation (39.0) (39.8)
Common stock 174.2 174.9
Additional paid-in capital 278.0 277.8
Retained earnings 89.3 82.0
Currency translation and other (25.7) (33.4)
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Total Shareholders' Equity 612.4 597.2
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Total Liabilities and Shareholders' Equity $1,631.7 $1,496.1
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See accompanying notes.
/TABLE
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<TABLE>
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
-----------------------
1995 1994
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(Millions of Dollars)
<S> <C> <C>
Cash Provided From (Used By) Operating Activities
Net earnings $ 14.2 $ 15.0
Adjustments to reconcile net earnings
to net cash provided from operating activities
Depreciation and amortization 15.5 14.1
Deferred income taxes .9 (2.4)
Postemployment benefits other than pensions 1.0 1.7
Increase in accounts receivable (71.1) (54.8)
(Increase) decrease in inventories,
prepaid expenses and other (36.1) 2.5
Increase in other current liabilities 35.6 23.7
Payments against restructuring reserves (1.1) (2.7)
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Net Cash Used By Operating Activities (41.1) (2.9)
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant and equipment (19.6) (13.5)
Payments for rationalization of acquired businesses (3.7) (7.6)
Other - 3.8
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Net Cash Used By Investing Activities (23.3) (17.3)
Cash Provided From (Used By) Financing Activities
Proceeds from issuance of common stock - 196.3
Expenditures for purchase of common stock (9.0) -
Net increase (decrease) in debt 77.4 (179.3)
Dividends (5.7) (5.8)
Other 1.2 (.2)
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Net Cash Provided From Financing Activities 63.9 11.0
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Decrease in Cash and Equivalents (.5) (9.2)
Cash and Equivalents at Beginning of Period 25.0 33.8
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Cash and Equivalents at End of Period $ 24.5 $ 24.6
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See accompanying notes.
/TABLE
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FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1995
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three-month period ended March 31, 1995 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1995.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
Certain items in the prior period financial statements have been reclassified
to conform with the presentation used in 1995.
2. EARNINGS PER COMMON SHARE
The computation of primary earnings per share is based on the weighted average
number of outstanding common shares during the period plus, when their effect
is dilutive, common stock equivalents consisting of certain shares subject to
stock options. Fully diluted earnings per share additionally assumes the
conversion of outstanding Series C ESOP and Series D preferred stock and the
contingent issuance of common stock to satisfy the Series C ESOP preferred
stock redemption price guarantee. The number of contingent shares used in
the fully diluted calculation is based on the common stock market price on
March 31, 1995, and the number of preferred shares held by the Employee Stock
Ownership Plan (ESOP) that were allocated to participants' accounts as of
March 31 of each of the respective years.
The primary weighted average number of common and equivalent shares outstanding
(in thousands) was 34,918 for the three-month period ended March 31, 1995, and
32,977 for the three-month period ended March 31, 1994. The fully diluted
weighted average number of common and equivalent shares outstanding (in
thousands) was 41,898 for the three-month period ended March 31, 1995 and
39,883 for the three-month period ended March 31, 1994, respectively.
Net earnings used in the computations of primary earnings per share are reduced
by preferred stock dividend requirements. Net earnings used in the computation
of fully diluted earnings per share are reduced by amounts representing the
additional after-tax contribution that would be necessary to meet ESOP debt
service requirements under an assumed conversion of the Series C ESOP preferred
stock.
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3. SUBSEQUENT EVENTS
On April 18, 1995, the Company signed an agreement to acquire Bertolotti
S.r.I., a distributor of premium brand European auto and truck parts
throughout Italy. The sale is expected to close during the 1995 second
quarter, subject to approval by the Italian government and various other
conditions. Bertolotti, with 1994 sales of approximately $53 million,
operates one central warehouse in Milan and 16 wholesale branches throughout
Italy. Its 235 employees and independent sales agents service approximately
5,000 customers.
On April 27, 1995, the Company completed the previously announced sale of
the operations and substantially all of the operating assets of its Precision
Forged Products Division to Borg-Warner Automotive, Inc. in a transaction
valued at approximately $45 million. The Company received approximately
$30 million in cash at closing and retained the division's customer
receivables, which will be converted to cash over the next 30 to 45 days.
Additionally, Borg-Warner assumed certain operating liabilities. The
proceeds from the sale will be used to fund the purchase of Bertolotti
and pay down debt.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1994
First quarter 1995 sales increased by 13.9 percent to $524.3 from
$460.3 million in the same 1994 quarter. Almost 50 percent of the increase
is in the replacement market. The international replacement sales increased
$38.2 million over the 1994 first quarter largely attributable to the
acquisition of Varex Corporation in South Africa. Excluding Varex, the
international sales increased approximately 9 percent. North American
replacement sales decreased 3 percent due to overall sluggishness in the
market and particular softness in the Mexican border area. The economic
crisis in Mexico caused by the devaluation of the peso is severely limiting
consumer spending both in Mexico and in the border areas of the United States.
Worldwide sales of original equipment products were up nearly 19 percent over
the 1994 first quarter. North American sales increased more than 9 percent,
reflecting a stronger North American auto and light truck build and increased
penetration of the Company's sealing products. European original equipment
sales advanced 50 percent as a result of increased auto builds and favorable
currency translation.
The Company's operating earnings increased $3.0 million to $35.0 million when
compared to the first quarter of 1994. The operating margin decreased slightly
from the 1994 first quarter to 6.7 percent. The Company attributes this
decrease to a change in sales mix as the 1995 first quarter had a larger mix
of lower margin original equipment sales.
Pretax earnings decreased to $22.8 million for the 1995 first quarter compared
to $24.2 million for the same 1994 quarter. The decrease in earnings is
attributable to additional interest expense due to rising interest rates and
higher levels of debt. In addition, amortization increased $.7 million
primarily as a result of the acquisition of Varex. Net earnings decreased to
$14.2 million or $.33 per common share on a fully diluted basis in the 1995
first quarter compared to earnings of $15.0 million or $.36 per common share
for the first quarter of 1994.
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LIQUIDITY AND CAPITAL RESOURCES
Working capital was impacted by an increase of $71.1 million in accounts
receivable during the first quarter of 1995 compared to an increase of
$54.8 million in 1994. This increase is attributable to higher sales in
1995. Working capital was also affected by an increase in inventory in the
first quarter of 1995 that did not occur in the first quarter of 1994. The
1995 increase in inventory was intended to increase product availability in
anticipation of increased sales in the second quarter. The Company expects
that available cash and existing short-term lines of credit will be
sufficient to meet its normal operating requirements.
Net cash used for investing activities consists primarily of capital
expenditures for property, plant and equipment to implement process
improvements and new product introductions. In both years, the Company
incurred payments for the rationalization of acquired businesses. These
payments will decrease in the future as the integrations are completed.
Net cash provided from financing activities reflects an increase in both long
and short-term debt. These borrowings were used to repurchase common stock
and fund capital expenditures and other net cash requirements. In February
1994, the Company issued 5.75 million shares of common stock in a public
offering which generated net proceeds of $191 million. The proceeds were
used to repay outstanding debt resulting from the acquisition of the Sealed
Power Replacement business in October 1993.
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
3.2 The Company's Bylaws, as amended (filed herewith and
incorporated herein by reference).
10.6 Amended Federal-Mogul Corporation Executive Severance
Agreement (filed herewith and incorporated herein by
reference).
11.1 Statement Re Computation of Per Share Earnings for
the three months ended March 31, 1995 (filed herewith
and incorporated herein by reference).
The Company will furnish upon request any exhibit described above
upon payment of the Company's reasonable expenses for furnishing
such exhibit.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the three
months ended March 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FEDERAL-MOGUL CORPORATION
By: (Michael J. Viola)
------------------------------
Michael J. Viola
Vice President and Controller,
Chief Accounting Officer
Dated: May 15, 1995
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EXHIBIT 3.2
BYLAWS
OF
FEDERAL-MOGUL CORPORATION
ARTICLE I
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders
shall be held on the fourth Wednesday in May of each year or at
such other date as the Board of Directors in its discretion shall
determine at the time stated in the notice of meeting, for the
purpose of electing directors and for the transaction of such other
business as may be determined by the Board of Directors or as
otherwise properly may come before the meeting. If the day fixed
for the annual meeting shall be a legal holiday at the place of
meeting, such meeting shall be held on the next succeeding business
day.
Section 2. Special Meetings. Special meetings of the shareholders
may be called by the Chairman of the Board, or by the President, or
pursuant to resolution of the Board of Directors. Business
transacted at a special meeting of stockholders shall be confined
to the purpose or purposes of the meeting as stated in the notice
of the meeting.
Section 3. Place of Meeting. The Board of Directors may designate
any place either within or without the State of Michigan as the
place of meeting for any annual or special meeting of shareholders
called by the Board of Directors. If no designation is made or if
a special meeting be called otherwise than by the Board of
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Directors, the place of meeting shall be the registered office of
the Corporation in the State of Michigan.
Section 4. Notice of Meetings. Written or printed notice stating
the time, place and purposes of a meeting of shareholders shall be
given not less than ten nor more than sixty days before the date of
the meeting, by mail, by or at the direction of the Chairman of the
Board, the President, the Secretary, or the directors or persons
calling the meeting, to each shareholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail in a sealed envelope
addressed to the shareholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid.
Section 5. Adjourned Meetings. Any annual or special meeting of
shareholders may be adjourned by the chairman of the meeting or
pursuant to resolution of the Board of Directors. Notice need not
be given of an adjourned meeting of shareholders if the time and
place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting only such business may be
transacted as might have been transacted at the original meeting.
If after the adjournment the Board of Directors fixes a new record
date for the adjourned meeting, a notice of the adjourned meeting
shall be given to each shareholder of record on the new record date
entitled to vote at the meeting.
Section 6. Voting Lists. It shall be the duty of the officer or
agent who shall have charge of the stock transfer books for shares
of the Corporation to make and certify a complete list of the
shareholders entitled to vote at a shareholder's meeting or any
adjournment thereof, arranged in alphabetical order within each
class and series, with the addresses of, and the number of shares
held by, each shareholder. Such list shall be produced at the time
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and place of the meeting, shall be subject to the inspection by any
shareholder during the whole time of the meeting, and shall be
prima facie evidence as to who are the shareholders entitled to
examine such list or to vote in person or by proxy at such meeting.
Section 7. Quorum. Unless a greater or lesser quorum is provided
by law, a majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall
constitute a quorum at any meeting of shareholders. The
shareholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
Whether or not a quorum is present, the meeting may be adjourned by
a vote of the shares present.
Section 8. Manner of Acting. The election of directors shall be
determined by a plurality of the votes cast by the holders of
shares entitled to vote thereon or their proxies. Except as
otherwise provided by law, or by the Articles of Incorporation, all
other matters shall be determined by a majority of the votes cast
by the holders of shares entitled to vote thereon or their proxies.
Section 9. Postponement of Annual or Special Meeting. The Board
of Directors acting by resolution may postpone and reschedule any
previously scheduled annual or special meeting of shareholders.
Section 10. Nomination and Shareholder Business Bylaw.
(A) Annual Meetings of Shareholders. (1) Nominations of persons
for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the shareholders may be
made at an annual meeting of shareholders (a) pursuant to the
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Corporation's notice of meeting, (b) by or at the direction of the
Board of Directors or (c) by any shareholder of the Corporation who
was a shareholder of record at the time of giving of notice
provided for in this Bylaw, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in this
Bylaw.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (c) of
paragraph (A) (1) of this Bylaw, the shareholder must have given
timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice by the shareholder to be
timely must be so delivered not earlier than the 90th day prior to
such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such
meeting is first made. Such shareholder's notice shall set forth
(a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected); (b) as to any
other business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought
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before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the
proposal is made; (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such shareholder, as
they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such shareholder and
such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A) (2) of this Bylaw to the contrary, in the event that
the number of directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement
naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least
70 days prior to the first anniversary of the preceding year's
annual meeting, a shareholder's notice required by this Bylaw shall
also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the 10th
day following the day on which such public announcement is first
made by the Corporation.
(B) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting. Nominations of persons for election to the Board of
Directors may be made at a special meeting of shareholders at which
directors are to be elected pursuant to the Corporation's notice of
meeting (a) by or at the direction of the Board of Directors or (b)
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by any shareholder of the Corporation who is a shareholder of
record at the time of giving of notice provided hereunder, who
shall be entitled to vote at the meeting nd who complies with the
notice procedures set forth in this Bylaw. Nominations by
shareholders of persons for election to the Board of Directors may
be made at such a special meeting of shareholders if this
shareholder's notice required by paragraph (A) (2) of this Bylaw
shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the 90th day prior to
such special meeting and not later than the close of business on
the later of the 60th day prior to such special meeting or the 10th
day following the day on which public announcement is first made of
the date of the special meetings and of the nominees proposed by
the Board of Directors to be elected at such meeting.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Bylaw shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of shareholders as shall have been brought
before the meeting in accordance with the procedure set forth in
this Bylaw. The Chairman of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the
procedures set forth in this Bylaw and, if any proposed nomination
or business is not in compliance with this Bylaw, to declare that
such defective proposal shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in
a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the
Exchange Act.
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(3) Notwithstanding the foregoing provisions of this Bylaw,
a shareholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of shareholders to
request inclusion of proposals in the Corporation's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
Directors
Section 1. General Powers. The business and affairs of the
Corporation shall be managed by its Board of Directors, except as
otherwise provided by law or by the Articles of Incorporation.
Section 2. Number, Tenure and Qualifications, and Removal. The
number of directors of the Corporation shall be as determined from
time to time by the Board of Directors but effective April 26,
1995, shall be seven members. Each director shall hold
office for the term for which he is named or elected and
until his successor shall have been elected and qualified, or until
his resignation or removal. The age limit for directors, including
directors who have served as Chief Executive Officer of the
Corporation, shall be age seventy, and for employee directors who
have not served as Chief Executive Officer of the Corporation shall
be age sixty-five. A director shall not be eligible for
re-election at the annual meeting of the shareholders next
following the date on which he attains the applicable age limit.
Notwithstanding the foregoing provisions of this Section 2, the
term of office of an employee director who has not served as Chief
Executive Officer of the Corporation shall expire upon termination
of his employment unless the Board of Directors shall theretofore
have requested that he continue to hold office following such
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termination of employment. Any director may be removed from office
as a director but only for cause and by the affirmative vote of the
holders of a majority of the shares entitled to vote at an election
of directors.
Section 3. Annual Meetings. The newly elected Board of Directors
shall meet immediately following the annual meeting of shareholders
at the place where such annual shareholders meeting is held for the
purpose of the organization of the Board, the election of officers,
and the transaction of such other business as may properly come
before the meeting, and no notice of such meeting shall be
necessary.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and at such
places, within or without the State of Michigan, as shall from time
to time be determined by the Board.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President
or a majority of the directors, and shall be called at the request
of any two directors. Such meetings, if called by the Chairman of
the Board, the President or by a majority of the directors may be
held at such place within or without the State of Michigan as the
Chairman of the Board, the President or as a majority of the Board
of Directors may from time to time determine. If any such special
meetings are called other than by the Chairman of the Board, the
President or a majority of the Board of Directors, they shall be
held at the registered office of the Corporation in the State of
Michigan unless otherwise consented to in writing by all of the
directors or unless previous nuclear attack prevents the holding of
a meeting at such place, in which case such meeting shall be held
as close to such registered office as possible.
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Section 6. Notice. Notice of any special meeting of directors
shall be given by or at the direction of the Chairman of the Board,
the President, the Secretary or the directors calling the meeting
by written notice delivered personally or mailed to each director
at his business address, or by telegram. If mailed, such notice
shall be given at least four days prior to the meeting and shall be
deemed to be given when deposited in the United States mail in a
sealed envelope so addressed, with postage thereon prepaid. If
notice be given by telegram, such notice shall be given at least
twenty-four hours prior to the meeting and shall be deemed to be
given when the telegram is delivered to the telegraph company. Any
director may waive notice of any meeting. The attendance of a
director at, or participation in, any meeting shall constitute a
waiver of notice of such meeting, unless the director, at the
beginning of the meeting, or upon his or her arrival, objects to
the meeting or the transacting of business at the meeting and does
not thereafter vote for or assent to any action taken at the
meeting. A director may participate in a meeting by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can communicate
with each other and such participation shall constitute attendance
at any meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice or waiver of notice of
such meeting.
Section 7. Quorum. A majority of the Board of Directors then in
office shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but, if less than a majority
of the directors are present at said meeting, a majority of the
directors present may adjourn the meeting from time to time without
further notice.
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Section 8. Manner of Acting. The vote of the majority of
directors present at the meeting at which a quorum is present shall
be the act of the Board of Directors, unless a larger number is
required by law, the Articles of Incorporation or these Bylaws.
Section 9. Vacancies. Vacancies in the Board of Directors may be
filled by a majority of the remaining members of the Board though
less than a quorum. Such vacancies may be filled for a term of
office continuing only until the next election of Directors by the
Shareholders.
Section 10. Compensation. Directors as such shall not receive any
stated salaries for their services, but by resolution of the Board
of Directors, adopted by a majority of directors then in office, a
fixed sum and expenses of attendance, if any may be allowed for
attendance at each meeting of the Board of Directors; provided that
nothing herein contained shall be construed to preclude any
director from serving the Corporation in any capacity other than as
a director or officer and receiving compensation therefor.
Section 11. Committees. The Board of Directors may designate one
or more committees, each committee to consist of one or more
directors, and may designate one or more directors as alternate
members of a committee to replace an absent or disqualified member
at a committee meeting. In the absence or disqualification of a
member of a committee, the members thereof present at a meeting and
not disqualified from voting, whether or not they constitute a
quorum, may by unanimous vote appoint another director to act at
the meeting in the place of such absent or disqualified member.
Committees and each member thereof shall serve at the pleasure of
the Board.
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To the extent provided by the resolution of the Board of Directors
a committee shall have and may exercise all powers and authority of
the Board in the management of the business and affairs of the
Corporation.
ARTICLE III
Officers
Section 1. Number. The Board of Directors shall elect a Chairman
of the Board, a President, a Secretary and a Treasurer, (and shall
designate a Chief Executive Officer in accordance with Section 5 of
this Article III) and may elect a Vice Chairman of the Board, a
Controller, one or more Executive Vice Presidents, Vice Presidents,
Assistant Secretaries, Assistant Treasurers and such other officers
and agents as it may deem necessary for the transaction of the
business of the Corporation. No one of the said officers except
the Chairman of the Board, the Vice Chairman of the Board, and the
President need be a director. Two or more of the above offices
except those of President and Vice President may be held by the
same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity if the instrument is
required by law or the Articles of Incorporation or these Bylaws to
be executed, acknowledged or verified by two or more officers.
Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at
the first meeting of the Board of Directors held after each annual
meeting of shareholders subject to the power of the Board of
Directors to designate any office at any time and elect any person
thereto. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office for the term
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for which he is elected and until his successor is elected and
qualified or until his resignation or removal.
Section 3. Removal and Resignations. Any officer or agent may be
removed by the Board of Directors with or without cause. An
officer may resign by written notice to the Corporation. Such
resignations shall be effective upon receipt by the Corporation or
at a subsequent time specified in the notice of resignation.
Section 4. Vacancies. The Board of Directors shall have the power
to fill any vacancies in any office occurring from whatever
reason.
Section 5. The Chief Executive Officer. The Board of Directors
shall designate either the Chairman of the Board or the President
as the Chief Executive Officer. Subject to the direction and under
the supervision of the Board of Directors, the Chief Executive
Officer shall manage the business and affairs of the Corporation,
and shall be in charge of its property and have control over its
officers, agents and employees. Subject to the direction and under
the supervision of the Board of Directors, the Chief Executive
Officer may execute in the name of the Corporation all deeds,
bonds, mortgages, contracts and other documents except in cases
where the execution thereof shall be expressly and specifically
delegated by the Board of Directors or these Bylaws exclusively to
some other person or persons. If the office of Chairman of the
Board and Chief Executive Officer are combined, the President may
act as the Chief Executive Officer in the case of the Chairman's
sickness, disability or temporary absence from the Corporation's
Registered Office, and whether or not the Chairman is sick,
disabled or absent, the President may execute on behalf of the
Corporation any deed, bond, mortgage, contract or document which a
Chief Executive Officer is authorized hereinabove to execute,
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subject to the direction and supervision of the Board of Directors
and the Chief Executive Officer. If the offices of President and
Chief Executive Officer are combined, the Executive Vice President
with the greatest length of service in such capacity or, if there
be no Executive Vice President, the Chairman of the Board, may act
as the Chief Executive Officer in the case of the President's
sickness, disability or temporary absence from the Corporation's
Registered Office, and whether or not the President is sick,
disabled or absent, such Executive Vice President or Chairman of
the Board, as the case may be, may execute on behalf of the
Corporation any deed, bond, mortgage, contract or document which a
Chief Executive Officer is authorized hereinabove to execute,
subject to the direction and supervision of the Board of Directors
and the Chief Executive Officer.
Section 6. Authority of Officers, Agents and Employees,
Generally. Except as otherwise provided by law, the Articles of
Incorporation or these Bylaws, all officers, agents and employees
of the Corporation shall have such powers and perform such duties
as from time to time may be prescribed by the Board of Directors,
or the Chief Executive Officer. However, unless specifically
authorized by resolution of the Board of Directors, a person who is
not an officer of the Corporation shall have no authority to
execute on its behalf any (1) contract for the purchase or sale of
lands or buildings, (2) deed, (3) lease of lands or buildings, (4)
mortgage, (5) instrument creating any lien on the personal or real
property of the Corporation or (6) contract or other instrument not
entered into in the ordinary course of business.
Section 7. The Chairman of the Board, The Vice Chairman of the
Board and the President. In addition to the powers and duties
elsewhere herein conferred or provided for, the Chairman of the
Board, the Vice Chairman of the Board and the President shall have
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the following powers and duties subject to the direction and under
the supervision of the Board of Directors. The Chairman of the
Board shall preside at meetings of the Board of Directors and of
the shareholders. In the absence of the Chairman of the Board, the
Vice Chairman of the Board, if such office shall be created, shall
so preside. The President shall preside at meetings of the Board
of Directors and of the shareholders in the absence of the Chairman
of the Board and any Vice Chairman of the Board.
Section 8. The Secretary. In addition to the powers and duties
elsewhere herein conferred or provided for, the Secretary shall
have the following powers and duties subject to the direction and
under the supervision of the Board of Directors and the Chief
Executive Officer. He shall attend all meetings of the Board and
all meetings of the shareholders and act as clerk thereof and
record all votes and the minutes of all proceedings in a book to be
kept for that purpose. He shall perform like duties for all
directors' committees when required. He shall have custody of the
seal of the Corporation and shall have authority to cause such seal
to be affixed to or impressed or otherwise reproduced upon all
documents the execution of which on behalf of the Corporation shall
have been duly authorized. He shall cause to be kept records
containing the names and addresses of all shareholders of the
Corporation, the number, class and series of shares held by each
and the dates when they respectively became shareholders of record
thereof at the registered office of the Corporation or at the
office of its transfer agent within or without the State of
Michigan. In general, he shall perform the duties usually incident
to the office of Secretary. At any meeting of the shareholders or
Board of Directors at which the Secretary is not present a
Secretary Pro Tempore or Clerk of the meeting may be appointed by
the meeting.
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Section 9. The Treasurer. In addition to the powers and duties
elsewhere herein conferred or provided for, the Treasurer shall
have the following powers and duties subject to the direction and
under the control of the Board of Directors and the Chief Executive
Officer. He shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation. He shall
deposit all moneys and other valuable effects in the name of and to
the credit of the Corporation, in such depositaries as may be
designated by the Board of Directors, and, in general, he shall
perform the duties usually incident to the office of Treasurer. If
required by the Board of Directors, the Treasurer shall furnish the
corporation with a proper bond, in a sum and with one or more
sureties satisfactory to the Board of Directors, for the faithful
performance of the duties of his office, and for the restoration to
the Corporation in case of his death, resignation, retirement or
removal from office of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control
and belonging to the Corporation.
Section 10. Assistant Secretaries and Assistant Treasurers. In
addition to the powers and duties elsewhere herein conferred or
provided for, Assistant Secretaries and Assistant Treasurers shall
have the following powers and duties subject to the direction and
under the supervision of the Board of Directors and the Chief
Executive Officer. Any Assistant Secretary or Assistant Treasurer
may act as the Secretary or Treasurer, respectively, in the case of
the sickness, disability or temporary absence from the Registered
Office of the Corporation of the Secretary or Treasurer, as the
case may be. In addition, any Assistant Secretary shall have the
authority to cause the seal of the Corporation to be affixed to or
impressed or otherwise reproduced upon all documents the execution
of which on behalf of the Corporation shall have been duly
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<PAGE> 16
authorized whether or not the Secretary is sick, disabled or
absent.
Section 11. Remuneration. The Board of Directors shall set from
time to time the remuneration of the officers of the Corporation
after reviewing the recommendation of the Chief Executive Officer
and as appropriate the report or recommendation of a committee of
the Board consisting of one or more directors who are not also
salaried employees of the Corporation.
ARTICLE IV
Indemnification of
Directors, Officers, Employees and Agents
Section 1. Non-Derivative Actions. Subject to all of the other
provisions of this Article IV, the Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to
or called as a witness in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative
or investigative (whether formal or informal) and any appeal
thereof (other than an action by or in the right of the
Corporation) by reason of the fact that the person is, was or
agreed to become a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, against expenses (including
attorneys' fees), judgments, penalties, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if the person acted
in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the Corporation or its
shareholders, and with respect to any criminal action or
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<PAGE> 17
proceeding, if the person had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation or its
shareholders, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct
was unlawful.
Section 2. Derivative Actions. Subject to all of the provisions
of this Article IV, the Corporation shall indemnify any person who
was or is a party to or is threatened to be made a party to, or
called as a witness in any threatened, pending or completed action
or suit and any appeal thereof by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that the person is or was a director of officer of the
Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, whether for profit or not,
against expenses (including actual and reasonable attorneys' fees)
and amounts paid in settlement incurred by the person in connection
with such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to
the best interests of the Corporation or its shareholders.
However, indemnification shall not be made for any claim, issue or
matter in which such person has been found liable to the
Corporation unless and only to the extent that the court in which
such action or suit was brought has determined upon application
that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably
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<PAGE> 18
entitled to indemnification for the expenses which the court
considers proper.
Section 3. Expenses or Successful Defense. To the extent that a
person has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1, 2, 8 or 13
of these Bylaws, or in defense of any claim, issue or matter in the
action, suit or proceeding, the person shall be indemnified against
expenses (including actual and reasonable attorneys' fees) incurred
by such person in connection with the action, suit or proceeding
and any action, suit or proceeding brought to enforce the mandatory
indemnification provided by this Section 3.
Section 4. Definition. For the purposes of Sections 1, 2 and 13,
"other enterprises" shall include employee benefit plans; "fines"
shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and "serving at the request of the
Corporation" shall include any service as a director, officer,
employee, or agent of the Corporation which imposes duties on, or
involves services by, the director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner the person
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be considered to
have acted in a manner "not opposed to the best interests of the
Corporation or its shareholders" as referred to in Sections 1 and
2.
Section 5. Contract Right; Limitation on Indemnity. This Article
IV shall be applicable to all proceedings commenced or continuing
after its adoption, whether such arise out of events, acts or
omissions which occurred prior or subsequent to such adoption, and
shall continue as to a person who has ceased to be a director,
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<PAGE> 19
officer or a person serving at the request of the Corporation as a
director, trustee, fiduciary, employee, agent or officer of another
corporation, partnership, joint venture, trust or other person.
This article IV shall be deemed to be a contract between the
Corporation and each person who, at any time that this Article IV
is in effect, serves or agrees to serve in any capacity which
entitles him or her to indemnification hereunder and any repeal or
other modification of this Article IV or any repeal or modification
of the Michigan Business Corporation Act or any other applicable
law shall not limit any rights of indemnification for proceedings
then existing or later arising out of events, acts or omissions
occurring prior to such repeal or modification for proceedings
commenced after such repeal or modification to enforce this Article
IV with regard to proceedings arising out of acts, omissions or
events occurring prior to such repeal or modification. The right
to indemnification conferred in this Article IV shall apply to
services of a director or officer as an employee or agent of the
Corporation as well as in such person's capacity as a director or
officer. Except as provided in Sections 3 and 6 of these Bylaws,
the Corporation shall have no obligations under this Article IV to
indemnify any person in connection with any proceeding, or part
thereof, initiated by such person without authorization by the
Board of Directors.
Section 6. Right of Claimant to Bring Suit. If a claim under
Sections 1, 2, 8 or 13 of this Article is not paid in full by the
Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
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<PAGE> 20
incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that indemnification of the
claimant is prohibited by applicable law, but the burden of proving
such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, independent
legal counsel, its General Counsel or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances, nor
an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, its General Counsel or its
shareholders) that indemnification of the claimant is prohibited by
applicable law, shall be a defense to the action or create a
presumption that indemnification of the claimant is prohibited by
applicable law.
Section 7. Proportionate Indemnity. If a person is entitled to
indemnification under Sections 1, 2 or 13 of these Bylaws for a
portion of expenses, including attorneys' fees, judgments,
penalties, fines, and amounts paid in settlements, but not for the
total amount thereof, the Corporation shall indemnify the person
for the portion of the expenses, judgments, penalties, fines, or
amounts paid in settlement for which the person is entitled to be
indemnified.
Section 8. Expense Advance. Expenses incurred in defending a
civil or criminal action, suit or proceeding and any appeal thereof
described in Sections 1, 2 or 13 of these Bylaws shall be paid by
the Corporation in advance of the final disposition of such action,
suit or proceeding; provided, however, that if required by the
Michigan Business Corporation Act, such expenses shall not be paid
by the Corporation unless the Corporation receives an undertaking
by or on behalf of the person involved to repay the expenses if it
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is ultimately determined that the person is not entitled to be
indemnified by the Corporation.
Section 9. Non-Exclusivity of Rights. The indemnification or
advancement of expenses provided under this Article IV is not
exclusive of other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any statute,
provision of the Corporation's Articles of Incorporation,
contractual arrangement, vote of the shareholders or disinterested
directors or otherwise. However, the total amount of expenses
advanced or indemnified from all sources combined shall not exceed
the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
Section 10. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from
time to time by the Board of Directors, or by written opinion of
the General Counsel with respect to agents and employees of the
Corporation not serving on its Executive Council or Advisory Board
or their equivalents, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation
to the fullest extent of the provisions of this Article IV with
respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
Section 11. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, partner,
trustee, employee or agent of another Corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against the person and incurred by him or her in any such
capacity or arising out of his or her status as such, whether or
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not the Corporation would have power to indemnify the person
against such liability under these Bylaws of the State of Michigan.
Section 12. No Liability if Determination Made in Good Faith.
Neither the Corporation nor its directors or officers nor any
person acting on its behalf shall be liable to anyone for any
determination as to the existence or absence of conduct which would
provide a basis for making or refusing to make any payment under
this Article IV or for taking or omitting to take any other action
under this Article, in reliance upon the advice of counsel.
Section 13. Scope of Indemnity; Changes in Michigan Law.
Notwithstanding any of the other provisions in this Article IV,
each person who was or is a party or is threatened to be made a
party to or called as a witness in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (whether formal or informal) and
any appeal thereof (hereinafter a "proceeding"), by reason of the
fact that the person is, was or agreed to become a director or
officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee
or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, whether for profit or
not, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee, trustee, or
agent or in any other capacity while serving as a director,
officer, employee, trustee, or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Michigan Business Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all
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expenses (including attorneys' fees and other expenses of
litigation), judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred by such person in
connection therewith and such indemnification shall continue as to
a person who has ceased to be a director, officer, employee,
trustee, or agent and shall inure to the benefit of his or her
heirs, executors and administrators: provided, however, that,
except as provided in Sections 3 and 6 hereof, the Corporation shall
indemnify any such person seeking indemnification in connection
with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
Section 14. Severability. If any portion of this Article IV shall
be invalidated or held to be unenforceable on any ground by any
court of competent jurisdiction, the decision of which shall not
have been reversed on appeal, such invalidity or unenforceability
shall not affect the other provisions hereof, and this Article
shall be construed in all respects as if such invalid or
unenforceable provisions had been omitted therefrom.
ARTICLE V
Fixing Record Date
In order to determine the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed, the record date for
determining shareholders entitled to notice of or to vote at a
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meeting of shareholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the
day on which the meeting is held, and the record date for
determining shareholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts
the resolution relating thereto. A determination of shareholders
of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE VI
Loans, Checks, Deposits, etc.
Section 1. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its
name unless authorized by a resolution of the Board of Directors.
Such authority may be general or confined to specific instances.
Section 2. Checks, Drafts, etc. All checks, drafts, or other
orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation shall be signed
by such officers, employees, or agents of the Corporation and in
such manner as shall from time to time be determined by or pursuant
to and in accordance with general or specific resolutions of the
Board of Directors.
Section 3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries as
the Board of Directors may select. Such selection shall be by or
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pursuant to and in accordance with a general or specific resolution
of the Board of Directors.
ARTICLE VII
Certificates for Shares
Section 1. Certificates for Shares. Certificates representing
shares of the Corporation shall be in such form conforming to
applicable laws as may be determined by the Board of Directors and
shall be signed by or in the name of the Corporation by the
Chairman of the Board, the Vice Chairman of the Board, the
President or a Vice President and may also be signed by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Corporation, certifying the number, and class and
series of shares represented by such certificate. The signatures
of the officers may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar
other than the Corporation or its employee. In case any officer
has signed or whose facsimile signature has been placed upon a
certificate ceases to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as
if he were such officer at the date of issue.
Section 2. Lost Certificates. If a certificate of stock be lost
or destroyed, a new certificate of the identical tenor of the one
alleged to be lost or destroyed may be issued upon satisfactory
proof of such loss or destruction, and the giving of a bond
sufficient to indemnify the Corporation against any claim that may
be made against the Corporation on account of the alleged lost or
destroyed certificate or the issuance of such a new certificate.
Section 3. Transfer of Shares. Transfers of shares of the
Corporation shall be made only on the books of the Corporation by
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<PAGE> 26
the registered holder thereof or by his attorney thereunto
authorized by power of attorney duly executed and filed with the
Secretary or transfer agent of the Corporation, and on surrender
for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the
Corporation.
Section 4. Regulations. The Board of Directors may make such
rules and regulations as it may deem expedient concerning the
issue, transfer and registration of the certificates for shares.
It may appoint one or more transfer agents or registrars or both,
and may require all certificates to bear the signature of either or
both.
Section 5. Elimination of Certificates for Stock. The Corporation
may by resolution of the Board of Directors eliminate certificates
representing shares of the Corporation and provide for such other
methods of recording, noticing ownership and disclosure as may be
provided by the rules of any national securities exchange on which
such shares are listed.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of
January in each year and end on the thirty-first day of December in
each year.
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ARTICLE IX
Seal
The following shall be the design for the corporate seal of the
Corporation: two concentric rings with the words "Federal-Mogul
Corporation, Michigan" between the circles and the words "Corporate
Seal" in the center.
ARTICLE X
Emergency Provisions
Section 1. General. The provisions of this Article shall be
operative only during a national emergency declared by the
President of the United States or the person performing the
President's functions, or in the event of a nuclear, atomic or
other attack on the United States or a disaster making it
impossible or impracticable for the Corporation to conduct its
business without recourse to the provisions of this Article. Said
provisions in such event shall override all other Bylaws of the
Corporation in conflict with any provisions of this Article, and
shall remain operative so long as it remains impossible or
impracticable to continue the business of the Corporation
otherwise, but thereafter shall be inoperative; provided that all
actions taken in good faith pursuant to such provisions shall
thereafter remain in full force and effect unless and until revoked
by action taken pursuant to the provisions of the Bylaws other than
those contained in this Article.
Section 2. Unavailable Directors. All directors of the
Corporation who are not available to perform their duties as
directors by reason of physical or mental incapacity or for any
other reason or who are unwilling to perform their duties or whose
whereabouts are unknown shall automatically cease to be directors,
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with like effect as if such persons had resigned as directors, so
long as such unavailability continues.
Section 3. Authorized Number of Directors. The authorized number
of directors shall be the number of directors remaining after
eliminating those who have ceased to be directors pursuant to
Section 2 of this Article, or the minimum number required by law,
whichever number is greater.
Section 4. Quorum. The number of directors necessary to
constitute a quorum shall be one-third of the authorized number of
directors as specified in the foregoing Section, or such other
minimum number as, pursuant to the law or lawful decree then in
force, it is possible for the Bylaws of a corporation to specify.
Section 5. Creation of Emergency Committee. In the event the
number of directors remaining after eliminating those who have
ceased to be directors pursuant to Section 2 of this Article is
less than the minimum number of authorized directors required by
law, then until the appointment of additional directors to make up
such required minimum, all the powers and authorities which the
Board could by law delegate, including all powers and authorities
which the Board could delegate to a committee, shall be
automatically vested in an emergency committee, and the emergency
committee shall thereafter manage the affairs of the Corporation
pursuant to such powers and authorities and shall have all other
powers and authorities as may by law or lawful decree be conferred
on any person or body of persons during a period of emergency.
Section 6. Constitution of Emergency Committee. The emergency
committee shall consist of all the directors remaining after
eliminating those who have ceased to be directors pursuant to
Section 2 of this Article, provided that such remaining directors
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are not less than three in number. In the event such remaining
directors are less than three in number, the emergency committee
shall consist of three persons, who shall be the remaining director
or directors and either one or two officers or employees of the
Corporation, as the remaining director or directors may in writing
designate. If there is no remaining director, the emergency
committee shall consist of the three most senior officers of the
Corporation who are available to serve, and if and to the extent
that officers are not available, the most senior employees of the
Corporation. Seniority shall be determined in accordance with any
designation of seniority in the minutes of the proceedings of the
Board, and in the absence of such designation, shall be determined
by rate of remuneration. In the event that there are no remaining
directors and no officers or employees of the Corporation
available, the emergency committee shall consist of three persons
designated in writing by the shareholder owning the largest number
of shares of record as of the date of the last record date.
Section 7. Powers of Emergency Committee. The emergency
committee, once appointed, shall govern its own procedures and
shall have power to increase the number of members thereof beyond
the original number, and in the event of a vacancy or vacancies
therein, arising at any time, the remaining member or members of
the emergency committee shall have the power to fill such vacancy
or vacancies. In the event at any time after its appointment all
members of the emergency committee shall die or resign or become
unavailable to act for any reason whatsoever, a new emergency
committee shall be appointed in accordance with the foregoing
provisions of this Article.
Section 8. Directors Becoming Available. Any person who has
ceased to be a director pursuant to the provisions of Section 2 of
this Article and who thereafter becomes available to serve as a
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<PAGE> 30
director shall automatically become a member of the emergency
committee.
Section 9. Election of Board of Directors. The emergency
committee shall, as soon after its appointment as is practicable,
take all requisite action to secure the election of a Board of
Directors, and upon such election all the powers and authorities of
the emergency committee shall cease.
Section 10. Termination of Emergency Committee. In the event,
after the appointment of an emergency committee, a sufficient
number of persons who ceased to be directors pursuant to Section 2
of this Article become available to serve as directors, so that if
they had not ceased to be directors as aforesaid, there would be
enough directors to constitute the minimum number of directors
required by law, then all such persons shall automatically be
deemed to be reappointed as directors and the powers and
authorities of the emergency committee shall be at an end.
ARTICLE XI
Amendments
These Bylaws may be altered or new Bylaws may be made and adopted
by the affirmative vote of a majority of the Board of Directors.
<PAGE> 1
EXHIBIT 10.6
May 1, 1995
FEDERAL-MOGUL CORPORATION
Dear :
Federal-Mogul Corporation (the "Corporation") considers the
retention of a sound and vital management to be essential to
protecting and enhancing the best interests of the Corporation and
its shareholders. In this connection, the Corporation recognizes
that, as is the case with many publicly held corporations, the
possibility of a "change in control" may exist and that such a
"change in control", and the uncertainty and questions which it may
raise among management, may result in the departure or distraction
of management personnel to the detriment of the Corporation and its
shareholders. Accordingly, the Corporation's Board of Directors
has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of
the Corporation's management, including yourself, to their assigned
duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a "change
in control."
In order to reduce such distractions, the Corporation agrees to
provide you the benefits set forth in this letter (the "Agreement")
in the event there should occur a "change in control" of the
Corporation (as defined in Article II hereof).
I. TERM.
This Agreement shall commence as of May 1, 1995 and shall
recommence each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional calendar year
unless not later than the September 30 immediately preceding any
such March 1, the Corporation shall have given notice that it does
not wish to have this Agreement extended for the following year;
provided further, however, that subsequent to a "change in control"
of the Corporation occurring when this Agreement is in effect, this
Agreement shall thereafter remain in effect for thirty (30) months
from the end of the calendar month in which the "change in control"
occurs. Notwithstanding the foregoing provisions of this Article
I, this Agreement shall automatically terminate upon your ceasing
to be an employee of the Corporation for any reason at any time prior
to a "change in control."
<PAGE>
<PAGE> 2
II. "CHANGE IN CONTROL".
For purposes of this Agreement, a "change in control" shall
mean (i) any purchase under a tender or exchange offer for the
Corporation's shares of Common Stock other than by the Corporation
or a wholly-owned subsidiary of the Corporation following which the
offeror owns beneficially more than 20% of the Corporation's
outstanding Common Stock, (ii) shareholder approval of any merger,
consolidation or sale of all or substantially all of the
Corporation's assets to or into any person or entity other than a
wholly-owned subsidiary of the Corporation formed for the purpose
of changing the Corporation's corporate domicile, (iii) a change in
the identity of a majority of the members of the Board of Directors
within any 12-month period, which change or changes are not
recommended by the incumbent Directors immediately prior to any
such change or changes, or (iv) any "person" (as the term "person"
is defined in Sections 13(d) and 14(d) of the Exchange Act as in
effect on February 6, 1985) is or becomes the "beneficial owner"
(as the term "beneficial owner" is defined in Rule 13d-3 under the
Exchange Act as in effect on February 6, 1985), directly or
indirectly, of securities of the Corporation representing 20% or
more of the combined voting power of the Corporation's then
outstanding securities. For purposes of this Agreement, ownership
of voting securities shall take into account and include ownership
as determined by applying the provisions of said Rule 13d-3.
III. TERMINATION FOLLOWING "CHANGE IN CONTROL".
A. Benefits. No salary or supplemental compensation benefits
shall be payable hereunder unless there shall have been a
"change in control" of the Corporation and your employment
except as set forth below by the Corporation or any successor
of the Corporation shall have been terminated on or before
the last day of the 30th calendar month next following the
date on which the "change in control" of the Corporation shall
have occurred. In that event you shall be entitled to the
benefits provided in Article IV hereof unless your employment
was terminated (i) because of your death, (ii) by the
Corporation by reason of Disability, Retirement or
Cause (as those terms are defined in Article III.B.1 and 2.
hereof) or (iii) by you other than for Good Reason (as defined
in Article III.B.3 hereof). Service based vesting portions of
long term incentive stock awards previously granted by the
Board of Directors shall fully vest and be immediately
exercisable upon change in control except to the extent as may
be limited by provisions of applicable securities laws or
regulations. Portions of long term incentive stock awards
which are dependent upon attainment of performance based
goals, such as price of stock of the Corporation, shall be
determined by the highest price attained following date of
grant and prior to date of termination of employment.
B. Certain Defined Terms. In addition to the terms elsewhere
defined herein, the following terms as used herein shall have
the following meanings unless their context or use clearly
indicates a different meaning:
1. Disability/Retirement For purpose of this Agreement, your
employment shall be deemed to have terminated by reason of
<PAGE>
<PAGE> 3
"Disability" if, at the time of termination, you
are eligible for benefits under the terms of the
Federal-Mogul Long-term Disability Plan, or are eligible
for a Social Security award on account of disability. In
the event that the Federal-Mogul Long-term Disability
Plan is no longer in effect, the following definition
shall apply. Employment shall be deemed to have
terminated because of disability if you are unable to
perform the duties of your job because of a physical
injury or disease or a mental illness. The injury or
illness must be one from which you are medically
determined not expected to recover. Termination of your
employment based on Retirement shall mean termination of
your employment and immediate eligibility for benefits
under the Personal Retirement Account (PRA), provided you also
are at least age 55 with 5 or more years of service. Further,
if you are not immediately eligible, upon termination, for
unreduced Social Security benefits, your termination under this
definition shall be deemed retirement if you signed a written
statement that accompanies your application for pension benefit
stating that the Corporation has not compelled or otherwise
coerced you to retire.
2. Cause. The Corporation may terminate your employment
for "Cause". For the purposes of this Agreement, the
Corporation shall have Cause to terminate your employment
hereunder upon (i) the willful and continued failure by you to
substantially perform your duties with the Corporation (other
than any such failure resulting from your incapacity due to
physical or mental illness), after a demand for substantial
performance is delivered to you by the Board of Directors of the
Corporation or of any successor of the Corporation (the Board)
which specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
or (ii) the willful engaging by you in gross misconduct
materially and demonstrably injurious to the Corporation. For
purposes of this subsection 2, no act or failure to act on your
part shall be considered willful merely because it was the
result of bad judgment or negligence; rather, such act or
failure to act must have been done, or omitted to have been
done, by you not in good faith and without reasonable belief
that your action or omission was in the best interests of the
Corporation. Notwithstanding the foregoing, your employment
shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that
in the good faith opinion of the Board you were guilty of
conduct described above in clauses (i) or (ii) of this
subsection 2, and specifying the particulars thereof in detail.
3. Good Reason. You shall be entitled to terminate your
employment for "Good Reason". For purposes of this Agreement,
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<PAGE> 4
any termination of employment under any one or more of the
following circumstances shall be for "Good Reason":
a. without your express written consent, the
assignment to you of any duties inconsistent with your
positions, duties, responsibilities and status with the
Corporation immediately prior to a "change in control" of
the Corporation, or a change in your reporting
responsibilities, titles or offices as in effect
immediately prior to a "change in control" of the
Corporation, or any removal of you from or any failure to
re-elect you to any of such positions, except in connection
with the termination of your employment for Cause,
Disability, Retirement or as a result of your death;
b. a reduction by the Corporation in your base salary, as
in effect immediately prior to a "change in control" of
the Corporation or as the same may thereafter be increased
from time to time; or the failure by the Corporation to
increase such base salary each year after a "change in
control" of the Corporation by an amount which at least
equals, on a percentage basis, the current average annual
percentage merit increase in the base salaries of the
elected officers in the other Corporation or companies (and
its or their Affiliates) involved in such "change in
control";
c. a failure by the Corporation to continue your
participation in
(1) any compensation or incentive plan in which you
participate on the effective date of this Agreement,
including but not limited to the following of the
Corporation's plans: Supplemental Executive Retirement Plan
(SERP), the Advisory Board Employees' part of the 1977
Supplemental Compensation Plan (SCP), 1984-1989 Stock
Option Plans (SOP), and any other compensation or incentive
plan that the Corporation maintained in effect on the date
immediately preceding the date on which occurs a "change in
control", or
(2) any welfare or benefit plan, qualified retirement
plan, life insurance plan, vacation plan, holiday plan,
car lease plan, medical expense, health and accident plan
or disability plan (and any other plans, arrangements and
privileges as are now in effect providing you with benefits
substantially similar to those now provided to you) in
which you participate on the effective date of this
Agreement, and any other welfare or benefit plan,
arrangement or privilege that the Corporation maintains in
effect or provides on the date immediately preceding the<PAGE>
<PAGE> 5
date on which occurs a "change in control" (any such plan
is individually a "Plan" and collectively the "Plans"), or
the Corporation taking any action (prompt notice of which
the Corporation shall provide you) which would adversely
affect your participation in (including increasing your
costs of such participation) or materially reduce your
benefits under any of the Plans or deprive you of any other
fringe or personal benefit enjoyed by you at the time of
the "change in control"; provided, however, that
notwithstanding the provisions of this paragraph c., the
Corporation's providing benefits of a type or amount
different than as provided for hereinabove shall not be
deemed a violation of this paragraph c. if required by law
or if the change in benefit type or amount is substantially
equivalent to the changes thereof effected for the five
highest compensated of all the employees whose rank is
substantially equal to yours and who are employed in the
other corporation or companies (and its or their
Affiliates) involved in such "change in control";
d. the relocation of the Corporation's principal executive
offices to a location outside Oakland, Wayne or Macomb
Counties, Michigan or the Corporation's requiring you to be
based anywhere other than the Corporation's principal
executive offices or the location where you are based
immediately prior to the "change in control", except for
required travel on the Corporation's business to an extent
substantially consistent with your business travel
obligations in effect immediately prior to the "change in
control", or, in the event you consent to any such
relocation of the Corporation's principal executive offices
or change in the location where you are based, the failure
by the Corporation (i) to pay (or promptly reimburse you
for) all reasonable moving expenses you incur relating to
a change of your principal residence in connection with
such relocation, and (ii) to indemnify you against any loss
defined as your cost of terminating any lease for such
residence, if it is leased, or if you own such residence
the difference between the actual sale price of such
residence and the higher of your aggregate investment in
such residence or the fair market value of such residence
as determined by any real estate appraiser designated by
you and reasonably satisfactory to the Corporation)
realized in the lease termination or sale of your principal
residence in connection with any such change of residence,
and (iii) to reimburse you for the amount of any federal,
state and local income taxes for which you become liable by
reason of your receipt of any amounts under clauses (i),
(ii) and (iii) of this paragraph d.;
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<PAGE> 6
e. the failure of the Corporation to obtain the assumption
of this Agreement by any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the assets of the
Corporation, by agreement in form and substance
satisfactory to you, to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it
if a "change in control" had occurred without any such
succession having taken place. Failure of the Corporation
to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Corporation in
the same amount and on the same terms as you would be
entitled hereunder if you terminated your employment for
Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination (as
defined in Article III.B.5. hereof). As used in this
Agreement, "Corporation" shall mean the Corporation
as hereinabove defined and any successor to its business or
assets as aforesaid which executes and delivers the
Agreement provided for in this paragraph e. or otherwise
becomes bound by this Agreement by operation of law; or
f. any purported termination of your employment by the
Corporation which is not effected pursuant to a Notice of
Termination satisfying the requirements of subsection 4.
below (and, if applicable, subsection 2. above).
4. Notice of Termination. Any termination of your employment
by the Corporation for Cause, Disability or Retirement, or by
you for Good Reason, shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
5. Date of Termination. "Date of Termination" shall mean the
following:
a. if this Agreement is terminated for Disability or
Retirement, the date you retire under the disability form,
or other form of Retirement;
b. if you shall terminate your employment for Good Reason,
the date specified in the Notice of Termination; or
<PAGE>
<PAGE> 7
c. if your employment is terminated for any other reason,
the date on which the Notice of Termination is given or, if
earlier, the date on which the Corporation determined that
your employment would be terminated.
IV. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
After a "change in control" of the Corporation but during the term of
this Agreement:
A. While you are in the employ of the Corporation during the term of
this Agreement, and thereafter as required by this Agreement, the
Corporation shall timely provide you the salary and perquisites, and
the other benefits provided for in the Plans, so that the failure to
provide you the same shall not afford you Good Reason as provided in
Article III.B.3. of this Agreement. You shall continue to receive
that part of such salary, perquisites and other benefits as,
immediately before any "change in control", is provided disabled
employees of your rank under the Corporation's disability benefit
Plans during any period that you fail to perform your duties as a
result of incapacity due to physical or mental illness and until your
employment is terminated for Disability, Retirement or death.
Thereafter, your benefits shall be determined in accordance with the
Plans and the Corporation shall have no further obligations to you
under this Agreement.
B. If your employment shall be terminated for Cause, the Corporation
shall pay you your full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given, and
you shall receive the accrued benefits to which you would otherwise
have been entitled under the Plans as of the Date of Termination, and
the Corporation shall have no further obligations to you under this
Agreement.
C. If your employment with the Corporation shall be terminated by
the Corporation other than for Cause, Retirement or Disability, or by
you for Good Reason, then you shall be entitled to the benefits
provided below:
1. The Corporation shall pay you your full base salary through
the Date of Termination at the rate in effect at the time
the Notice of Termination is given, and you shall continue as a
participant in any Plan for which you are eligible through such
date.
2. In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay
you as severance pay (which, together with any amount payable to
you pursuant to Article IV.D.1. below, are hereinafter called
"Severance Payments"), the following (reduced by the amount
of any applicable tax withheld):
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<PAGE> 8
a. Not later than the fifth day following the Date of
Termination, a lump sum amount equal to the sum of: (i)
2.999 times your total annual compensation, including
current annual base salary at the rate in effect
immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination (or, if higher, at
the highest rate in effect in the three year period
preceding such occurrence) and supplemental incentive
compensation (equal to the highest annual amount received
in the three (3) previous years under the SCP, the
determination in respect of each such Plan being separately
made), and (ii) any incentive compensation under the SCP
which had been allocated or awarded to you for a calendar
year or other measuring period that concluded prior to the
Date of Termination but has not yet been paid, and (iii) a
pro rata part (in proportion to the number of days in the
SCP period for measuring financial performance then in
progress, that has elapsed before your Date of Termination)
of the aggregate value of all contingent incentive
compensation awards to you for all uncompleted award
periods and for the period in progress under the SCP. The
compensation payable to you under such Plan to be made as
provided in clause (iii) above shall be determined as if
the period for measuring the Corporation's financial
performance specified in such Plan (and for each award
theretofore made to you) had concluded the day preceding
your Date of Termination and the Corporation had fully
attained the financial objectives that the Board specified
for such periods and, in the case of the SCP, the Board had
further determined that you were entitled to an award in
the full standard amount based on your salary rate and
position.
b. At your option, in lieu of lump sum payout of your
Severance Payments as set forth in paragraph a. above, you
may elect as provided in Article IV.J. to receive 1/36th of
such aggregate sum in monthly installments for a three-year
period commencing on the first day of the month coinciding
with or next following your Date of Termination and
continuing on the first day of each month thereafter until
you have received thirty-six such payments or you die or
attain age 65 (if earlier), and if you shall attain age 65
or die prior to the end of such payout period, a lump sum
amount equal to the aggregate sum of any remaining
installments shall be paid in cash, (i) to you within
thirty days of the date you attain age 65, or (ii) to the
person or persons you designate in writing at the time you
elect the installment method of payout within thirty days
of the date you die. If you elect the installment method
of payment, you shall, during such period but prior to the
date you attain age 65, continue to be covered by such of
the Plans as provide hospital-surgical-medical and life
insurance benefits. Further, if at the conclusion of the
<PAGE>
<PAGE> 9
installment period you shall have attained a minimum of age
55 and 15 or more years of service (including the
installment period) you will be eligible for retiree health
care coverage and benefits as were in effect the day
preceding the "change in control."
c. This Agreement supersedes the arrangements for "change
in control" in any Plan in effect now or at any time during
the term of this Agreement. However you may, by written
notice to the Corporation within ninety (90) days following
your Date of Termination, designate any of the Plans which,
on the date of a "change in control", has specific terms or
provisions for severance and other benefits in the event of
"change in control". An election under this paragraph will
reduce any benefits payable to you pursuant to this
Agreement.
D. If your employment shall be terminated (i) by the Corporation
other than for Cause, Disability or Retirement, or (ii) by you for
Good Reason, and you elect to receive your Severance Payments on an
installment basis as provided in Article IV.C.2.b. above, then you
will also be entitled to receive the benefits provided for in
subsection 1 below.
1. In addition to the accrued vested retirement benefits
to which you are entitled under the PRA and the SERP, or any
successor plans thereto, you will accumulate constructive credit
toward vesting service, contributions and interest on a monthly
basis. This constructive credit will continue during the period
of severance and will cease at the earliest of 36 months,
attainment of age 65, or your death.
The constructive credit will be applied using the amount of your
current PRA and SERP account balance at the time of termination
as a base. A credit plus interest is applied to this base,
using the same formulas for the PRA and SERP as were in effect
the day before the "change in control." Total Compensation
shall be based upon the formula for determining severance pay
amounts described in Article IV.
The constructive PRA and SERP account balances will accumulate
in the same manner as the PRA and SERP did prior to the "change
in control" for 36 months or attainment of age 65 or death.
At that time, but not later than five days after severance
payments cease, an amount equal to the total value of the
constructive PRA and SERP balances, minus an amount equal to the
PRA and SERP vested balances at the time of termination, will be
paid to you in a single lump sum check.
In the event of your death prior to completion of the 36 month
severance period, an amount equal to the difference between
the accumulated constructive PRA and SERP account balances and
the PRA and SERP vested account balances at time of termination
will be paid to your beneficiary.
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<PAGE> 10
If you are not vested in your PRA or SERP account balance at
time of termination, the 36-month severance period will count as
constructive service toward vesting in the constructive PRA and
SERP account balance.
E. In addition to all other amounts payable to you under this
Article IV, you shall also be entitled to receive all benefits
payable to you under the Corporation's tax qualified (as defined by
the Code) retirement plans as detailed in Exhibit B and any other
applicable nonqualified (for purposes of the Code) deferred
compensation agreements including long term incentive plan grants
between you and the Corporation.
F. If your employment with the Corporation shall be terminated (i)
by the Corporation other than for Cause, Disability or Retirement, or
(ii) by you for Good Reason, then in addition to the other benefits
to which you are entitled under this Article IV, the Corporation will
allow you to purchase at par or other stated value (howsoever the
same shall be denominated, which in any case shall be the prescribed
stock value, but not including any amount for stock transfer fee) any
country club stock and luncheon club stock which the Corporation owns
or holds on your behalf, and allow you to purchase at the rate then
applicable to Corporation retirees (or at the rate for retirees in
effect on the date of the "change in control", if in your sole
opinion that rate is more favorable to you than such rate as is then
in effect) the lease car(s) which you are leasing at your Date of
Termination.
G. You shall not be required to mitigate the amount of any payment
provided for in this Article IV by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Article IV be reduced by any compensation earned by you or the
amount of any benefits provided to you as the result of employment
by another employer after the Date of Termination, or otherwise.
H. The Corporation shall pay you all legal fees and expenses
incurred by you in seeking to obtain or enforce any right or
benefit provided for in this Agreement.
I. Certain additional payments may be paid by the Corporation
as follows:
1. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or
distribution by the Corporation to or for the benefit of
you (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required
under this section I.) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by you with respect to
such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then you shall be entitled
<PAGE>
<PAGE> 11
to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by you of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
2. Subject to the provisions of section I.3., all
determinations required to be made under this section I.,
including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the
Corporation's independent auditors, or such other firm as may be
designated by the Corporation, (the Firm) which shall provide
detailed supporting calculations both to the Corporation and you
within 15 business days of the receipt of notice from you that
there has been a payment, or such earlier time as is requested
by the Corporation. In the event that the Firm is serving as
accountant or auditor or legal advisor for the individual,
entity or group effecting the Change of Control, the Corporation
shall appoint another nationally recognized accounting or law
firm to make the determinations required hereunder (which firm
shall then be referred to as the "Firm" hereunder). All fees
and expenses of the Firm shall be borne solely by the
Corporation. Any Gross-Up Payment, as determined pursuant to
this section I., shall be paid by the Corporation to you within
five days of the receipt of the Firm's determination. If the
Firm determines that no Excise Tax is payable by you, it shall
furnish you with a written opinion that failure to report the
Excise Tax on your applicable federal income tax return would
not result in the imposition of a negligence or similar penalty.
Any determination by the Firm shall be binding upon the
Corporation and you. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Firm hereunder, it is possible that
Gross-Up Payments will not have been made by the Corporation
which should have been made to you (the "Underpayment"),
consistent with the calculations required to be made hereunder.
In the event that the Corporation exhausts its remedies pursuant
to section I.3. and you thereafter are required to make a
payment of any Excise Tax, the Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Corporation to or for the benefit
of you, in accordance with the provisions of section I.1.
3. You shall notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Corporation of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after you are informed in
writing of such claim and shall apprise the Corporation
of the nature of such claim and the date on which such
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<PAGE> 12
claim is requested to be paid. You shall not pay such claim
prior to the expiration of the 30-day period following the date
on which you give such notice to the Corporation (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Corporation
notifies you in writing prior to the expiration of such period
that it desires to contest such claim, you shall:
a. give the Corporation any information reasonable
requested by the Corporation relating to such claim,
b. take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim
by an attorney reasonably selected by the Corporation,
c. cooperate with the Corporation in good faith in
order effectively to contest such claim, and
d. permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and
pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold you harmless, on an
after-tax basis, for any Excise Tax, payroll tax, or income
tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this section I.3., the Corporation shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct you to pay
the tax claimed and sue for a refund or contest the claim in
any permissible manner, and you agree to prosecute such contest
to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Corporation shall determine, provided, however,
that if the Corporation directs you to pay such claim and sue
for a refund, the Corporation shall advance the amount of such
payment to you, on an interest-free basis and shall indemnify
and hold you harmless, on an after-tax basis, from any Excise
Tax, payroll tax, or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for your
taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Corporation's control of the contest
<PAGE>
<PAGE> 13
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
4. If, after the receipt by you of an amount advanced by
the Corporation pursuant to section I.3., you become entitled to
receive any refund with respect to such claim, you shall
(subject to the Corporation's complying with the requirements of
section I.3.) promptly pay to the Corporation the amount of such
refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by you
of an amount advanced by the Corporation pursuant to section
I.3., a determination is made that you shall not be entitled to
any refund with respect to such claim and the Corporation does
not notify you in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after
determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
J. Any election you make as provided for in Article IV.C.2.(b) or in
Article IV.D. shall be by notice in writing, which shall be
acceptable to the Corporation if substantially in the form of
Exhibit A attached hereto, Any such election, when made, may
subsequently be revoked and replaced with a new election, made in
like manner, at any time before a "change in control". Thereafter
such an election may be changed only if made in like manner, before
the first to occur of the 90th day following a "change in control"
or the date you receive a Notice of Termination.
V. BINDING AGREEMENT.
This Agreement shall inure to the benefit of and be enforceable by
your executors, administrators, successors, heirs, distributees, devisees,
legatees or other personal or legal representative.
VI. CONFIDENTIAL INFORMATION.
You shall hold in a fiduciary capacity for the benefit of the
Corporation all secret or confidential information, knowledge or
data relating to the Corporation or any of its affiliated
companies, and their respective businesses, which shall have been
obtained by you during your employment by the Corporation or any of
its affiliated companies and which shall not be or become public
knowledge (other than by your acts in violation of this Agreement).
After termination of your employment with the Corporation, you
shall not, without the prior written consent of the Corporation or
as may other wise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other
than the Corporation and those designated by it. In no event
shall an asserted violation of the provisions of this
<PAGE>
<PAGE> 14
Section constitute a basis for deferring or withholding any amounts
otherwise payable to you under this Agreement.
VII. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on
the first page of this Agreement, provided that all notices to the
Corporation (except notices substantially in the form of Exhibit A
attached hereto) shall be directed to the attention of the
Secretary of the Corporation, or to such other address as either
party may have furnished to the other by notice in writing in
accordance herewith, except that notices of change of address shall
be effective only upon receipt.
VIII. MISCELLANEOUS.
Except for the right to amend as provided below in Article IX,
no provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed
to in writing signed by you and, on behalf of the Corporation, by
such officer or officers thereof as may be specifically designated
by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
provision or condition of this Agreement to be performed by such
other party shall be deemed a waiver of that or any similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time or times. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not set
forth expressly in this Agreement. Nothing expressed or implied
herein shall create any right or duty (on the part of you or the
Corporation) to have you remain in the employment of the
Corporation at any time prior to a "change in control" of the
Corporation, each reserving all rights to terminate the employment
relationship at any time prior to a "change in control" of the
Corporation with or without Cause.
IX. VALIDITY.
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Michigan, without reference to principles of conflict of laws. The
invalidity or unenforceability of any one or more provisions of
this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, which shall remain in
full force and effect.
X. AMENDMENTS.
The Corporation reserves the right unilaterally to amend this
Agreement, upon thirty (30) days' prior notice to you (or such shorter
time as you may agree to in writing), at any time before a "change in
control" occurs so long as such amendment is not in conflict with
Exhibit 8 to the minutes of the February 6, 1985 meeting of the Board or
any subsequent resolution of the Board and so long as any additional costs
<PAGE>
<PAGE> 15
to the Corporation resulting from such amendments are not significant.
Any such amendment shall become effective, if signed for the Corporation
by its Chairman of the Board or Vice President - Human Resources, on the
date specified in such notice to you. This Agreement may not be amended
or modified in any respect after the occurrence of a "change in control"
without the express written consent thereto of you and of the Corporation.
XI. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the
subject matter hereof, please sign both of the enclosed copies of
this letter and return one of them to the Corporation. This letter
will then constitute our agreement on such subject.
Very truly yours,
FEDERAL-MOGUL CORPORATION
By:
------------------------------------
(Typed Name)
---------------------------
Title:
---------------------------------
Executed and effective this
day of May, 1995
- -----------------------------
Witness
- -----------------------------
(Typed Name)
<PAGE>
<PAGE> 16
INDEX OF DEFINED TERMS
-EXECUTIVE SEVERANCE AGREEMENT-
AGREEMENT SECTION PAGE WHERE
IN WHICH TERM DEFINITION
TERM IS DEFINED APPEARS
- ----------------- ----------------- ----------
Agreement Introduction 1
Base Period IV.C.2.a. 8
Board III.B.2. 3
Cause III.B.2. 3
Change in Control II. 2
Code IV.I.2. 11
Corporation Introduction;III.B.3.d. 1, 5
Date of Termination III.B.5. 6
Disability III.B.1. 2
Exchange Act II. 2
Good Reason III.B.3. 3
Notice of Termination III.B.4. 6
Plan/Plans III.B.3.c. 4
Retirement III.B.1. 3
SERP III.B.3.c.(1) 4
Severance Payments IV.C.2. 7
Payment IV.I. 10
<PAGE>
<PAGE> 17
EXHIBIT A
Date
------------------------
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Treasurer
RE: EXECUTIVE SEVERANCE AGREEMENT DATED MAY 1, 1995
BETWEEN THE UNDERSIGNED AND FEDERAL-MOGUL CORPORATION
(THE "AGREEMENT")
Gentlemen:
I elect that any payments made to me as provided in Article IV. of
the Agreement by paid (check either of A. or B. below):
A. In a lump sum as provided in Article IV.C.2.a.
- -----
B. In 36 monthly payments as provided in Article IV.C.2.b.
- -----
The foregoing election(s) respecting the optional alternatives set
forth above shall forthwith revoke and supersede such contrary
election(s), if any, as were heretofore made by me or by my
personal or legal representative.
Very truly yours,
By:
-----------------------------------
Typed Name:
---------------------------
WITNESS:
- ------------------------------------
Signature
Typed Name:
-------------------------
City of , and
State of .<PAGE>
<PAGE> 18
EXHIBIT B
INDEX OF RETIREMENT PLANS
Personal Retirement Account (PRA)
Supplemental Executive Retirement Plan (SERP)
Salaried Employees' Investment Program (SEIP)
<PAGE> 1
<TABLE>
EXHIBIT 11.1 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED PRIMARY FULLY DILUTED
-------------- ---------------
MARCH 31 1995 1994 1995 1994
- ------------------------------------------ ------ ------ ------ ------
<S>
EARNINGS: (In Millions)
<C> <C> <C> <C>
Net earnings $ 14.2 $ 15.0 $ 14.2 $ 15.0
Series C preferred dividend requirements (.7) (.8)
Series D preferred dividend requirements (1.5) (1.5)
Additional required ESOP contribution <F1> (.5) (.5)
----- ----- ----- -----
Net earnings available for common
and equivalent shares $ 12.0 $ 12.7 $ 13.7 $ 14.5
----- ----- ----- -----
----- ----- ----- -----
WEIGHTED AVERAGE SHARES: (In Millions)
Common shares outstanding 34.9 32.5 34.9 32.5
Dilutive stock options outstanding .4 .4
Conversion of Series C preferred stock <F3> 1.8 1.9
Contingent issuance of common stock to
satisfy the redemption price guarantee <F2><F4> .7 .6
Conversion of Series D preferred stock <F3> 4.4 4.4
----- ----- ----- -----
Common and equivalent shares outstanding 34.9 32.9 41.8 39.8
----- ----- ----- -----
----- ----- ----- -----
PER COMMON AND EQUIVALENT SHARE: $ .34 $ .39 $ .33 $ .36
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
[FN]
<F1> Amount represents the additional after-tax contribution that would be
necessary to meet the ESOP debt service requirements under an assumed
conversion of the Series C preferred stock.
<F2> Calculations consider the March 31, 1995 stock market price in accordance
with Emerging Issues Task Force Abstract No. 89-12.
<F3> Amount represents the weighted average number of common shares issued
assuming conversion of preferred stock outstanding.
<F4> Amount represents the additional number of common shares that would be
issued in order to satisfy the Series C preferred stock redemption price
guarantee. This calculation considers only the number of preferred shares
held by the ESOP that have been allocated to participants' accounts as of
March 31 of the respective years.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 24,500
<SECURITIES> 0
<RECEIVABLES> 356,500
<ALLOWANCES> 14,000
<INVENTORY> 399,100
<CURRENT-ASSETS> 813,200
<PP&E> 697,800
<DEPRECIATION> 235,100
<TOTAL-ASSETS> 1,631,700
<CURRENT-LIABILITIES> 392,100
<BONDS> 377,500
<COMMON> 174,200
0
135,600
<OTHER-SE> 302,600
<TOTAL-LIABILITY-AND-EQUITY> 1,631,700
<SALES> 524,300
<TOTAL-REVENUES> 524,300
<CGS> 410,600
<TOTAL-COSTS> 78,700
<OTHER-EXPENSES> 3,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,400
<INCOME-PRETAX> 22,800
<INCOME-TAX> 8,600
<INCOME-CONTINUING> 14,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,200
<EPS-PRIMARY> .34
<EPS-DILUTED> .33
</TABLE>
